Saturday, March 10, 2012

On the TSA, bailouts and needless economic interventions

The TSA (Transportation Security Administration) was a G.W. Bush bailout for the airlines because, after 9/11, there was a genuine fear of flying amongst the American public. So, the U.S. government stepped in to give Americans confidence to fly again.

However, all this action did was create a moral hazard for the airlines. Every time there is a failure in TSA's security, the airlines are not be held responsible, the U.S. government is. As a result, there is an ongoing degradation of liberty and the humiliation of the U.S. traveler at the hands of government officials.

If the airlines were responsible for security, there would be competition in security. That competition would drive toward maximum security with minimum damage to the travelers' liberties accompanied by minimum cost and inconvenience, as well.

Some airlines would do better than others. Prices might even be affected by how well airlines do in the security department. All-in-all, there would be improved security at a lower cost—and the travelers would bear all of the cost. The American taxpayer would not be held hostage as the payer of last resort in the event of ongoing failures or the need for new technologies.

Already the Obama administration has handed out favorable contracts for the production of the new x-ray machines and other TSA equipment to manufacturing firms strongly connected to unions. It is just one more way of intervening in the economy where the government need not be present at all.

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