By Michael M. Bates
Thursday, March 1, 2007
Being in the same tax bracket as Ralph Kramden, I generally don't need financial advice. Consequently, my awareness of celebrated money maven Suze Orman is limited. I know she is regularly seen on taxpayer funded television and has written several successful books. That's about it.
Two weeks ago, C-SPAN aired a Senate hearing on federal college financial aid. Ms. Orman was one of the witnesses. For a person hailed as a monetary guru, it wasn't an inspiring performance.
Perhaps she should be given the benefit of the doubt. Teddy Kennedy chaired the Senate Committee on Health, Education, Labor, and Pensions hearing. Getting within breathing distance of that dipsomaniac would be enough to give anyone the vapors, which may explain Suze's confusion.
Ms. Orman spoke about young people's widespread financial irresponsibility. Who will teach them fiscal accountability? she asked. Not their grandparents or parents. And how could "teachers that are all at the poverty level to begin with" possibly do the job?
We've heard the assertion that teachers are grossly underpaid so long and so frequently that it's gained an element of credibility. Now Suze's dialed the story down to poverty level for all of them.
Two analysts at the Manhattan Institute think tank recently examined data on public school teachers' salaries compiled by the U.S. Bureau of Labor Statistics. They found that in 2005 the average public school teacher earned $34.06 an hour. This is, they noted, 36% more per hour than the average non-sales white-collar worker and 11% more than the average professional specialty and technical worker.
During her testimony, Ms. Orman changed her mind. She abruptly decided that those impoverished educators can handle the action after all. Every high school student would be required to take "some financial exam that they have got to pass before they enter into the world."
Suze said a few minutes later that most people aren't equipped to make good decisions on higher education financial aid. Dealing with lenders, applications, agreements and all that other stuff is just too complicated. She therefore wants more government regulation:
"I would like the choices and competition, believe it or not, taken out of it because we always lose when others are competing over our business."
Ms. Orman has turned truth on its head. When people and companies compete for our business, we win. Most consumer goods are plentiful in this country, relatively inexpensive and getting better in terms of quality.
The government didn't impose laws that created this situation. If it had, they'd probably have backfired. Competition almost always leads to lower prices and greater efficiency.
In 1981, the IBM personal computer was introduced. Boasting 16K of RAM, the base price was $1,565. That didn't include a monitor or disk drive.
Were IBM still the only source of PCs, we can only guess what pricing would be like. Competition quickly improved the quality and quantity of computer features and brought prices sharply down.
That didn't happen because Washington curtailed choices, as Suze recommends for financial aid. Nor was it because manufacturers wanted to do us all a big favor. It was simply in their own best interest to compete for -- and win -- our business. That's how they make profits, stay afloat and prosper.
The same year that IBM brought out its PC, a first-class postage stamp was 18 cents. Now it's more than double that. This week a postal regulatory commission recommended a 2-cent increase to 41 cents. With a monopoly on first- and third-class mail, the United States Postal Service doesn't have to worry much about competition.
Moreover, it's moved into areas that might have puzzled first postmaster general Ben Franklin. Need an Ultimate Mancini CD? A Marilyn Monroe Teddy Bear? A NASCAR t-shirt? A copy of "The Gifts of Kwanzaa"? All can be ordered on the USPS Web site. Why I don't know.
I doubt that it improves the Postal Service's effectiveness. Its pricing and levels of service, in my judgment, haven't gotten better. Unlike most other sectors of the economy, the Postal Service seldom has to contend with challengers. If it did, would customers always lose as Suze Orman claims?
Possibly the lady just had a bad day. Or maybe her disdain for free enterprise partly explains the $11,000 she gave to Mrs. Clinton's senatorial campaign. Either way, if I ever get out of Ralph Kramden's bracket, I'll look somewhere else for financial guidance.
This column by Michael M. Bates appeared in the March 1, 2007 Reporter Newspapers
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