How The US Government Just Increased the Cost of Everything

How The US Government Just Increased the Cost of Everything

President Obama recently signed the “Moving Ahead for Progress in the 21st Century Act” into law. This act made sweeping changes to the laws governing transportation in the United States and committed $105 Billion taxpayer dollars to union labor projects across the United States. The bill also included provisions to maintain artificially low interest rates on student loans.

One almost unnoticed portion of the bill will put up to seventeen thousand small businesses out of business within the year and will raise the cost of almost every good bought or sold in the United States.  Section 32918 of the bill raises the bond requirements for freight brokers and forwarders from $10,000 to $75,000.

Freight brokers are people who negotiate the shipment of industrial goods between shippers and carriers.  If you or I want to ship something, we call FedEx or UPS.  If a manufacturer wants to ship a semi-trailer full of auto parts or fruit pies, they call a freight broker.  Most freight brokers are individuals who work for themselves.  This bill requires each of these individuals to pay $75,000 into a surety bond just to keep their own jobs.

The laws of supply and demand teach us that, as the supply of freight brokers decreases, prices will rise in response.  This rise in shipping costs will then cause the price of every good which is bought or sold in the US to rise.  As the cost of shipping carrots rises, the cost of carrots must rise in response.  Ultimately, the consumers must pay the costs created by this bill.

The Congress didn’t think up this outrage on their own.  This bill is the result of significant lobbying by big business.  The large freight brokers realized that raising the bond requirement would put most of their smaller competitors out of business.  To maximize the damage, they made sure that the bond requirement was the same for all freight brokers — whether the broker is an individual working for himself or a multi-billion dollar international conglomerate. Quoting from the bill, “Each broker subject to the requirements of this section shall provide financial security of $75,000 for purposes of this subsection, regardless of the number of branch offices or sales agents of the broker.”

James Lamb, the president of the Association of Independent Property Brokers & Agents (AIPBA) explains the new law in clear terms, “It’s not about fighting fraud. It’s about creating an oligopoly for big brokers under the guise of fighting fraud.” Susan Wilson, editor-in-chief of Entrepreneur-Support, concurs, saying “The majority of freight brokers are small one-person businesses. The bill makes no distinction between these small companies and the large freight brokers who move billions of dollars worth of freight. The $75,000 bond requirement will put the majority of small brokers out of business. The few large brokers have effectively bribed the government into putting their competitors out of business.” Daryl Spencer of IMOK Freight adds “We will be able to post the bond and continue to do business, but many of our smaller competitors will be unfairly put out of business.”

It is unfortunate that, at a time when our nation is facing staggering unemployment and most families are struggling to deal with rising prices and falling incomes, the Congress and the President would come together in a bi-partisan agreement which will force the closure of up to seventeen thousand small businesses and raise the cost of living for every American household.

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