Because of a typographical error, a quote from a Council on Wage & Price Stability study of the Interstate Commerce Commission was incorrect in yesterday's editions. The quote should have been: Current ICC regulation "create enormous inefficiencies and inequities."
In a parting shot at federal economic regulation, the Ford administration yesterday strongly condemned the Interstate Commerce Commission and its claiming a recent study of billions of dollars in benefits to the public from ICC controls.
Current ICC regulation "creates ties," according to a staff report to the Council on Wage & Price Stability, a copy of which was obtained by The Washington Post. The report called for "substantial reforms" but not abolition of the agency.
Founded in 1887, the ICC is the country's oldest federal regulatory body. It approves rates and business entry in interstate trucking, bus lines, railroads, waterway barges and oil pipelines.
In response to broad attacks from many economists and Nixon-Ford administration officials, the ICC's bureau of economics published its own study of regulation costs and benefits costs were far less than suggested by late last year. The report claimed that benefits were $3 billion to $9 billion a year.
Both the ICC study and yesterday's council staff report focus on the pioneering work of economist Thomas Gale Moore, published by the American Enterprise Institure and Brookings Institution. Moore concluded that the U.S. economy would be better off without the ICC's rules and regulations, which he said.
According to yesterday's report, the ICC did not substantiate its claims that society benefits from current regulation. Moreover, the ICC questioned Moore's methodology but used the same basic approach in reaching its conclusions, making "numerous and substantial analytical errors" in the process, the council staff said.
It added that the ICC's primary shortcoming was failure to distinguish between transfers of income from one group in society to anther and the actual social costs or benefits.
For example, "All the evidence we are familiar with suggests that truck rates would fall" if there were less control over rates and business entry by the ICC, said the council staff.
The fact that truck operating rights were woth 15 to 20 per cent of a firm's gross annual revenues, or between $1.5 billion and $2 billion in 1968, "indicates that monopoly profits exist in this industry," the new study stated. "There would be no point paying for a certificate of public convenience and necessity if the same rate of profit could be earned elsewhere in the economy."
Noting that the ICC had disputed the view that rates would decline under less regulation because of subsidy benefits provided small shippers by larger shippers, the council staff said: "How can one conclude that the transfer payments made by those who ship small-sized shipments improves social welfare?"
Pricing certain services below costs leads to overconsumption of such services, while pricing others above cost to subsidize others leads to underutilization of those services, and the result is an inefficient mix of small and large shipments, the council staff said.
If it is socially desirable to subsidize one segment of the population, there are more efficient and more quaitable means available than through control over freight rates, the report stated.
If it is public policy to subsidize money-losing railroad branch lines should the burden fall on owners of the railroad and on shippers not on the branch line and their customers in the form of higher freight rates), the council staff asked. A direct subsidy coming under constant review would be better because "where subsidy is hidden, there is less public scrutiny of the program," the staff report said.