In my previous blog I discussed Government Monopolies such as the Department of Justice, the Department of Education, the Federal Reserve, NASA, the Post Office, the military, and the Department of Energy, which are just a few examples of government run monopolies. Social programs such as Medicare, social security, and the government’s recent take over of the student loan business are all monopolies that private sector businesses cannot challenge. Is there anything that can be done to mitigate the effects of government monopolies? Interestingly, as I was researching this topic, Townhall Magazine did a piece on this very subject in its April 2010 issue. Thus, there are a few things still working in favor of capitalism.
First, debt and inefficiency will force many government monopolies into bankruptcy. For instance, the Post Office is losing billions each year while their private sector competition (UPS and Fed Ex) is thriving. Thus, the government may be forced to privatize the Post Office to save them billions in accumulated debt. Government financial issues are also forcing them to cut back on spending for NASA. Hence, NASA is another government monopoly candidate that may be better served if it were privatized. Other examples of government power grabs in the private sector include Fannie Mae, Freddie Mac, Amtrak, GM, and Chrysler; they too would do better if the government placed these entities back into the private sector.
The recent recession revealed a disturbing trend. High spending social welfare countries and states are in the deepest financial trouble. Greece, Italy, Spain, Portugal, and liberally run states such as California, New York, New Jersey, and Illinois are all in dire financial situations. People are learning that socialism, unlimited entitlements, and Keynesian economics are all recipes for financial failure and doom. The result of this realization has been pushing the global electorate further right on the political scale. Germany, Italy, France, Great Britain, and the United States are starting to take big steps to the right. This will hopefully lead to more fiscally responsible governments that will rein in spending and ultimately break up government monopolies that are causing fiscal unrest.
The U.S. government will also be under pressure to lower corporate taxes so American industries will be able to compete globally. Today, the U.S. corporate tax rate is the second highest in the world and is one reason jobs are moving overseas. Even socialistic Western European countries have much lower corporate tax rates than the United States. Lower taxes will ultimately lead to less government power and control and more power for capitalism and the private sector. This philosophy also works between competing states. States with lower tax rates are attracting both citizens and corporations to move to these states. This ultimately will lead to a declining tax base in highly taxed liberal states such as California, New York, Illinois, and New Jersey. This, in turn, will force these states to cut back on government monopolies and social programs to remain solvent. They will also be forced to lower individual and corporate tax rates to compete with other states.
Another aspect that will minimize the power of government monopolies is to reduce the power of special interest groups such as unions. Nearly half of all states have “right-to-work” laws, which protect employees who do not want to be unionized. For instance, union influence dominates the policies of the Department of Education. Teacher unions advocate for teachers, but not for the students. Teacher unions collect millions in dues each year that are used to lobby for things such as gay marriage and other issues that have nothing to do with education. This is why it is important to minimize the influence of unions. Also, many corporations, such as Boeing, have started to move operations from union friendly states (Washington) to corporate friendly states (South Carolina). Losing industry means states will be losing precious tax revenue, thus “right-to-work” laws are pressuring union friendly states to think about the adverse affects of these policies.
The bottom line is that lower tax rate states with pro-business legislation are putting pressure on high tax rate states who favor special interests over corporations. This is forcing states and the federal government to rethink its anti-corporation policies. This is especially true during this recession, which has magnified the shortcomings of anti-business laws.
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