How government forces private firms out of business with predatory pricing

This article on Fox News’ Forum is by John Lott. He explains the threat of predatory pricing as it relates to Obama’s health care plan.

First, Lott explains the stated goal of Obama’s plan:

President Obama is selling government health insurance to the American people as the way to save money.  That government health insurance will merely provide competition to keep private insurance companies from gouging their customers.

But here is the problem with a parallel system run by the government:

There are a couple of problems with Obama’s argument.  Government is just not known for its cost effectiveness or quality.  And the way for government enterprises to survive is with massive taxpayer subsidies and charging customers prices below the firm’s actual costs, driving more efficient private firms out of business.  These subsidies mean that when government enterprises “win” they do so by driving more efficient private firms out of business.

Here is an an example of how it works with USPS vs Fedex:

The U.S. Postal Service would often increase its first-class mail rate, where it had a monopoly, to raise money to subsidize its overnight delivery service where it faced stiff competition.  For example, it raised first-class mail to thirty-three cents in January 1999 and simultaneously reduced the price of domestic overnight express mail from $15.00 to $13.70, even though it was already losing money at the $15.00 rate. The price, which was lowered in response to increasingly successful competition in overnight delivery from FedEx and UPS Overnight, remained below $15.00 for the next seven years.  Clearly the Postal Service was not able to drive its competitors out of business with this maneuver, in part because its on-time delivery record and quality was poorer.

The Postal Service lost money on its overnight deliveries despite advantages that FedEx and UPS could only dream of.  The Postal Service is exempt from paying state sales, property and income taxes.  And it uses some of the most expensive real estate in the country — rent-free. The competition that Obama advocates between government and private insurance companies isn’t going to be any fairer.

The government can run huge deficits, effectively transferring money from the productive private sector into their parallel public competitor, with the end goal being complete control of consumer purchases. Obama intends to run private companies out of business so that you have only one place where you can go to purchase health care: OBAMA. And you will do anything he tells you in order to get that health care.

It’s all about controlling your behavior by taking your money and then restricting your access to services. The end goal is that everyone will have equal life outcomes regardless of how hard they work, and how risky and/or immoral their lifestyle. Democrats do not trust you to keep the money you earn, and to spend your money on the things that you want. They think government knows best.

In his book “Freedomnomics”, Lott has even more examples of predatory pricing. I recommend that book, especially for the chapter on abortion and crime. Pro-lifers will find the book very useful. It’s important for people to understand that the more involved government gets in the free market, the less liberty we have as consumers.

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