The Justice Department is blocking the American Airlines and US Airways attempt to merge. According to the JD, the lack of competition apparently will raise ticket prices unfairly and consumers will be hurt. Really? For our next trick, we’re going to attempt to pour water into a rock. Where has the Justice Department been every other time?
Southwest Airlines and Air Tran merged. United and Continental merged. Delta merged with somebody – I just can’t remember. Going way back, what happened to TWA, Ozarks, Pan Am, America West, etc.? All mergers, all for the same reason – eliminate competition and increase fares. And now (suddenly) America’s Barney Fife has caught up with those tricky airlines.
The JD is quoted as saying that, “increasing consolidation among large airlines has hurt passengers.” Apparently, very few JD officials travel. Oops… let me re-state that. Apparently, very few JD officials travel on their own dime. Otherwise, they would have seen these trends, oh let’s say a decade ago.
The following is not for consumers… you know what the elimination of competition does to pricing. The rest of this blog is for the good folks in the Justice Department. I would ask that they read the following words with great interest. Call your favorite JD employee and let them know this blog exists.
Whether it is airlines, bus lines, lines of shoes, socks for shoes or any other consumable, the premise is the same, the less of something (read choice), the greater the price. It’s a silly little principle called “supply & demand.” If I have 20 choices for orange juice, I’ll have a better price than if I only have 10 to choose from. And if there is only two, the consumer is getting smashed to a “pulp.”
So back to credit unions. We are currently lobbying aggressively to maintain the credit union tax-free status as it relates to federal income tax. Credit unions don’t pay federal tax and this has had a number of people on edge for decades (read big bankers). If credit unions pay taxes, (the argument goes) there would be less of a federal deficit, because government tax receipts would increase. The noble charge of big bankers and others would help correct the federal deficit and the world would be a better place.
Oh, those sly devils in blue suits. They want credit unions to be taxed because many credit unions would fail and there would be less competition. Less competition would force more consumers to use banking services. The supply would fall short of demand and (Justice Department beware) the costs to consumers for banking services would more than likely go up.
The veiled attempt by bankers to hide behind “helping to diminish the federal deficit” is laughable. Their motivation is to eliminate a competitor. For bankers and their stockholders, this is a good thing – for the rest of us not so much.
The Justice Department’s revelation that fewer airlines means higher prices is the same rodeo that would take place if credit unions get taxed – fewer credit unions would equal higher consumer prices. It’s really that simple.