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What Trucking Deregulators Did Right

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The evidence presented by the trucking deregulators attracted the support of the press. In 1979, more than 400 editorials supporting trucking reform appeared throughout the country; unfavorable or neutral editorials totaled only 22.37. The typical editorial began with an example of seemingly mindless ICC regulation (birdseed is exempt, hamster food is not), then went on to recite the major substantive arguments on both sides, and ended with a ringing endorsement of deregulation couched in a warning that political muscle rather than common sense would likely dictate Congress's decision.

The twenty-to-one ratio of favorable to all other editorials is a good indication of just how persuasively reformers made their substantive case for trucking deregulation to a relatively impartial jury. That the merits themselves were so strong is a part, but not all, of the explanation. It's not hard to think of examples where meritorious arguments fell on deaf or disbelieving ears.

Substantial industry-specific data: To begin with, there was a substantial body of quantitative and qualitative data specific to the trucking industry. Lacking that, deregulation would probably not have gotten on Congress's agenda, much less passed. A 1977 memo from a senior lawyer in DOT described the problem: "We [still] don't know as much about trucking as we do about airlines and we probably never will. In trucking, it's very difficult to point to concrete examples, and you have to rely on theory. Theory is not that useful in passing legislation."



The case for trucking reform that was ultimately passed by the Ninety-sixth Congress represented years of research and analysis by various government agencies, in particular DOT. DOT's research program on trucking regulatory reform began in 1973 and continued virtually nonstop, despite significant political obstacles. This effort built on early academic studies and later funded much of the continued scholarly research on motor carrier regulation.

The government's research effort was for years the heart of the trucking reform movement, moreover, not an academic backwater to the larger political contest. Deregulation was an idea born of economists; they nursed and nurtured it when no one else would.

The intense commitment that many economists felt to the cause of trucking reform is ironic in light of the profession's view of individual behavior as narrowly self-interested. One strong believer, a DOT careerist, even risked being fired by a superior who opposed airline and trucking decontrol. The superior was Brock Adams, Carter's first transportation secretary. Unaware of Adams's stand on deregulation, the DOT economist- administrator briefed the new secretary on the research effort underway. Adams nodded with seeming approval. However, he soon made it known that anyone working on deregulation research would be fired, and the administrator was exiled from DOT's policy circle. Adams reluctantly embraced airline decontrol within the month, and trucking deregulation a year or so later, when Carter's all-out commitment to these reforms became clear. Meanwhile the DOT deregulator had carried on with the agency's research on trucking, contracting much of the work out to DOT's Cambridge, Massachusetts, research center.

Political obstacles aside, the case for trucking deregulation was substantively more difficult to make than the one for airlines. Airplanes move a single, undifferentiated product-passengers-between a limited number of points. Moreover, the CAB had good and readily accessible data on the airline industry. "Small communities" for airlines referred to a finite number of locations, and one could quickly determine who had been serving these communities, for how long, whether service had ever been terminated, and if so, when.

The trucking industry is vastly more complex. Thousands of products move between thousands of points at billions of different rates. Not surprisingly, the ICC simply didn't know what carriers had authority to serve which towns and whether they were actually using it. Precisely because of the lack of ICC data, scholars had not studied trucking as closely as airline regulation. Thus there was not the reservoir of academic research on which to draw.

Despite these problems, the amount of analysis eventually produced on trucking regulatory reform was substantial. Most of it came out of DOT's Office of Regulatory Policy, with additional contributions from the ICC, Departments of Justice, Agriculture, and Energy, the Council of Economic Advisers, Office of Management and Budget, Council on Wage and Price Stability, Congressional Budget Office, and the Senate Commerce and Judiciary committees.

There were analytic questions that deregulators never found a way to address. All the research on economies of scale looked at production-cost advantages of size; none of it answered the question of whether size gave trucking companies marketing advantages. Another question that reformers never satisfactorily answered was why operating rights were so valuable: Rates were regulated by the ICC, but competition on the basis of service was not. Why, then, didn't service rivalry compete away the value of operating certificates?

These gaps in knowledge were not critical to the case, however, and they went unnoticed in the political debate. Given the large amount of evidence deregulators had amassed and the unanimity among experts, it was hard for any congressman to accuse reformers of not having done their homework, or to table an unpopular vote with a call for further study--a favorite ploy. "Symbolically, it was important to be able to say [that] study after study had shown [the benefits of deregulation]," observed a trade association lobbyist. "Most congressmen had piles of studies in their office. There's always some skepticism [toward studies], but here there were so many and they were so consistent."

Analysis informed by strategy: The effort to go well beyond theory reflected reformers' sensitivity to the legislative environment. But in much more subtle ways, the substantive case for trucking deregulation was informed by political strategy. DOT was never without a plan for strategic use of analysis. Spreadsheets, frequently updated, laid out the relevant information in neat columns: Desired Effects, Arguments Against, Research Completed, Research Underway, Research Needed.

Implicit in this plan was the aim of reducing the uncertainty associated with trucking deregulation. "We knew we had to have an answer to [the question], 'What will happen if we deregulate?'," said one congressional committee aide. "If you go back to your senator and say we're not sure what will happen, then forget it."

In this respect, the case for deregulating a healthy industry like trucking was harder to make than the case for decontrolling the airline industry, which had been in poor financial health for years. One legislative staffer recalled a common reaction of senators to trucking-reform proposals: "Bah! The [regulated] system works well. It may cost a little more, but we know it works."

Given Congress's fear of the unknown, perhaps the single most politically effective argument for deregulation of any kind is the existence of identical services provided side by side, one regulated and the other not. Reformers capitalized on that fact extensively with studies of the exempt agricultural sector, intrastate trucking in New Jersey and household-goods transport in Maryland, both of which are unregulated, and motor carrier service in unregulated foreign countries.

Reform Bill

To bring it closer to home, there was extensive analysis tailored to the specifics of a realistic regulatory reform bill. This was a necessary complement to academic studies, which tended to view deregulation in the absolute (How much would society save if the trucking industry were perfectly competitive?) rather than as a product of political compromise (What would be the effect of abolishing antitrust immunity just for single-line rate- making?).

Another complement to the more scholarly studies was evidence gained from "tromping the real estate"--that is, from venturing out into the field. This was helpful when the ATA tried to paint deregulators as ivory- tower types who had never set foot inside a truck terminal. Criticized for the narrowness of DOT's small-communities studies, Goldschmidt liked to say that analysts hadn't mailed out thousands of impersonal questionnaires because they "wanted to get out and talk to the people."

The small-communities surveys were politically tailored research at its utmost. A waffling senator effectively commissioned his own study. Even for senators and congressmen already convinced that the small- communities issue was a red herring, the studies provided "something to hang their hats on" when perturbed constituents came knocking.

Strategy informed not only the data that deregulators gathered but the way they presented it. Sophisticated economic arguments were conveyed in identifiable and understandable ways (though the basic argument against barriers to entry and, to a lesser extent, antitrust immunity had intuitive appeal). The examples of seemingly mindless rules and restrictions were important here. Moreover, deregulators used a simple measure of the public benefits from reform--the multibillion-dollar savings to consumers.

While estimates of the potential savings ranged from $900 million to $12 billion, reformers almost always cited the COWPS figure of $5 billion; later on they used CBO's more authoritative estimate of $5 billion to $8 billion. (That figure was typically disaggregated as well and expressed as a savings per household of around $100 per year.) They played down other higher and lower figures, fearing that congressmen would react to wide-ranging statistical estimates by dismissing them altogether.

This push to quantify the potential savings to consumers from trucking reform went contrary to the (one-time) advice of John Snow, deputy undersecretary of transportation during the Ford administration and one of the early proponents of deregulation. In a 1975 memo to several other high-level policymakers, Snow, a Ph.D. economist and lawyer, warned against giving Congress aggregate estimates of social savings. He said it was politically counterproductive because the larger the estimate, the greater the implied adverse impact on labor and capital.

Snow's advice was probably sound at the time. In the early 1970s, when DOT first produced estimates of what deregulation could save consumers, the political opposition was so intense that the agency spent considerable time just defending its figures. More generally, the attitude of many congressmen toward the notion of economic efficiency was almost hostile at that time, because efficiency implied a reduction of jobs. That adherence to Snow's advice seemed so unthinkable five years later was an indication of just how far the political center had shifted on the issue of deregulation, and of how much the political "market" had improved--at least temporarily--for a policy reform that promised diffuse savings to the public.

Reflecting these political changes, deregulators did not play down the fact that reform would make losers out of the trucking industry (though they said little about the risk of bankruptcy to many marginal firms). Instead they portrayed the industry as something of a villain--with much talk of "monopoly profits," "price fixing," and "collusion that in any other business would be a felony."

The approach to labor was more cautious. Deregulators maintained that reform would not necessarily mean fewer jobs, because firms that had turned to private carriage as a way around regulation would return to common carriage under decontrol, bringing with them potential Teamster jobs (private trucking is largely non-Teamster)-an argument they only half believed. On the wage question, deregulators played up the potential for reform to put downward pressure on labor costs absent the price-fixing cartel. But they never went so far as to argue (as some reformers felt they should) that deregulation was the only way to "break the back of the Teamsters."

Coordination

Coordination between analysts and other advocates: The substantive case for reform was sensitive to strategic factors in part because there was effective communication and coordination between the analysts and those on the political front line. Logistics aside, the two groups learned from one another. Gary Broemser, the director of DOT's Office of Regulatory Policy, attended weekly meetings of the ad hoc coalition supporting reform. Coalition members received from him the latest DOT reports and analyses on trucking and expressed to him any lobbying problems they had encountered where analysis might bear. The chairman of the coalition gave Broemser and the DOT analysts "high marks" for their efficiency and political sensitivity.

This coordination of analytic and political effort produced prompt and effective counters to ATA claims. Refuting the ATA's CPI comparison with the economist's technical answer (changes in the composition of a ton-mile) would have been far less convincing than what politically attuned analysts worked out-the truckload versus less-than-truckload comparison, which cleverly turned the ATA's argument on its head.

Another politically tailored statistic proved critical to the most important Senate vote on the trucking bill. The ATA maintained that the expanded agricultural exemption approved in markup would affect 21 percent of the regulated trucking industry's total tonnage. That figure was the key to the industry's lobbying campaign against the expanded exemption, which provided the major test of strength on the Senate floor. The administration's figure was quite different; it claimed that only 3 7 percent of total interstate truck traffic by revenue would be affected. It's not hard to reconcile the two figures if one reads the fine print: they measure different things. In a political vacuum, the administration would doubtless have explained the difference, but under the circumstances, fighting fire with fire was deemed appropriate.

Good internal coordination also meant that the dissemination of analysis was well timed. DOT rushed its survey of Nevada small communities to completion in order to present the findings at Cannon's field hearing in his home state. Several months later, Commerce Committee staff members saw to it that CBO's small-communities analysis was completed in time to have dramatic impact; Cannon read the favorable conclusions to a packed room on the last morning of the Senate hearings. CBO's $8 billion estimate was also obtained just in time for dissemination before the full Senate vote.

Despite close coordination of effort, systematic differences in attitude toward policy evidence separated many of the reform advocates on the front line from those carrying out the analysis. Some lobbyists, particularly those trained as lawyers, were "dubious of numbers." "I didn't use the figures on total savings," said one trade association representative. "My lawyer's background made me hesitant; I know you can prove almost anything with numbers. But it was a good point for the newspapers." In dealing with members of Congress, a majority of whom are lawyers themselves, lobbyists often preferred to rely on what seemed to them "commonsense" arguments.

Even the most dubious lobbyists found the DOT small-communities surveys useful in persuading congressmen who shared their skepticism of numbers. But, ironically, the reluctance of some professional analysts to perform nonscientific research was an obstacle to carrying out these surveys initially. "There are two kinds of economists," observed one high-level DOT official," the one who says it will take three weeks (to gather evidence), and the one who says it will take three years. There was a lot of fighting over that within DOT (on the small-communities issue). Finally I went to the White House people and said --I need anecdotes. That's what led to the small-community studies."

Eventually the political battle became one where economists did more than "make the bullets that lawyers fire at one another." Analysts from DOT and the ICC went on the firing line themselves, delivering speeches to groups antagonistic to deregulation. Though forbidden by law to lobby, they presented their evidence-both scientific and anecdotal-on small- community service and other reform issues. "The economists became much more political," recalled a DOT official. "One of them said it was the best experience he'd ever had."

At the same time, non-economist reformers became much more sophisticated about substance. "The economists became lawyers and politicians and vice versa," said the DOT official. "There was a lot of fighting initially. But eventually, everyone became all-around advocates. It was really an interdisciplinary approach."

What-If Anything-the ATA Did Wrong

Senator Cannon opened his first hearing on trucking deregulation with a guarantee that the Commerce Committee would "decide the issues based on a factual analysis and not the decibel level of the advocates on either side." That the ATA-Teamster alliance had the edge on decibels went without saying. The irony is that when it came to the presentation of "factual analysis" by both sides, the ATA was hopelessly outshouted.

For every study the ATA offered in evidence, the administration offered three or four and often more to counter it. One DOT representative liked to begin speeches on small communities by showing his audience two stacks of studies: one, a towering pile, was what the federal government had produced on the subject; the other, a lone pamphlet, was the ATA's contribution. Goldschmidt too liked to hit the ATA where it was weak.

Where are the studies to show that there is a cross-subsidization of small town service? That the current system saves fuel? Those minorities have been allowed into the truck system? That the small communities receive good service because of the existing system? The debate has raged for years and yet the opponents of reform have come forward with assertions and rhetoric and little else. On the other hand, the administration and others have submitted literally dozens of serious studies documenting the case for reform.

Ultimately, the ATA was hampered greatly by the lack of empirical support for its arguments and by credibility problems with much of what evidence it had. The trade group consciously placed a low priority on empiricism-a decision for which some have criticized it. But faced with limited resources, the ATA chose to put its money on public relations.

When the Ford administration proposed to deregulate trucking in 1975, the ATA prepared a public-relations film, The Dividing Line, narrated by newsman Frank Blair. The title referred to the distinction between good-economic-regulation and bad-social and environmental-regulation, a favorite industry theme. The public-relations campaign intensified in 1979, when the ATA hired Hill and Knowlton to help sell Congress and the public on the benefits of continued regulation.

Hill and Knowlton's campaign may have been effective in small towns, where it was primarily aimed, but in Washington, D.C., the public-relations firm was perhaps best remembered for a laughable poll it conducted. Hill and Knowlton held simultaneous press conferences in five cities to publicize the results of a survey taken by a subsidiary, the Group Attitudes Company. The poll, cited in a number of regional newspapers and wire- service reports, showed "virtually no public support for the move in Congress to deregulate the nation's trucking industry." A closer look revealed that of 405 people asked to identify some businesses and industries that should be regulated or deregulated; only 15 people mentioned trucking at all. Of those, 12 said it should be deregulated and 3 said it should be regulated. The accompanying press release neglected to mention that the poll was taken by a subsidiary of a firm campaigning against deregulation.

Hill and Knowlton were admittedly not hired for its social science capability. Besides, the ATA had its own internal analytic shop. But there were problems there as well. The man who directed the ATA's economics division up until 1977 did not have an undergraduate degree. When he left, the division was without a director for a year. Said one ATA analyst, "At the time when we should have been doing the empirical work to prepare for the political fight, we just didn't have the bodies with the brains."

ATA subsequently recruited the appropriate degrees. A Ph.D. economist who taught agricultural economics at Pennsylvania State University for many years took over the division in 1978. Under him were two department heads, both with advanced degrees. In 1980, the division employed over twenty people and occupied most of one floor of the ATA's six-story office near DuPont Circle in Washington, D.C.

Opposition Study

During the last year of the political battle, a handful of analysts from ATA's economics division worked primarily on trucking deregulation, though the summer, 1979, gasoline crisis diverted some of that manpower. For the last six months of the fight, ATA analysts did little else but respond to the latest opposition study. They critiqued virtually every report the administration put out during that period (primarily small-communities studies). When the Senate Judiciary Committee released its draft report on Kennedy's hearings just weeks before the Senate markup, the ATA prepared a point-by- point rebuttal. That document appears as an appendix to the published committee report. The rest of the ATA's critiques were never circulated outside the building.

The lack of empirical studies was damaging to the industry on almost every contested question, but nowhere more than on the issue of small communities. According to ATA analysts, a major problem was the inaccessibility of certain vital information sources-the CTS tapes, for one-which they say would have shown that there really was a geographic cross-subsidy. This seems unlikely. Cross-subsidy or not, the CTS tapes would not have revealed the true answer; they don't contain enough information about corridor costs. ICC analysts, who obtained the tapes from the Judiciary Committee, had the same idea, but decided the CTS data wouldn't be dispositive.

Lacking CTS data, the ATA put its money on a second bet-a survey of small-town shippers and their attitudes toward regulated carriage. Using Dun and Bradstreet listings, the ATA drew a national sample of 3,000 shippers and mailed them questionnaires. But the response rate was only 15 percent, which the ATA says was too low to make the results worth reporting. Here again, one can't help but react skeptically. Hill and Knowlton's poll notwithstanding, the ATA's 1976 survey of carriers, "Small Town Blues," was based on a mere 26 percent response rate, and the trade group relied on that as ammunition for four years.

Why a survey of shippers which, at best, could provide only indirect evidence those small towns would not benefit from deregulation? Was there a reluctance to ask carriers directly, for fear of what they might say? More generally, do trade association analysts feel that certain questions are better left unasked because of what the answer might be? "Absolutely not," said the head of the ATA's economics division, Wesley Kriebel. "I don't make policy. I don't want to make policy. Our job is to provide data [however unflattering] to those who do."

However apolitical its analytic shop, lack of credibility is a serious problem for a trade association. Sometimes the members bring it directly on themselves. "Our carriers told us they were serving those small towns and we believed them," said one ATA analyst. "Too late the data showed they weren't. We were caught in a credibility gap." (Another ATA analyst was skeptical that anyone could be so naively believing. "That's silly," he said.

"People here should have known there was not much geographic cross subsidy occurring.")
Other times just being a trade association is enough to cast a shadow on credibility. That's no doubt one reason the ATA emphasized public relations over substance. Said one ATA analyst when asked why the trade group didn't produce hard evidence, "Would one more study with our imprimatur really have done any good?"

The ATA's credibility was damaged by its inability to line up any serious academic support. The only well-known economist to be identified with regulation advocates was Michael Evans, a supply-side advocate who testified that, on the basis of his macro model, deregulation would push trucking rates higher. What academic support the ATA did have came from a handful of business school professors-most notably D. Daryl Wyckoff of Harvard. (Wyckoff's background as a trucking company manager cast doubt on his credibility, however.)

The ATA was quick to play up Wyckoff's Harvard ties but even quicker to mock "ivory-towered economists and academicians" in general. One ATA analyst felt that approach alienated potential support. "We never should have started swinging at academics. It made for great speeches, but it was strictly a short-term gain. It's a classic error. The ERA people made it when they mocked the housewife."

Battle of Personalities

But academic support for deregulation was so overwhelming that the ATA's public-relations approach can hardly be viewed as a significant contributor. The analyst's hindsight is less useful as strategic advice than as an indication of how many ATA people--even the analysts--saw the fight: as a battle of personalities and symbolic politics without real substance. In their commonly expressed perception, the Democrats needed somebody to beat up on in the name of less government intervention, and we were it. "If we could have just called it 'bananas' instead of 'regulation' we would have been okay," said an ATA analyst.

Given this attitude, it's not surprising that the ATA analysts, despite a faith in the political worth of hard evidence, bore no ill will toward Hill and Knowlton, expressed no feeling that money spent on public relations could have been better used on studies. Rather they felt that better public relations could have saved the day. Avoid swinging at academics. Call it "bananas" instead of "regulation."

One detected a hint of jealousy, though, toward the money and support lavished on the ATA lobbying operation. On the ATA organizational chart, the economic and lobbying divisions appear as equals. In practice that's far from true. The Government Relations Division has its own separate building-a modern, expansive red-brick structure just down from the House office buildings on Capitol Hill. In 1980, the seven lobbyists headquartered there (all white, male Protestants) were the ATA's golden boys, seen as rainmakers by many in the industry. "The director of this division doesn't have the power of [the ATA's lobbying director]," said one analyst. "If I was running the show, the Hill office wouldn't be the tail wagging the dog."

From the industry's standpoint, the two divisions--economics and government relations--probably ought not to have equal power. The ATA is foremost a lobbying organization, after all. But it might have helped the lobbying effort had there been better coordination with the analysts. "We never... mapped out a strategy linked to the available data," said one ATA analyst "We never sat down and said-Where are our strong points, our weak points? Where do we have data? What are the three key issues where we need it?"

On the one hand, it seems surprising that one of the most powerful trade groups in the country, in a battle for its survival, would never have mapped out a plan for strategic use of analysis--especially considering that economists were the heart of the opposing army. On the other hand, it's not surprising when one considers how minimally analysis figured into the ATA's overall battle plan.

In retrospect, the ATA may have devoted too little effort to empiricism, especially given the questionable effectiveness of its public-relations campaign. Even if trade association studies are skeptically received on Capitol Hill, there may be a critical mass when it comes to substantive evidence: Any more won't help a group very much, but any less and its analytic arguments are dismissed altogether as self-serving. The ATA failed to reach that critical threshold, and credibility problems undermined what little evidence the industry group did have.

But precisely because of those problems, the ATA's decision to stress public relations over substance was sound. No amount of attention to empiricism would have helped the industry's case significantly. The evidence simply wasn't there. (One ICC economist, asked what he would have done had he been on the ATA's side, said without hesitation, "I'd have bought people off. There's no way you could convince them with the numbers.") Any studies would inevitably have had credibility problems.

Moreover, stress on public relations served the ATA's internal needs. Unlike statistical studies, films and catchy advertisements are highly visible to members and serve to reassure them that the trade association is doing everything possible in their interest.

In short, the facts simply weren't on the industry's side. Eventually, members of Congress came to see that. But while deregulators merit considerable credit for that outcome, the ATA deserves little blame.
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