Economic survival 101

Economic survival 101

November 18th, 2012 in Opinion Free Press

Is it unkind or just realistic to say that a lot of Americans would benefit from a crash course in basic economics - or at least consumer math?

For a moment, disregard the biggies. Forget the chilling indifference of many citizens toward a national debt that now exceeds the value of everything the U.S. economy produces in a year.

Set aside the fact that an astonishing number of Americans hold the unfathomable view that we can rapidly add tens of millions of people to government-run medical care through Obamacare without serious financial consequences.

No, one needn't look at the Jupiter-size examples of fiscal lunacy to realize that something is badly amiss in the public's - and Congress' - understanding of economic reality.

Take the ceaseless uproar over airlines' efforts to shore up their finances.

The outrage toward the carriers is formulated more or less along these lines: "Did you hear that (fill in the blank) airline is making you pay nowadays for your first checked bag? It's even charging for things like pillows and bottled water that used to be free! What a bunch of greedy fat cats! I wish they'd go out of business."

Wish granted!

Or very nearly.

American Airlines filed for bankruptcy last November, "following in the footsteps of United (2002), US Airways (2002 and 2004), Delta (2005), and a host of others that have gone under or have been merged into anonymity, including TWA, Pan Am, Eastern, and most recently Continental and Northwest," writes James Glassman, an adviser to the U.S. Securities and Exchange Commission, on Forbes.com.

And here is another choice fact for those who think paying for extras on airlines is just a gouging scheme - and for lawmakers who know better but are ever eager for a pickup game of class envy: The airlines lost 150,000 employees and a jazzy $55 billion during the first 10 years of this century.

Everybody happy now?

What gets missed in the discussion of paying for extra legroom or food or baggage is the original purpose of those fees: to hold down basic ticket prices.

Facing a recession and skyrocketing fuel costs in recent years, airlines have had to restructure and rethink their business models.

Now, instead of paying higher across-the-board fares to subsidize for others the snacks, luggage conveyance and similar amenities that he may not want, a passenger can pay in a more a-la-carte fashion for the things he does want. In other words, the actual users of certain goods and services get to foot the bill for them.

What a concept!

With half a moment's thought, many of the critics would realize that this is precisely what they have been clamoring for from cable TV companies: to let them pay only for the channels they want, not for slow-motion train wrecks such as E! and MSNBC.

Alas, uninformed chatter by the flying public is not the real threat - except to the extent that it gives populist cover to members of Congress who never miss a chance to raise taxes.

Uncle Sam slaps a 7.5 percent tax on airline tickets. But the tax doesn't apply to baggage fees. That's a boon to passengers and airlines alike. It reduces travel costs and encourages more people to fly, spurring economic activity.

But in Washington's eyes, missed tax revenue is a disaster on the order of Madonna's film career. So, The Washington Post reports, Congress is contemplating slapping a tax on baggage fees, too. Just so they don't get too fat-catty, you know.

That presents the troubling prospect that federal lawmakers may soon be seen throwing planes under buses.

Just what a beleaguered industry needs: yet another reason to go bankrupt.