Jan. 16, 2009 at 8:00 AM ET
In the 1960s and early 1970s, U.S. consumers who found themselves in a maddening battle with corporate America had a friend in the White House. That friend was Esther Peterson.
As White House special assistant for consumer affairs, Peterson worked under both the Johnson and Carter administrations for consumer protections that still have an impact on every trip consumers make to the grocery store. For example, she was largely responsible for a series of food labeling improvements that led to unit pricing, which allows apples-to-apples comparison shopping. She also worked to establish new requirements for nutritional information that we take for granted today. Peterson lived to be 91, and before her long career was over she was granted the Presidential Medal of Freedom.
Sadly, when Peterson died in 1997, the concept of consumer advocacy in the federal government largely died with her. At about the same time, during the Clinton administration, Peterson's old job -- White House special assistant for consumer affairs -- was unceremoniously eliminated.
That hasn't panned out very well.
We can't bring back Peterson, but we can restore her spirit. The time has come to put a consumer advocate back in the White House.
A coalition of consumer groups has petitioned President-elect Barack Obama, asking him to restore Peterson’s old office. Doing so would be a respectable down payment from the new president on campaign promises he made about restoring fairness to America's marketplace.
My colleagues in the business section often remind me, correctly, that it's impossible to pin today's economic disaster on one single cause. But poor consumer choices -- stemming from both bad judgment and fraudulent advice -- would be the first suspect I'd bring in for questioning if I were prosecuting the case.
The inability of federal agencies to protect consumers in recent years is obvious. It hasn't helped that budgets for many of these agencies have been continually slashed -- the Federal Trade Commission has about half the employees it had during the late 1970s. Still, consumers really have nowhere to go when locked in an entrenched battle with a company, save the few who have the time and money to pay for their day in a civil court. Consumer rights in America today have been reduced to millions of David vs. Goliath battles, and unfortunately, David can't always win.
Instead, bankers, credit card companies, cable TV firms and other large corporations have been given a clear signal: bullying is good business. Punitive fees, sneaky charges and anti-competitive practices are fine, as long as they don't go too far. Selling mortgages that all involved know won’t possibly be repaid? Well, that was just good business, too.
Once in a while, a company that misbehaves egregiously, like the credit bureau Experian with its FreeCreditReport.com site, is forced to return its ill-gotten gains. But even then no other punishment is levied. So there is really no risk for bad behavior.
A "consumer czar," as some have called it, couldn’t change this environment overnight. The job, as it's been described by the Public Interest Research Group, Consumers Union and other interest groups making the request, wouldn't have any direct regulatory oversight. The office couldn't fine anyone or make law. Legally, it would be simply be a voice in the White House. But symbolically, it would be a lot more.
"The person would have a megaphone to go on television about consumer protection issues, and say I will tell the president 'That's unfair,'” said Edmund Mierzwinski, consumer program director at the Public Interest Research Group. “We don’t want just be somebody in a little cubby hole in the White House.”
Mierzwinski said the office should have a single hot line that consumers with problems could call and be directed to the appropriate federal agency for help.
During his campaign, Obama promised that the Consumer Product Safety Commission and the Food and Drug Administration, agencies with budgets that have long been neglected [or reduced?], would be reinvigorated. More food and toy safety inspectors are obviously necessary – remember, at the height of the lead toy scare last year, the New York Times reported that the CPSC had only one inspector for all imported toys.
But the problem of consumer protection is so vital to the economy that it needs more than just a tune-up. It needs a new home.
Ultimately, Mierzwinski favors the creation of a full-fledged federal consumer protection agency. An effort to create such an agency during the 1970s, spearheaded by Ralph Nader, fell short.
"We have an Environmental Protection Agency. ... With the financial meltdown and the health care mess, the lives of American consumers are just as much at risk as environment," Mierzwinski said.
Protecting consumers is good business
Restoration of a White House consumer affairs advisor would be a baby step toward that rather ambitious end. With perhaps a few dozen employees, it would necessarily be more a policy office than an advocacy office. It would hardly be in a position to fix individual consumers’ problems. But it would put companies on notice that the environment for taking advantage of consumers is changing.
It's important to understand that basic fairness in the marketplace isn't a liberal or conservative goal, and neither is the notion of protecting consumers. The influence of Esther Peterson’s old office had wilted under Republican presidents, but it was then scuttled by a Democrat. Instead, protecting consumers is simply good business.
No one would benefit from relaxed rules allowing automakers to produce cars without trustworthy brakes; even if you are an incredibly careful driver, you'd end up paying for the increased number of car accidents. Ditto for food safety rules in restaurants; maybe you wouldn’t mind eating at places that never have to face a health inspection, but you’d end up paying for all the illnesses that resulted. And today, we all are paying the bill -- an enormous bill - for the hazardous mortgage marketplace that was allowed to fester.
For years, many have been seduced by the notion that consumer protection was a merely a pesky impediment to the forward march of profitable companies and the Dow Jones Industrial Average. Now, we should know better. Obama has many, many interest groups lining up to make their cases about what his priorities should be. But restoring faith and trust in the American marketplace deserves one of these top slots, and a respected public advocate deserves a seat at his table in the White House.