Despite the skepticism of some lawyers and others in politics toward "numbers," they imply precision and certainty, so there's a strong incentive for both sides - of the trucking deregulation-- in a policy battle to quantify even that about which they're less than sure. Outright fabrication is the exception; the process is too adversarial to permit that. But there is a tendency to engage in "creative calculating" and to make soft estimates appear much firmer than they really are.
Lana Batts, who in 1980 headed ATA's Economics and Planning Department (one of two sections in the economics division), likes to quote Batts's Laws on this subject: He who has a number is one up on him who does not, and, he whose number is bigger is more credible. (Batts's corollary to that: If you can't make your number big, add five decimal places.)
The challenge is not just to make a more convincing case than your opponent, but to get the attention of Congress in the first place. Numbers have to be big to do that, as Everett Dirksen's oft-quoted line about federal dollars implies: "A billion here, a billion there; pretty soon you're talking real money."
The figures on the effect of exempting processed food from regulation are an example of creative calculations. One ATA analyst described what happened after the first vote on the exemption amendment was tabled, in part to give both sides an opportunity to quantify the impact it would have on the trucking industry: "The [ATA] lobbyists said to us, "Give us the numbers." [They didn't say] "Do you have any numbers?" We scrounged around, but we didn't have much." The measure ATA analysts produced- showing that the exemption would threaten percent of the regulated carriers' total tonnage-was dramatically large. It also concealed the fact that most of that tonnage was transported by (regulated) contract carriers, who supported deregulation (though they opposed the exemption).
The administration's measure--showing that only 37 percent of total interstate truck traffic by revenue would be affected--was also carefully crafted. Neither figure gave any clue as to what the savings nor cost to society would be; Congress didn't ask about that, only about who would lose and by how much.
This preoccupation with winners and losers can lead to use of numbers that confuse distribution with efficiency. In 1976, in response to Thomas Gale Moore's well-publicized estimate that the cost of trucking and rail regulation might approach $15 billion a year, the ICC (then a close ally of the industry) did its own cost-benefit analysis. The commission concluded that ICC regulation benefited the nation to the tune of $4.4 billion a year, almost all of that from trucking regulation.
The ICC's analysis was strikingly poor. (A Business Week "Commentary" said its authors deserved an F in Economics 101.) Most notably, the analysis failed to distinguish between income transfers from one group in society to another and net social costs or benefits. It calculated as benefits the redistribution of income through cross-subsidy but neglected to consider that some pay for what others receive. Most economists at the ICC today cringe at the mention of their predecessors' methodology. But these same analytic and statistical flaws were common in the industry's arguments for continued regulation.
Even a good case gets bloated. CBO's estimate that deregulation would save as much as $8 billion took on a life of its own, even though it was based not on an original CBO study-as newspaper headlines implied-but rather on CBO's review of existing studies. Moreover, there is considerable subjectivity involved in any such review-which studies to include, how much to weight individual ones, how to present the conclusions.
The issue of data presentation is particularly relevant. CBO's $8 billion bottom line represented its estimate of the potential impact of deregulation by 1985 (expressed in 1980 dollars). Presumably that date was chosen as a time by which the effects of deregulation would have had a chance to work through the economy (the bill before CBO preserved antitrust immunity until 1983). Only in the accompanying text did one learn that the bill "could result in increases in certain rates over the short term" (precisely because of the preservation of antitrust immunity). That effect, the text went on to explain, "would likely be overwhelmed" by the effects of increased competition-but only in the "longer run"-that is, by 1985. In short, the estimate distorted the magnitude of potential long-term savings by ignoring potential interim costs.
Nowhere in the trucking debate were the numbers softer than in estimates of energy impact. The administration claimed that reducing empty backhauls would save 220-320 million gallons of fuel a year; the ATA said increased competition would put more trucks on the road using additional fuel. Neither side had much to back up its claims.
The first effort to quantify the energy impact of deregulation came about in 1975, when the trucking task force asked the Federal Energy Administration for its estimate. Lacking the necessary information, the FEA turned to the MIT Center for Transportation Studies for an answer. Working under a two-week deadline, Paul Roberts and James Kneafsey, associates of the center, produced an estimate that the net effects of both trucking and rail deregulation would be to increase fuel use by 15 million barrels a year (the equivalent of a day's use).
The Roberts-Kneafsey estimate looked solely at the effect on energy due to expected diversion from rail to truck; it ignored altogether potential efficiency increases within the trucking industry-the raison d'être for reform. DOT commissioned an independent assessment which concluded that, taking into account intramodal efficiency gains, deregulation would save 22 million gallons annually.53 The FEA endorsed the Roberts-Kneafsey report and sought to present the results in congressional hearings on the Ford administration's trucking reform bill. However, the Office of Management and Budget refused permission and told the FEA to resolve its differences with DOT.
The 220-320 million gallon estimate of fuel savings from deregulation cited by Carter administration spokesmen also had questionable parentage. It can be traced to a figure in a Charles River Associates study. In 1978, when the Department of Energy (successor to FEA) testified on a bill to provide for limited backhaul authority, the Charles River figure was "inflated in a very unscientific way," according to one DOE analyst. DOE later told other agencies that the figure was not well founded, but that caveat was never properly communicated to, or else was ignored by, some administration spokesmen who continued to cite the estimate.
Meanwhile, DOE had contracted for a study from Cambridge Systematics (CS), a Boston consulting firm, on the energy impact of deregulation. (DOT protested giving the contract to CS on conflict-of-interest grounds; CS had also done a study for the ATA.) Preliminary results showed that there would be a slight net fuel increase from both truck and rail decontrol. DOE was never asked to testify on the question, however, and release of the results was successfully delayed. In March, 1980, after the Senate hearings were over, DOE presented the preliminary results to the Commerce Committee staff. DOE's message to the committee was that energy consumption should not be a major consideration in deciding the fate of trucking deregulation.
When President Carter signed the motor carrier act, his Rose Garden speech highlighted the energy savings that would result. Said one DOT analyst, "We kept trying to get that out of Carter's [signing] statement, but somehow it kept getting put back in."
The estimated savings represent an insignificant amount of oil, but the size of the number is not the issue. The issue is that deregulators made it appear far more certain than it really was that reform would reduce the use of fuel. The impact of deregulation on fuel consumption depended on two big unknowns-potential diversion of traffic from rail to truck, and shippers' demand for service under decontrol (a third factor, the potential intramodal efficiency gain, is more of a known quantity). Any estimate of savings was highly speculative.
Arguments Seldom Heard
One reason it was so hard to estimate the energy impact of deregulation is that no one knew how shippers' demand for service would be affected. If their demand goes up, all else equal, that will increase fuel use. From an efficiency standpoint, that's perfectly all right. As long as shippers face the true social cost of their increased demand (which they don't insofar as oil prices are controlled), it must mean that the cost to them of additional transportation service is more than offset by other savings-for example, reduced inventory costs.
In short, fuel efficiency and economic efficiency are not always synonymous: Sometimes it's cheaper to take a taxicab. But deregulators were careful not to make that argument on Capitol Hill in view of the oil shortage. It lacked appeal to the layman. It also violated the cardinal rule of lobbying: Keep it simple. Like a trade name with an unflattering acronym, some efficiency arguments don't reduce well.
Other efficiency arguments were downplayed in the political debate because their implication was all too clear. If there are economies of scale in the trucking industry, as the ATA mentioned, from an efficiency standpoint society should be allowed to benefit from them. Senator Cannon made that point to an audience of motor carriers, but deregulation proponents refrained. On Capitol Hill, small business is akin to Mom, apple pie, and Senate bean soup.
The economist's argument that regulation can keep rates too low is another one that doesn't agree with most congressmen. Even if the trucking industry were correct in claiming that regulation had kept rates artificially low, that would imply a basic misallocation of resources, and regulators would have ill-served the nation, at least in efficiency terms. But absent dramatic evidence of scarcity due to price controls-like the gasoline lines in the late 1970s or the meat shortages a decade earlier, both of which prompted a strong congressional reaction-that argument has little political appeal.
Other efficiency arguments are unpopular because they can be made to sound inhumane. The ATA's small-communities argument was an example of the "widows and orphans" defense: "We can survive fine under deregulation," says the regulated industry. "We just won't be able to provide for the widows and orphans anymore." The widows and orphans defense implies a cross-subsidy in the tradition of Robin Hood. In economic terms, if society desires to subsidize widows and orphans, that's best accomplished directly, through a lump-sum tax, rather than indirectly, through the price mechanism. But that theoretical notion is not very credible as a political proposition, and one isn't apt to hear savvy economists advocating it to Congress.
Proponents of trucking deregulation were fortunate. In the case of energy consumption and industry concentration, the facts were such that reformers could avoid making the unpopular efficiency argument. More important, there weren't sticky distributional problems. There really were no widows and orphans (with the possible exception of some small shippers). The big losers were truckers and Teamsters, and deregulators were able to portray at least one of those groups as a villain.
