Sitcoms, Inflation, and Sound Public Policy

By May 29, 2018Blog
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By Tim Shea, Special Contributor | Did you ever realize the economic impact of sitcoms, inflation, and public policy?

Seinfeld. It was a simpler show for a simpler time, living proof that fiction doesn’t need an actual plot to be obscenely successful. The sitcom’s subject matter was often dark and always eclectic, to put it mildly, and episodes addressed everything from “marine biology” to soup etiquette. Of particular interest to us, it even strayed occasionally into the realm of economics. Alright, fine, calling it economics is a bit of a stretch. But it did provide a fascinating case study in applied arbitrage.

The episode in question was something straight out of every cash-strapped eight-year-old’s daydreams, detailing the misadventures of two bumbling idiots as they struggled to exploit Michigan’s almost mythical 10 cent bottle deposit. Ultimately, the pair land upon the bright idea of co-opting a mail truck to circumvent fuel costs, tolls, and other expenses. Hilarity ensues.   Image Source: logo

It is a great credit to the show’s writing that many of its bits and gags are as funny today as they were when they first aired 20+ years ago. There’s an almost timeless quality to the humor. In the case of “The Bottle Deposit”, however, that timelessness is borderline literal; take a look at any bottle or can, and you’ll see almost the exact same refund disclaimer that enraptured Newman way back in 1996. In fact, in the 47 years since states first introduced bottle deposit schemes, only Oregon has changed the original terms in any meaningful way.

That is not to say the rest of the economy has remained likewise stagnant in the intervening years. It hasn’t, and consequently, inflation has taken a substantial bite out of the relative value of the deposit/refund. Some perspective, courtesy of the Bureau of Labor Statistics’ Inflation Calculator: in order for policy to have the same effect as it did in 1996, the refund would have to increase some 60% to 8 cents per bottle. Even more shocking, to keep a pace with inflation since the 1971 advent of bottle deposits, the original 5 cents would need to jump up to a whopping 31 cents.

This discrepancy has begun to have an appreciable impact on the effects (or lack thereof) of bottle redemption policies. Simply put, the required deposits no longer bite as much as they need to, and the refunds just aren’t worth the hassle. Such is certainly the case in Connecticut, where the fact that roughly half of all of bottle and cans now wind up in landfills has forced the legislature to consider doubling the deposit…or scraping it altogether. And even doubling might not be enough to offset the ravages of inflation. Oregon’s recent bump from 5 to 10 cents was only about one-fifth of the increase needed to achieve parity with the original law.

All of this is a rather roundabout but hopefully entertaining way of saying that inflation can have very real consequences for public policy. Fortunately, this is a lesson that more and more lawmakers have taken to heart in recent years. For example, the Alternative Minimum Tax was finally pegged to inflation in 2013, and likewise many state minimum wage laws have inflation adjustment provisions.

Such inflation-conscientiousness is encouraging, but it cannot be allowed to slip by the wayside as the economy steams ahead. All too often, policy makers are content to discuss economic figures in nominal instead of real terms. This is misguided at best and dishonest at worst. In order to be economically sound, public policy must include robust debate, analysis, and provisions for the ever-higher costs of living, especially as the Fed toys with letting inflation slip above their 2 percent target.

On the other hand, if Arizona wants to keep selling their iced tea at 99 cents a pop for the next couple of decades, that’d be just fine.


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