The Government Model of Doing Business is a Failure because it’s more Politics than Business

Posted by PITHOCRATES - September 7th, 2011

Finding other People to pay for Generous Benefits is the Government Way

The United States Postal Service (USPS) is not a part of government.  It doesn’t receive any tax dollars.  It’s supposed to survive alone on the revenue of their services.  In particular, the postage stamp.  But the USPS is dying.  Thanks to new technology.  People are using email.  And paying bills on line.  And FedEx and UPS deliver packages better than they do.  So they’ve lost a lot of business.  This enterprise that is not part of the government.  Which is now seeking help from the government.  To survive.

Even though it’s not a part of government it is protected by government.  The USPS has a monopoly on 1st class mail.  And like all businesses with a government enforced monopoly they didn’t innovate.  They didn’t exceed the expectations of their customers.  They just trusted in government.  That government would maintain their fat revenue stream.  So they could continue to pay fat pay and benefit packages.  But you can never truly keep competition away.  For there is always someone looking to innovate.  And exceed customer expectation.  The USPS has learned this lesson.  The hard way (see Obama crafting fix as Postal Service faces default by Emily Stephenson posted 9/6/2011 on Reuters).

The White House will offer its reform plan in the next few weeks for the agency, which lost $3.1 billion last quarter and is approaching due dates for multiple billion-dollar payments, said John Berry, director of the U.S. Office of Personnel Management.

The Obama administration wants Congress to delay for 90 days a $5.5 billion retiree health benefits payment due this month. The Postal Service has said it expects to default on that payment…

It has proposed cutting 220,000 jobs, or more than a third of its full-time staff, by 2015, and is studying about 3,650 of its 32,000 offices for potential closure.

A $3.1 billion loss in one quarter?  Revenue for that quarter was only $16 billion.  So that’s a loss of 19%.  What’s even more startling is that the retiree health benefits payment due is 34.4% of revenue.   That’s just over a third of all revenue going to people no longer working for the post office.  This is not a business.  This is pure government. 

It’s little more than a Ponzi scheme.  And it worked until technology provided competition in other forms.  Now they have a declining revenue base supporting an expanding group of benefit recipients.  Sound familiar?  Sounds a little like Social Security, doesn’t it?  Another failing Ponzi scheme.

Finding other people to pay for generous benefits will always end this way.  And that’s the government way.  Which explains why the economy produced zero jobs last month.  It doesn’t know how to create a job.  All it knows how to do is to take money from those who work and give it to people who support them.

In Canada the Government is letting the Private Sector find and bring Oil to Market

You know who knows how to create jobs?  Canada (see Canada’s Oil-Sand Fields Need U.S. Workers, Alberta Minister Says by Jeremy van Loon posted 9/7/2011 on Bloomberg).

Unemployed U.S. construction workers should look for jobs in Canada’s oil-sands industry, which faces a shortage of as many as 75,000 positions in the next few years, Alberta Energy Minister Ronald Liepert said.

Alberta’s oil sands, the world’s third-largest recoverable reserve of crude, needs workers including electricians and construction staff, Liepert said in an interview at Bloomberg headquarters in New York late yesterday. Labor restrictions between Canada and the U.S. need to be eliminated first, he said…

U.S. President Barack Obama will address Congress tomorrow with a plan to boost job growth by injecting more than $300 billion into the economy next year. Unemployment in the world’s largest economy remains at 9.1 percent more than two years after the recession’s official end. That compares with 7.2 percent in Canada.

In Canada the government is letting the private sector find and bring oil to market.  Which is good for Canada.  Because oil is high in demand.  Very, very high in demand.  The Keynesian economists all say our current economic woes are due to a lack of demand.  And the Obama administration is a Keynesian administration.  So you’d think they would let Americans find and bring American oil to market, too.  But no.

Instead, they put a moratorium on Gulf oil exploration.  Forbid oil exploration on most American land.  And put all their eggs in the green energy basket.  Especially the electric car.

The Success of Electric Cars depends on the Cost of Gas 

Electric cars don’t pollute.  But the power plants that produce the electricity that charge their batteries do.  The majority of which are fossil-fueled.  Why?  Because wind-generated and solar-generated electricity just can’t produce electricity as plentifully and as cheaply as fossil-fueled plants can.  Which will become a bigger and bigger problem as more electric cars plug into the electric grid (see Bidding for volts posted 9/6/2011 on the Economist).

ELECTRIC cars and hybrids could represent as much as 15% of the new car market by 2020, depending on the price of oil. This means that in some places a lot of vehicles will be plugged simultaneously into the mains after the evening commute home, in order to recharge their batteries for the following day. The sudden demand for power this will entail, on top of the existing evening peak, could put the small electrical transformers that serve local grids under considerable strain—possibly to the extent of causing brownouts.

First of all, note that the success of electric cars depends on the cost of oil.  Why?  Because gasoline-powered cars are better.  And people will always choose them over electric cars.  Unless the cost of gasoline makes them more expensive.

So the switch to electric cars will only happen at great cost to the consumer.  Who will pay more.  In more ways than one.

Electric cars are not like washing machines, which vary little from brand to brand in their electrical demands. Car batteries come in different capacities, have different recharging speeds and use different chemistries which have their own recharging criteria. The picture is complicated still further by the development of fast-charging systems that suck capacity out of the local grid with much greater relish than a traditional charger. And hybrids add yet another dimension since these, if electricity is too expensive, can run on petrol instead.

Luckily, a driver would not have to worry about making any of these tedious calculations if one of Dr Rogers’s software agents were working for him. All he need do when connecting his car to the recharging point of an evening is inform the system, perhaps using a key pad, when he wanted to drive the vehicle again and the likely distance of his journey. The negotiations would then take place on a computer system that linked all the local vehicle-recharging points.

Gee, I hope the electric car owner doesn’t have to rush their child to the hospital during the night.  Say some 6 hours before going to work.  About an hour before that electric car’s charging was scheduled to start.  If so, hopefully the child’s parents have a reliable gasoline-powered car in the garage as well.

Keynesians want to Grow Government and Spend Money 

The USPS is a microcosm of the United States.  At least on the path we’re currently on.  And you can see how well things are working for the USPS.

Keynesians worship the god of demand.  All problems go back to a lack of demand.  They want to tax and spend.  To give money to people to spend.  To stimulate.  As only Keynesians know best.  Despite their near century of failure.  But in the face of record demand for a commodity (oil) that America could look for and bring to market to meet that demand, they shun that demand.  Why?

Instead they’d rather see oil prices rise so high that people will reluctantly buy electric cars.  That will strain our electric grid.  Causing brownouts.  Or more consumer costs to upgrade the grid.  Either way, the consumer will pay more and be inconvenienced more if the government gets its way.

The examples of failure (the USPS and green energy) are all around us.  As are the success stories (Canadian oil).  Yet government keeps choosing failure over success.  Why?

Because something is more important than economic well being.  Political power.  And a bad recession is an opportunity.  To grow government.  And spend more money.  Which is what Keynesians want to do.  And will do.  Every time.  Despite their near century of failure.

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