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Robert Reich: Why your cable bill is so high

Yahoo Finance
Yahoo Finance

If you’re like most Americans, you have wondered at some point – probably monthly – why your cable bill is so high. And for good reason. The average cable bill in the United States rose 5% in 2012, the latest year available. That’s nearly triple the rate of inflation. And that elevated expense gets you some of the slowest service in the developed world.

What about airfare?Average domestic airfare rose 2.5% last year to $391. That’s the highest level since the government began tracking the data in 1995.

Gas prices, meanwhile, are down nearly thirty percent or about a dollar a gallon since last year.

So why do prices in some industries seem to remain stubbornly high despite market forces that would seem to demand otherwise?

In an interview with Yahoo Finance Editor-in-Chief Andy Serwer before a live audience at LiveTalksLA, noted economist and former Labor Secretary under President Clinton, Robert Reich, says it’s about politics.

“People ask me, ‘why is it that my airfare hasn’t gone down even though fuel prices have plummeted over the last three years,’” he said. “Fifteen years ago we had nine major airlines. Now we have four major airlines and in many hubs, there are only one or two. Voila. You don’t have competition.”

Reich says that’s the case because the companies - airlines, Internet service providers and others - have consolidated power as they have consolidated their industries.

“Some of it has to do with politics and the power of these industries over the rules of the game with regard to airlines, Internet service, anti-trust and what have you.”

Cable rates are up 56% since Congress deregulated the industry in 1996, according to Consumers Union. Over that same time period, inflation is up 21%.

Reich offers another example of where the rules have been rewritten in the last 30 years to benefit the few instead of the many, in his view: bankruptcy laws.

“It is possible, for example, for a major industrialist to declare bankruptcy four times to shield his fortune,” he said in a not-so-veiled reference to one Donald Trump. “But if you’re a homeowner and you got caught in the downdraft of a major recession to the point where you owed more on your home than the home was worth, you cannot use bankruptcy to reorganize your mortgage debt. Or if you graduate with a huge amount of student debt and you can’t manage it, you cannot use bankruptcy to reorganize that student debt. Now, is that just the way it is? No! It’s politics. It’s power.”

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So is this likely to change anytime soon? Reich says maybe not yet, but if history is a guide, there will be a ground swell of support for change eventually.

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