D. Dowd Muska


When Government Is Your Toughest Competitor

January 22, 2015

The Business Coalition for Fair Competition (BCFC) bears the herculean burden of monitoring -- and combating -- a toxic manifestation of the “public” sector’s mission creep. The advocacy group recently released its list of 2014’s “top ten most egregious examples of unfair government-sponsored competition with private enterprise, including small business.” It’s a distressing enumeration of politicians and bureaucrats who refuse to stick to their knitting.

In November, the U.S. Postal Service admitted that it had tumbled $5.5 billion into the red, its “eighth consecutive annual net loss.” But no matter. Cliff Clavin’s clan isn’t letting dismal books keep it from expansion plans. In September, the Federal Times reported that the USPS was conducting initial tests of a “concept it called ‘customized delivery’ in which the Postal Service receives freezer bags filled with foods or other packaged goods from sellers and delivers them to people’s homes.” There’s a prohibition on “unfair or otherwise inappropriate competitive advantage for the Postal Service … particularly in regard to small business concerns,” but that didn’t stop the Postal Regulatory Commission from approving a two-year, San Francisco-based pilot program.

There are dozens of wonky reasons to oppose the USPS’s delivery scheme, but an online commenter probably put it best: “Great. My milk will arrive spoiled and my bread will be delivered to my neighbors.”

Shifting from groceries to gasoline, last summer the City of Somerset, in Kentucky, decided to open its own filling station. It had been selling compressed natural gas for years, so why not branch out? One of the mayor’s distant cousins -- a state senator -- thundered that the Somerset Fuel Center is “nothing but a socialist movement towards government trying to solve everyone’s problems. And government is not the answer; government’s the problem.” (Hyperbolic, but basically accurate.) Kentucky’s chapter of the National Federation of Independent Business pledged to lobby the state legislature “to see if we can find relief there.”

Also seeking succor: Hunters and wildlife-management firms in New York. In 2013, the state awarded a “single source procurement” to the U.S. Department of Agriculture for the eradication of feral swine. Wild piggies have invaded the Empire State, and threaten crops. But while sportsmen are eager to solve the problem, and invasive species are frequently handled by for-profit enterprises, New York went with the feds. In May, an investigation by a Syracuse newspaper found that taxpayers’ price per pig killed in 2013 was $10,694. “It shouldn’t cost that much,” Loomacres Wildlife Management’s said Cody Baciuska told Albany’s CBS affiliate in July. A state assemblyman called the expense “obscene.”

To the south, a Virginia bicycle-shop owner decried the local institution of higher learning’s subsidized challenge. Blake Aldridge, proprietor of Bike Barn, faces a threat from Virginia Tech’s Hokie Bike Hub, which teaches students to do their own repairs. “When you have a mechanic, and you start providing a service that is in competition with the local businesses, I kind of start to think, you know, where’s the line at?” Aldridge asked a local television station. (One of his workers was less charitable, and accused the Hokie Bike Hub of “stealing business just flat out.”) In a curt and dismissive defense of its enterprise, a Virginia Tech spokesman insisted that the school was “well within boundaries of state law to provide this service.”

In Minnesota, a technology nonprofit was the subject of unwanted attention from the Star Tribune. Auditors found that TIES, based in St. Paul, “misspent millions of dollars on a headquarters renovation, mismanaged a State Fair parking lot and had such lax financial controls it paid for nonexistent services.” Reporter Jennifer Bjorhus learned that while almost all of the entity’s budget “comes from member school districts, who tap the organization for training and technology,” the “Minnesota Department of Education … has no oversight role with TIES,” and was not “required to receive a copy of the audit.”

In 2014, the Federal Communications Commission sought to help “entrepreneurial” municipalities that want to offer super-high-speed Internet. In a June blog post, the agency’s chairman opposed state laws against “competitive community broadband.” In response, a Chattanooga Internet executive charged that there was “no greater hindrance to my expansion of capital investment in my communities that I serve than the [city’s] tax funded “competition.’”

High costs, poor results, nepotism, sweetheart deals, an uneven playing field. When government wanders into worlds that are inherently commercial, the shenanigans multiply -- and accountability is often nonexistent. Read the BCFC’s list. And keep an eye out for similar abuses in your community.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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