Good Government

Patrick B. McGuigan | June 30, 2009

Crowding Out Oklahoma's Private Sector: A Real-World Example

Patrick B. McGuigan

The U.S. taxpayer bailout of General Motors points toward the rising trend of European-style socialism in the United States. But wait, in light of the recent European Parliament elections (see page 2), in a few years we might be talking about the decline of American-style socialism in the European Union.

It's actually fairly easy to grasp how fundamentally unfair it is to penalize Ford Motor Company-which has had its share of problems but seems a model of prudence and efficiency in comparison to GM and Chrysler-by rewarding the bad behavior of its most irresponsible competitor. Or how unfair it is to ask private health insurers to compete with the so-called "public option" being promoted by President Obama.

A bit more nuanced, but arguably even more ludicrous, is the fact that the heavily subsidized financing arm of America's "business too big to fail" is a quasi-bank that is too bad to succeed: GMAC Financial Services.

They've already asked for and received a $13 billion infusion from Uncle Sugar this year. Now they're on television with expensive advertisements, paid for by you, bragging about the low interest rates they can offer customers.

Roger M. Beverage, president and chief executive officer of the Oklahoma Bankers Association, is on the war path about the GM bailout maneuvers orchestrated by our empathetic president and his sympathetic Congress. "Like the U.S. Post Office, which loses money yearly and comes hat-in-hand to rich Uncle Congress to tide it over for another 12 months, GMAC has been losing, and continues to lose, money every day it operates," Beverage says.

By the way, GMAC says it will need $9.1 billion more in new capital before the end of 2009. And that capital won't come from private investors, but from all of us who pay taxes.

The facts about GM, GMAC, and the big bank bailout capture the Bizarro world we have entered, where the current president makes George W. Bush look like a model of libertarian prudence. The real story, perhaps most damaging of all, lies in the thousands of examples of government theft through unfair competition against private businesses.

Among many, many examples one could cite, consider for a moment the case of the University of Oklahoma's Printing and Mailing Services. Last year, administrator John Sarantakos bragged about the new tax-financed, state-of-the-art printing system he manages in Norman. Like some sort of 19th century robber baron, he declared: "We want to print everything. Obviously, that's not feasible, but that's always been the goal."

Whose goal? It's certainly not the goal of Oklahoma's private print houses, which have to compete on an unlevel playing field. It's not the goal of many Oklahoma taxpayers, especially those whose views incline them to embrace the Yellow Pages test (i.e., if a product or service is available in the Yellow Pages, the government ought not to be in that business).

My source inside the printing industry runs a private print shop. This individual is highly reluctant to criticize what's happening, but reflected, "It was bad enough when they essentially got a lock on all on-campus printing jobs, and expanded their growing presence doing print work for all government agencies. The disaster began to unfold when they took it a step further to take on print jobs from public-private partnership entities, as well."

One disaster included the OU print shop's capture of a huge printing job for a public-private cooperative venture, one of those partnerships that is neither fish (government agency) nor fowl (private business), but a group enjoying certain tax and other benefits in return for performance of certain co-op functions.

"Source," still smarting from the loss of a good-paying project for his shop, continues by reflecting that OU printing services is "not on the same playing field as private sector competitors. They are a government-run, higher education entity competing on a commercial basis, but they don't have to pay the same taxes as we do. I don't mind competition on a fair basis, but that's not what's happening here."

OU printing services takes business away, albeit "without having to bid under the same conditions or factors as those of us in the private sector." To put a fine point on it, "Things are getting really hinky when state departments are allowed to avoid competitive bidding completely. That means the private guys don't even have a shot to test the system, to see if they might be able to land at least some of those jobs."

Is this on-campus monopoly merely allowed, or mandated? My question is not what might be done to lessen the negative effect OU printing services is having on private competitors, but to ask whether or not what John Sarantakos does in running a government-financed monopoly should be banned?

Government antitrust violations will likely worsen in the Obama years, and the whole situation brings to mind Jonah Goldberg's recent observation in National Review: "Government meddling takes much of the guesswork out of business. Think of big utilities. In exchange for letting the government set their rates, they never have to worry about rivals. Profit margins are guaranteed and predictable. History records no instance where the CEO of an electrical utility missed a tee time because a competitor suddenly unveiled an exciting new product."

If this were a baseball game, you might look at it this way: The OU print shop is allowed to start the inning as a runner on third base, before anyone else even steps up to the plate.

OCPA research fellow Patrick McGuigan (M.A. in history, Oklahoma State University) is an editor at The City Sentinel, a weekly newspaper in Oklahoma City. He is the author of two books and the editor of seven

Patrick B. McGuigan

Independent Journalist

A member of the Oklahoma Journalism Hall of Fame, Patrick B. McGuigan is founder of CapitolBeatOK, an online news service, and editor of The City Sentinel, an independent newspaper. He is the author of three books and editor of seven, and has written extensively on education and other public policy issues.

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