I realized the other day while walking around the Capitol building that I had never met anyone representing the “Lamp Lighter Association.” Of course, since we’ve had electric light bulbs since 1879, their association (Or union? Maybe even a guild?) doesn’t seem to exist anymore.
It’s likely that at some point in our history the people who went around lighting lamps lobbied some level of government for higher pay, more benefits, or even just to lecture people on the ills of this newfangled electricity fad. However, just because the now (almost) extinct lamp lighters are no longer walking (and presumably lighting) the halls of Congress, that doesn’t mean those halls are even slightly less crowded.
It’s kind of like the hydra: for every one group that moves out, two new groups take their place. For instance, when the lamplighters faded away, electric bulb manufacturers likely filled their position. As Sears, Macy’s, Kmart, CVS, and a slew of other retail giants plan on closing their doors, it’s likely someone will fill the retailers’ lobbying role.
Accelerating a market trend that’s been going on for years, the big box and brick-and-mortar retailers that have failed to adjust to new technology and business methods are going out of business. More people are shopping online, but more importantly, the newer retailers are using their buildings and business investments differently than the big box stores of yesterday and that allows places like Amazon to sell items for less. Heck, the way that the Amazon model works, sometimes they don’t even have to pay for stock. Retailers pay Amazon to hold their stock.
This change has caused a bunch of closures, bankruptcies, and economic disruption the last couple of years, and during the Trump administration this market change is likely to accelerate even more. As Business Insider wrote last month:
Macy’s has already said that it’s planning to close 100 stores, or about 15 percent of its fleet, in 2017. Sears is shuttering at least 30 Sears and Kmart stores by April, and additional closures are expected to be announced soon. CVS also said this month that it’s planning to shut down 70 locations.
Mall stores like Aeropostale, which filed for bankruptcy in May, American Eagle, Chicos, Finish Line, Men’s Wearhouse, and The Children’s Place are also in the midst of multi-year plans to close stores.
This is going to have an effect on the retail market in general, for good and bad. But it will also have an effect in Washington, where it will change not only who is walking the halls of Congress but what those people are asking for from legislators and the administration. They changes they’ll lobby for are all likely to be bad.
The online retailer that is likely to succeed the broke brick-and-mortar retailers on Capitol Hill is Amazon. They have the lion’s share of the market at more than $82 billion in sales, which is more than 6 times their nearest online competitor, Wal-Mart, and don’t plan on Wal-Mart catching up anytime soon.
That’s (finally) good news for Amazon, a company that went about 20 years before turning a profit. But now that they’re in control, how are they going to try to lift the ladder up from behind them? What are they going to ask Congress to do that secures their market share? What is newest crony-in-charge going to ask for?
We don’t know everything, but knowing that we need to watch them is half the battle. (We also need to keep in mind the unprecedented influence of a company run by a man who also happens to own The Washington Post.) However, one thing we can be sure of is this new top dog will ask for an Internet sales tax bill, forcing online retailers to tax buyers based on the buyers’ state and city of residence.
The Internet sales tax policy that Amazon has supported for years has a lot of issues, one of the biggest issues is that it will slow down their competitors. The top-level cronies in Washington sometimes ask for things that help their company, but the primary crony tactic is almost always to ask for a policy that will hurt and hamper their competitors.
Disruptive companies don’t like government regulation, until they’re kings of the hill and they have the influence to keep other companies from disrupting them. (It’s the Golden Rule: whoever has the gold makes the rules.) That’s why Amazon has had a long affair with the Internet sales tax.
Amazon has warehouses all over the country and that means they’re supposed to charge state-based sales taxes to their buyers. On the other hand, the little Mom and Pop shop that has a small website and one product doesn’t have the many warehouses of Amazon. If a Mom and Pop had to charge a state-specific sales tax based on where the buyer is, that would create a high level of overhead and liability for their business. For Amazon, it’s something they’re already doing.
Just as the lamplighter union faded away, the brick-and-mortar retailers are starting their retreat. Despite his calls to “drain the swamp,” cronies aren’t likely to go away under the Trump administration.
As the economy changes, it’s just going to be a new set of swamp monsters. We need to be ready because they aren’t likely to play nice, and while the Mom and Pop brick-and-mortar might be struggling, the next Amazon might be in someone’s garage today – unless Amazon lobbyists keep those companies from ever taking off.
Charles Sauer (@CharlesSauer) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor and for an academic think tank.
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