The Retired Investor: DST Economics /

By Bill SchmickChronicler of the iBerkshires

On Sunday, November 6, 2022, Americans set their clocks back to standard time. Earlier this year, the US Senate unanimously approved a bill that would have made daylight saving time (DST) permanent starting November 20, 2023. What happened?

The U.S. House of Representatives did not act on the measure. To become law, the measure would have to be passed by the House and signed into law by the President. Fundamental disagreements over the wording of the Senate bill, called the Sunshine Protection Act, ultimately centered on the right time to make permanent – ​​daylight saving time or standard time.

Recent public opinion polls indicate that most Americans would like to see permanent DST. You might ask why and when did the current system develop, and what is the economic impact of changing it?

Benjamin Franklin came up with the idea in 1784, but it was Europe, particularly Germany, that implemented the change in 1916. In America, daylight saving time has had a checkered past, with beginning with President Wilson, who made it law in 1918. It was repealed seven months later, reinstated in 1942 by FDR, and formalized by Lyndon Johnson in 1966, who standardized the start and end dates of the summer time across the country.

Arizona, Hawaii, Puerto Rico, American Samoa, US Virgin Islands, and Northern Marianas do not recognize daylight saving time. Only 70 countries around the world observe it, but those that do are strict about it. For example, on Saturday October 30, 2022, clocks in most of Europe were set back one hour at the end of daylight saving time.

By passing the Sunshine Protection Act, U.S. Senate lawmakers justified permanent daylight saving time by arguing that it could boost consumer spending, while reducing energy consumption by adding an extra hour of daylight at the end of the working day.

Historically, not everyone in the United States liked the concept of daylight saving time. Farmers lobbied against the concept because it would give them one less hour of sunshine to send their crops to market. They also claimed that the cows don’t like it because milking is done on a schedule and daylight saving time disrupts that.

As for energy conservation, at one time the United States implemented year-round daylight saving time (from January 1974 to April 1975) to combat the energy crisis in the era. Once again in 2005, Congress extended DST by one month to reduce energy costs as well. Unfortunately, studies have shown that the fraction of savings on electricity and gas bills from daylight saving time is more than offset by higher energy consumption in other areas.

The United States Chamber of Commerce has long supported daylight saving time. The Chamber argues that consumer spending increases during daylight saving time. Retail sales are jumping due to more people shopping after work. Energy consumption also increases. Increased use of air conditioning and fans, as well as additional driving occur when consumers take advantage of the extra daylight to shop. This explains the minimal gains in energy savings overall.

Two of their members, golf and the barbecue industry, have made their case. Golfers profit from the extended hour of play to the tune of $200 million to $400 million a year, according to the Chamber of Commerce, while barbecue-related business profits increase by more than $150 million a month. Restaurants, hotels and businesses in tourist areas also favor daylight saving time as they say visitors stay later.

On the negative side, William F. Shugart II, an economist at Utah State University, says the clock change itself can cost the country $1.7 billion in lost opportunity costs. He argues that people could do something more productive. Additionally, the Air Transport Association, as of 2007, estimated that the airline industry suffered over $147 million in tight schedules worldwide due to the clock change.

Beyond the economy, which seems to have as many upsides as downsides, the social impacts are just as puzzling. Longer daylight promotes safety for children playing outdoors, joggers, and dog walkers, and increases visibility, which reduces car accidents.

Against the pros, there are arguments that moving the clocks forward provides less sunlight in the mornings when most kids go to school. Since most thefts are committed at night, additional daylight can reduce crime.

In any case, don’t expect Congress to pass legislation to make either time change permanent this year. Depending on the outcome of the midterm elections, something could change in 2023, but given the partisanship in Congress, I wouldn’t hold your breath.

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his comments are or should be considered investment advice. Direct inquiries to Bill at 1-413-347-2401 or email him at [email protected]

Anyone wishing to obtain personalized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement by OPI, Inc. or a solicitation to become a customer of OPI. The reader should not assume that the specific strategies or investments discussed are employed, purchased, sold or owned by OPI. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or capital. This communication may include opinions and forward-looking statements, and we cannot guarantee that these beliefs and expectations will prove to be accurate. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or capital. This communication may include opinions and forward-looking statements, and we cannot guarantee that these beliefs and expectations will prove to be accurate.

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