Why is a staunch Conservative advocating for…GASP…regulation? Put down the pitchforks and torches and let me explain.
We advocate for small government, not no government. We also must be practical with our philosophy, not idealistic. Many Conservatives didn’t like Romney, but those that stayed home contributed to Obama’s re-election.
In the case of taxis, history has demonstrated that they operate like a quasi-utility. Despite common sense, the free market in city transport actually makes things worse. Believe me, I was as shocked as the Libertarian Uber driver who took me to the airport last week.
Background
New York City had an oversupply of taxis in the 1930’s. That led to cutthroat competition, as it was the Depression and men needed jobs. Fare wars led to violent strikes. Taxis became increasingly dangerous to operate, as fares didn’t generate sufficient revenue to maintain the vehicles. Dangerous gypsy cabs appeared. Passengers were put in jeopardy by poorly maintained cars, questionable drivers, and price gouging.
Mayor LaGuardia passed The Haas Act in 1937, requiring drivers to obtain licenses (medallions) and limiting the number of cabs to 11,787. It also required insurance coverage, and regulated fares and vehicle quality. The problems went away.
Since then, other cities instituted similar rules. However, there have been multiple cases in which de-regulation was instituted. These scholarly studies concluded that it made things worse for drivers and consumers, producing lower driver income, decrease in service quality, higher response times, and more complaints from riders.
The reason is the free market begins to work too well and what results is a race to the bottom. It’s logical. In a completely unfettered market, drivers will cut prices to the bone in order to offer the cheapest fare to the passenger.
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Of course, we consumers have no problem with this. As for the drivers, they have made a free choice to be a driver. That’s all true. Yet, this is where the wheels come off, so to speak.
Lower fares lead to less driver revenue, which means less money to properly maintain vehicles, which means a decrease in safety for driver, passenger, and the public (if, say, a car’s brakes fail because the driver couldn’t afford to replace them).
Insurance
That takes us to the insurance conundrum. There will be accidents. I don’t want some knucklehead running me down, only to discover he has no insurance because he couldn’t afford it because he isn’t making enough money driving.
Believe it or not, that’s already happened to me once. I had uninsured motorist coverage, so I was taken care of. Yet why should I bear the burden of someone else’s irresponsibility? Personal responsibility and accountability are Conservative principles, and those get thrown out the window if insurance is passed over because driver income is too low.
Hasn’t the free market solved the problem? Doesn’t Uber now provide insurance?
Uber’s insurance coverage is questionable. Drivers only have contingent coverage with low-limits during “app on” mode. Although Uber claims to have a million dollar liability policy during a trip, other sources question the viability of that policy (which only provides contingent coverage for collision), and the solvency of the insurer.
As any personal injury attorney will attest, a million dollars in coverage seems great until someone is run over, paralyzed, and hooked to a feeding tube for the rest of his life. Passengers cannot count on the driver’s policy. As soon as the driver’s insurance company gets hit with a claim, they’ll deny it because virtually every policy excludes commercial use of the vehicle.
Furthermore, any claims that do get paid are taken from that company’s risk pool, which raises premiums for everyone else. Why are we subsidizing Uber’s sub-par insurance?
That describes the need for rideshare insurance regulation.
Moving the Goalposts
There’s another practical issue to consider.
After NYC capped the supply of medallions, and the decades went by and NYC grew and prospered, only a small number of medallions were added, so the existing ones rose in value, eventually topping out at over $1 million.
Medallion owners hold a hard asset of tangible value. The NYC Taxi and License Commission reports that 60% of yellow taxi medallions are owned by corporations, and 40% are owned by individuals.
Who are these individuals? The very people Conservatives welcome into this country: legal immigrants seeking the American Dream. The NY Taxi & License Commission reports that 94% of drivers are immigrants.
Right or wrong, the entrenched medallion system has created wealth for these people. They emigrated legally, started as taxi drivers, saved for a medallion down payment, and now have loans they must service. Permitting an irrational two-tier system where rideshare doesn't require medallions could theoretically harm medallion value (although there is zero evidence of such impact at this time).
In addition, adjunct businesses like Medallion Financial Corporation (NASDAQ:TAXI), which loans money to finance medallions, would be harmed. Now we’re talking about billions of dollars in lending facilities that are placed in jeopardy.
These medallion owners (and their lenders) lived according to Conservative values, and would get penalized as a result. It sends the wrong message and undermines Conservative philosophy. It also undermines a fundamental doctrine of law called equitable estoppel. Essentially, medallion owners and lenders were promised that if they played by the rules, their market would be protected and they relied on this promise to their detriment. How can we screw over hard working people and businesses in this manner?
We can’t. That’s why rideshare must be regulated.
Complaining that medallion owners wouldn’t be stuck with this problem if government hadn’t imposed its will in the first place is the realm of the ideologue. Conservatives must be practical, and we must be compassionate towards those who adhered to our principles.
We cannot undermine hard work, entrepreneurialism, capitalism, and Conservatism by supporting an “innovation” that is, in fact, harming the very people it purports to help. That’s what happens when Liberals make policy!
Conclusion
As with any entrenched system protected by government, the taxi industry has its share of problems – cronyism, smelly and dirty cabs, and allegations of minorities being ignored for rides. There’s plenty of room for reform.
Yes, we want a free market. However, as Conservatives, we pride ourselves on using facts, logic, and reason to determine what policies are best. We also must apply our principles from a pragmatic standpoint.
And from what I see, rideshare must be regulated.
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