Consumer Protection Usually Doesn’t Live Up to its Name

It seems as if the folks in Washington don’t have enough to do with taking over the American financial, automobile, and health care industries. The talk now is about creating a new consumer protection agency to “protect … the financial well-being of American consumers.”

While this may sound like a good cause, a review of the recently adjourned 81st Texas Legislature raises the question whether government “protection” helps or harms the financial well-being of consumers.

The big news this session was what didn’t happen. Politics in the waning days of session killed hundreds of bills. So-called consumer groups bemoaned the loss of many of them, also assigning blame to big business.

One advocate crystallized the perspective of these groups when he said that this session amounted to “nibbling around the edges without making any fundamental changes that will really improve the lives of Texas consumers.”

The truth of the matter, however, is that consumers fared pretty well this session. And the reason for this is because all the Legislature did was “nibble around the edges.”

For one thing, the Legislature nixed a highly-touted local option transportation tax package. These proposed taxes and fees could have cost Texas consumers as much as $21 billion over the next decade.

Renewable energy and energy efficiency was also a high priority this session. Yet almost all of these bills failed, some at the closing bell. A middle of the road estimate of how much these bills would have cost consumers is several hundred million dollars a year.

Consumer advocates were particularly anxious to re-regulate the homeowners insurance and electricity industries, even though the recent deregulation of these areas has led to an explosion of consumer choice and better prices.

One proposal would have required insurance companies to use only state-mandated policy forms that describe the coverage of each policy – the exact same regulation that created the mold crisis a few years back and cost consumers about $900 million.

The legislative session also saw a resurgence of trial lawyers’ efforts to undo tort reforms of recent years. One bill, for instance, would have allowed plaintiffs to recover damages that neither they nor anyone else had incurred.

It is impossible to quantify how much these trial lawyer-supported bills would have cost consumers, but studies estimate that excessive litigation imposes a “tort tax” on American consumers of between $600 billion and $900 billion a year, or from $8,000 to $12,000 for the average family of four.

Not exactly consumer friendly. Fortunately, none of these roll-back-tort-reform bills passed.

Whether it is more government programs, renewable energy mandates, or trial lawyers looking out for the little people, all of these measures wind up costing consumers and taxpayers more money. It isn’t at all clear that consumers think the alleged protection they are getting is worth the billions of dollars they are being forced to pay for it.

American consumers who have had enough ought to contact their representatives in Washington and Austin and tell them, “We don’t really need your protection, thank you; we can’t afford it anymore.”

This post was first published by the Texas Public Policy Foundation.

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