Massive government subsidies to Amazon.com and other internet retailers

This piece in the WSJ explains how the government has gotten around regulations put in place to stop them from unfairly competing against private companies.

A Citigroup analysis finds each box [Amazon ships] gets a $1.46 subsidy. It’s like a gift card from Uncle Sam. . . . 

Other companies, such as UPS and FedEx , compete with the Postal Service to deliver packages. Lawmakers, to their credit, wanted a level playing field between the post office and its private competitors. The 2006 Postal Accountability and Enhancement Act made it illegal for the Postal Service to price parcel delivery below its cost.  

But with a networked business using shared buildings and employees, calculating cost can be devilishly subjective. When our postal worker delivers 10 letters and one box to our home, how should we allocate the cost of her time, her truck, and the sorting network and systems that support her? What if the letter-to-box ratio changes? 

In 2007 the Postal Service and its regulator determined that, at a minimum, 5.5% of the agency’s fixed costs must be allocated to packages and similar products. A decade later, around 25% of its revenue comes from packages, but their share of fixed costs has not kept pace. First-class mail effectively subsidizes the national network, and the packages get a free ride. An April analysis from Citigroup estimates that if costs were fairly allocated, on average parcels would cost $1.46 more to deliver. It is as if every Amazon box comes with a dollar or two stapled to the packing slip—a gift card from Uncle Sam.

For years Amazon and other companies that sold over the internet didn't pay sales taxes.  Here is a National Conference of State Legislatures report in 2014.

Main Streets all across America are looking to Washington to close a loophole that gives online-only retailers an unfair advantage over their Main Street competitors. 

This unfair advantage costs local communities jobs and tax revenue and creates significant unfairness in the marketplace for businesses and consumers alike. 

NCSL advocates for passage of e-fairness legislation because it levels the playing field for local businesses, which are the economic backbones of our communities that provide employment and tax revenue to fund vital services. As sales taxes account for over a third of revenues for most states, including over half of tax collections for six states, the inability to collect taxes that are legally owed constrains states’ options to reform their tax code elsewhere. This includes lowering tax rates or requiring states to raise certain tax rates to fund necessary government services. 

How Did We Get Here?Two Supreme Court rulings (Bellas Hess and Quill) cite concern that collecting sales tax for multiple states would be too difficult. As it is now, the Supreme Court ruled that states can only require retailers to collect state taxes in territories where they have offices or stores. 

How Is it Affecting States?States lost an estimated $23.3 billion in 2012 from being prohibited from collecting sales tax from online and catalog purchases. With nearly every state still facing budget shortfalls, this revenue could help fund police, school teachers and other much-needed programs. . . .

Hillary Clinton's plan for free public universities an attempt to bankrupt private colleges

From the Sun-Sentinel newspaper in Florida.

Hillary Clinton has her heart set on fundamentally transforming higher education in the United States. Just three weeks ago, in her Democratic National Convention speech, Clinton pledged to work with former rival Bernie Sanders “to make college tuition-free for the middle class and debt-free for all,” and in her speech August 11 in suburban Detroit, in which she laid out her vision for improving the nation’s economy, Clinton reiterated the importance of providing low-income and middle-income Americans with the opportunity to attain a college education without debt. . . . 

The chief component to Clinton’s plan to resolve the growing student debt crisis is to make public colleges tuition-free for most students and to eliminate tuition at all community colleges. According to Clinton’s campaign website, under her plan, “By 2021, families with income up to $125,000 will pay no tuition at in-state four-year public colleges and universities. And from the beginning, every student from a family making $85,000 a year or less will be able to go to an in-state four-year public college or university without paying tuition.” . . . 

Many private college leaders are wondering just that. In an August 2 report by Politico, Patricia McGuire, the president of Trinity Washington University and a self-described supporter of Clinton, says the free-tuition proposal would put schools like hers “gravely at risk” and warns the policy could “ruin some of the places where low-income students get the best education and are most likely to be successful.” 

Some might say these fears are unwarranted; after all, private colleges already charge significantly more than public colleges, and demand at many private schools is as high as ever. . . .

Obama's Department of Education won't say which colleges it has banned receiving federal money

From Inside Higher ED:

The U.S. Department of Education is so concerned about the risk that dozens of colleges pose to students and taxpayers that it has curtailed access to federal money at those institutions -- but it won’t say which ones.  

Even as it pushes to make far more information about colleges available to consumers, the department is keeping hidden from public view its decisions to punish certain colleges with funding restrictions known as heightened cash monitoring. 

At the end of last October, 76 colleges or universities were subject to the most stringent form of those restrictions, according to the department. Another 455 institutions, as of last August, faced a lower level of scrutiny.  

But the department has refused to provide the names of those colleges because of the “competitive injury” it may cause them.  . . . 

Such reasoning hasn’t stopped the department from publishing other information about colleges that might harm their reputation in the interest of protecting students. It annually publishes colleges’ financial responsibility scores and an array of other financial and price data. And last year the Obama administration began releasing the names of colleges under investigation for mishandling sexual assault cases. . . .

Here is my concern.  In the past the Obama administration has banned students at some private schools from obtaining federal student loans.  I wouldn't be surprised if all 76 schools here are private schools.

Excellent analysis by Ezra Levant: "The CBC is using taxpayer’s dollars to shut down private sector journalism"

Very cheap, energy efficient transportation, and the government wants to kill it

Personally, I don't care about "energy efficient" transportation per se.  I figure that the market will figure out the most efficient way to transport people and energy costs are no more important than other costs.  Yet, it seems more than a little hypocritical for the government to try making this type of transportation so difficult and costly.

Let's say you wanted to get from New York to DC this evening. You could take the government-supported train system - which would cost you $153 or more - or you could take a bus, which gets no government subsidies, for... $19. . . .
[These buses] are now, as CATO transportation expert Randal O'Toole puts it, "the nation's fastest growing transportation mode." He adds:
"They do so with almost no subsidies... Intercity buses are safe and environmentally friendly, suffering almost 80 percent fewer fatalities per passenger mile than Amtrak and using 60 percent less energy per passenger mile than Amtrak." . . .

I did a quick search and I found that for this coming Monday the average Megabus fare is $14.73.  The average Amtrak fare is $160.

If you want to see more on the efficiency of these buses, this is of some use.

Does the US have a conflict of interest in going after Toyota since it owns GM?

It isn't obvious that the government's behavior is "consistent" with how the government handles similar cases.

The US transportation chief's public rebukes of Toyota's handling of a massive safety recall have raised eyebrows, given the US government's major stake in rivals General Motors and Chrysler.
"The optics are terrible because -- and this is what happens when a government owns a company - the two companies that are going to gain the most out of this are General Motors and Chrysler," said Peter Morici, a professor at the University of Maryland's business school.
"But their behavior is consistent with the general policy of the US government, whether it's dealing with coffeemakers or cars."
Safety officials understand that product design mistakes are inevitable and will work to help companies correct the problem and alert consumers. But they will not tolerate a slow or weak response, Morici told AFP.
Transportation Secretary Ray LaHood sat down with reporters Wednesday to lay out a timeline of how US officials had "pushed Toyota to take corrective actions" on its pedal problems since 2007.
The meeting came a day after he issued a statement accusing the Japanese automaker of dragging its feet on recalling vehicles in danger of sudden, unintended acceleration due to pedals which could get trapped under floor mats or become "sticky." . . .

Amtrak loses $32 per passenger

If Amtrak wasn't operating at such a loss, how many other alternatives would spring up? You would have more buses for one competing along their routes, though there are already a lot that do. These losses are nothing new. If a private firm were to do this, it would be considered predation. From the Associated Press:

U.S. taxpayers spent about $32 subsidizing the cost of the typical Amtrak passenger in 2008, about four times the rail operator's estimate, according to a private study.

Amtrak operates a nationwide rail network, serving more than 500 destinations in 46 states. Forty-one of Amtrak's 44 routes lost money in 2008, said the study by Subsidyscope, an arm of the Pew Charitable Trusts. . . .

While Acela Express made a profit, "The more heavily utilized Northeast Regional lost almost $5 per passenger."

On competition with government companies: The case of the BBC

James Murdoch, chief executive of News Corporation, Europe and Asia, has some words of warning that are probably relevant to government competition in other sectors.

An out-of-control BBC and addiction to central planning by regulators are damaging democracy and media choice in Britain, James Murdoch said in Edinburgh last night.

Giving the annual MacTaggart lecture to an audience of television executives, Mr Murdoch, 36, the son of Rupert Murdoch, called for a “dramatic reduction of the activities of the State” in broadcasting, arguing that it effectively treated viewers like children.

He contrasted the prevailing political attitude to mainstream broadcasting with the lightly regulated newspaper, film or book industry where consumer choice predominates.

Mr Murdoch, chief executive of the European and Asian operations of News Corporation, parent company of The Times, said: “In the regulated world of public service broadcasting, the customer does not exist: he or she is a passive creature — a viewer in need of protection.

“In other parts of the media world, including pay television and newspapers, the customer is just that: someone whose very freedom to choose makes them important.”

He said that the “chilling” expansionism of the BBC meant that commercial rivals and consumer choice were struggling. In particular the “expansion of state-sponsored journalism” in the form of BBC News online was “a threat to plurality and the independence of news provision, which are so important to our democracy”.

Mr Murdoch criticised Radio 2’s effort to woo younger listeners by hiring presenters such as Jonathan Ross on “salaries no commercial competitor could afford”.

“No doubt the BBC celebrates the fact that it now has well over half of all radio listening. But the consequent impoverishment of the once-successful commercial sector is testament to the corporation’s inability to distinguish between what is good for it and what is good for the country.” . . .

The Economist magazine on Predatory Pricing

The Economist magazine points to the skepticism that economists have about predatory pricing. I wish that they would have would have noted that the one place where predatory pricing is most likely to take place is government enterprises.

I couldn't agree more with this quote:

TWO decades before he won the Nobel prize for economics in 1991, Ronald Coase wrote an essay decrying the poor state of research in industrial organisation, the discipline in which he established his reputation. The field, he complained, was devoted to the study of monopoly and antitrust policy. That, he said, made for bad scholarship: an economist faced with a business practice that he cannot fathom, according to Mr Coase, “looks for a monopoly explanation”.

It has always struck me as odd that anything that economists see the first explanation is some type of monopoly power.

So much for predatory pricing

Craig Newmark has a posting about Braniff's claimed predation attempt against Southwest Airlines. It reminds me of my book on how difficult predatory price is.