America should have a public option for everything

In town meetings across Vermont last week, residents voted in favor of converting the Vermont Economic Development Authority into a public bank. Modeled after a similar bank in North Dakota, the Vermont proposal would create an institution that held and invested the state's funds locally, on the hope that doing so would provide a boost to the local economy and cut out middlemen bankers.

The Vermont public bank proposal is actually almost boringly modest in its scope. But the broader idea of creating government-run enterprises is an extremely interesting one, and gets way less attention than it ought to. Indeed, public agencies at the municipal, state, and federal level should be far more aggressive in directly running businesses in order to provide public alternatives to private competitors.

These days, our national discourse around government involvement in managing enterprises is largely constrained to the topics of regulation and monopoly. Both have their role, of course. Regulation is important for a number of reasons, including the containment of pollutants and other external costs. Government-run monopolies are a fine way to administer public utilities that tend toward natural monopolies anyway.

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But these aren't the only two channels available to governments. In some and perhaps many cases, it makes sense for the government to do more than regulate an industry, but not go as far as to monopolize it. In those cases, a public option is ideal.

"Public option" became something of a household term a few years ago during the ObamaCare debate. In this case, the "public option" would have been a government-run health insurance company that competed with private insurers on the ObamaCare exchanges. Health insurance is probably best provided through a government monopoly, though creating a public option is at least a second-best policy. Such an option would give consumers a trustworthy alternative to private insurers, create competition in markets where there is very little, and put downward cost pressure on private insurers by having the government offer cheaper plans. Naturally, the private insurance and pharmaceutical lobbies killed the idea.

More recently, an idea to provide basic banking services at post offices has picked up steam on the heels of Sen. Elizabeth Warren's (D-Mass.) endorsement. These postal banks would provide a public option for the kinds of financial services those with low-incomes often need, most importantly a low-cost way to access the value of their paychecks, something existing private cash-checking services don't provide. This is a fantastic idea, though its realization is hobbled by a number of difficulties, not the least of which is financial industry opposition.

A public option in individual retirement accounts announced in this year's State of the Union address appears to be on track to actually happen. Called myRA, the policy essentially amounts to turning the U.S. Treasury into an IRA provider, allowing people to park some retirement savings there if they so choose. The scope of the plan is modest, and proposals to provide a full-blown public option for IRAs and 401(k)s are much more attractive. But it is a start nonetheless.

In America today, in the rare cases where we do see some talk about public options, it is usually because there is serious failure in an industry. The U.S. health care industry is wildly expensive, the financial industry fails to serve the needs of those without banks, and our private retirement system is in shambles. It's not mysterious why discussion of public alternatives pop up in those areas.

We should have a more aggressive approach to public options. They should not be last-ditch efforts to plug in the holes left by spectacularly dysfunctional parts of our economy. Anywhere there is a space where the government can profitably run an enterprise, it ought to do it, especially if the enterprise is consumer-facing. In so doing, it can bring pressure against private competitors on a number of axes, provide trustworthy options for low-information consumers, and help beak up in some small way at least the grip private business has on our society.

Governments could get into the business of building and operating housing units that they rent out at market rates. This would expand the housing supply, something desperately needed in some areas, while also providing a source of revenue. Governments could get into consumer credit, perhaps offering its own line of credit cards. This would help consumers wary of hidden terms and conditions that make other cards such a gamble. Even a chain of public grocery stores is not out of the question, provided it could stay afloat.

Conservatives will oppose the idea on anti-government grounds, unless they live in North Dakota, where they seem to support their public bank. But government enterprises have a long pedigree and can be useful, especially if rolled out while the country is suffering from a severe long-term unemployment crisis like the one America currently finds itself in.