Email, Texting and Online Bill Paying is doing to Canada Post what it did to the USPS

Posted by PITHOCRATES - January 19th, 2014

Week in Review

The United States Postal Service (USPS) is going broke.  Thanks to email, texting and online bill paying.  Making the USPS more and more irrelevant these days.  And it’s not just the USPS having this problem (see Ontario mother with sick child urges Canada Post to keep door-to-door delivery by The Canadian Press posted 1/13/2014 on City News Toronto).

An online petition urging Canada Post to reconsider its decision to end door-to-door delivery in urban centres has garnered more than 120,000 signatures…

Canada Post announced some dramatic changes to its operations last month, including plans to phase out the age-old tradition of home delivery in urban areas. The company said that without postal carriers travelling by foot, it would save a significant amount of money…

The petition — posted on the website change.org — draws attention to anyone in Canada who has limited mobility, such as the elderly or disabled, and the possibly dangerous effects this change could have on their lives…

Hamilton said that Canada Post is trying to maintain service to all Canadians but that they need to find innovative ways to do it in order to remain self-sufficient.

Canada Post had projected an annual loss of $1 billion dollars a year by 2020 if they were to continue with the door-to-door delivery.

Part of the reason why Canada can’t afford to keep urban delivery is because they have single-payer health care.  Which is pretty costly.  Especially with Canada having what all advanced economies have.  An aging population.  Which means more people are leaving the workforce and consuming taxpayer benefits than there are people entering the workforce paying taxes.  And with better health care people are living longer into retirement.  Which forces tax rates higher on the working (i.e., the young and healthy) to pay for those not working.

It is interesting that the same people, the young and healthy, are the ones destroying Canadian Post.  For they’re the ones emailing, texting and paying bills online.  Which means they will have to raise taxes further on the young and healthy to support the older generation.  Transferring more and more costs from the old to the young.  Which is what happens in a socialist country.  Generational theft.  Costs keep rising so people have smaller families.  Causing the population to age.  And requiring ever higher tax rates on those in the workforce to pay for the growing numbers who have left the workforce.

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The Cruel March of Technology now has the USPS in its Crosshairs

Posted by PITHOCRATES - August 3rd, 2013

Week in Review

The United States is not the only country trying to figure out what to do with a dated institution long past its prime that few people use these days.  Something that was a large part of our parents’ lives.  But becoming more and more meaningless to the younger generations.   The Postal Service (see Canada Post needs to reduce home delivery by Daniel Fontaine posted 7/31/2013 on Vancouver 24 hrs).

The reality today is tech-savvy Canadians are no longer enamoured with their postal service, nor do they rely upon it to operate their daily lives. Thanks to online banking, e-mail, scanners and texting, Canada Post and its costly, outdated service look ancient by comparison…

Today, door-to-door mail service in many rural or even less-populated urban areas is no longer an option. Canada Post abandoned the front-door policy in new subdivisions, instead favouring group mailboxes…

… would it really impact those getting home delivery if they received their mail only twice a week? I doubt it would make a whit of difference — except perhaps to the bottom line of Canada Post. Reducing home delivery means paying fewer postal workers and a more efficient operation…

But don’t expect the public-sector unions and a majority of home-delivery recipients to let daily mail service go without a fight, even if the business case no longer exists to maintain this costly level of service.

The United States Postal Service (USPS) has been on life-support for a long time.  First it was email.  Then ecommerce.  Then online bill paying.  Then texting.  With FedEx and UPS delivering the things we buy on line with our tablets and smartphones what’s left for the USPS?  Besides junk mail?  Even the Social Security Administration uses e-banking.  The volume of mail has fallen so far that they cannot raise stamp prices high enough to cover their operating costs and fund their pension plan.  Unless they can get people to mail a postcard for $57.  Or more.

There used to be video stores all over the place.  As renting videotapes was a booming business at one time.  But the same reasons that have made the USPS obsolete have made the video store obsolete.  There are still a few around.  But it is hard to compete with vending machines renting movies at the grocery store.  And watching them over the Internet.  Where they can charge less as they don’t have the costs of a brick and mortar store to pay for.  And this is the problem the USPS has.  There are less costly and faster alternatives available.  Why pay to mail a letter that will take days to travel to the recipient when you can email something for free that arrives seconds after sending?  Even the video stores don’t have competition that bad.

Remember receiving a telegram?  Probably not.  Something else that has long since fallen by the wayside.  The telephone put that to rest.  Today people can call with bad news.  They don’t have to send a telegram.  Putting a lot of telegram deliverers out of a job.  But life went on.

So perhaps it’s time to pull the plug on the USPS.  Or greatly reduce the service.  Maybe twice a week.  For let’s face it, nothing good comes in the mail these days anyway.  Bills, junk mail and jury duty summons.  Things we just won’t mind waiting an extra week to get.

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Email and Electronic Bill Paying as well as Retiree Benefits are Bankrupting the U.S. Postal Service

Posted by PITHOCRATES - February 10th, 2013

Week in Review

The United States is not the only country having trouble with their postal service.  Email and electronic bill paying have taken away a huge source of revenue for the postal service in the US.  As well as in the UK (see Post Office will shut one in five branches after ‘losing £40m a year’ by Anna Edwards posted 2/7/2013 pm the Daily Mail).

The Post Office said they were losing £40 million [$63 million US] a year, so it was seeking retail partners for 70 branches, enabling them to stay in their current locations…

CWU general secretary Billy Hayes said the announcement was a ‘huge blow’ to the Post Office network, saying: ‘Staff will be in shock at the scale of what will effectively be the closures of Crown post offices across the country.

‘This move will have a huge impact on the high streets of small towns earmarked to lose their Crown post office.

‘These offices provide a dedicated specialist service to communities which will not be replicated by a window or two in a bigger shop…

‘It leaves huge questions about the future of the Post Office – how can it realistically deliver services for passport applications, identity services and a range of financial services while being dramatically pruned back? What does it mean for Metropolitan Police plans to move into London post offices?’

Robert Hammond, of Consumer Focus, said: ‘The Post Office network must change if it is to be sustainable.

‘These changes to Crown post offices are part of the biggest-ever programme of change to the network and consumers will want to see Post Office services that are high-quality and accessible, and offer the products and services they need. This is more important than the issue of who operates the post office itself.

People are using Royal Mail less in the UK.  So to save the postal service the UK is taking drastic action.  Basically privatizing as much of it as they can.  By partnering with other retail outlets that can cut the overhead cost of standalone post offices.  Some people may not be happy about these developments.  But it’s their own fault for using email.  And paying their bills online.  If they want to keep the postal service this may be their only chance.  Something the Americans should consider.  Based on the money they’re losing (see Postal Service loses less, but still in trouble by Jennifer Liberto posted 2/8/2013 on CNN Money).

In the three months ended Dec. 31, the agency lost $1.3 billion — considerably less than the $3.3 billion lost in the year-earlier period.

The service was hurt as the volume of first-class mail, which most consumers use to pay bills and stay in touch, decreased by 4.5.%, said USPS chief financial officer Joseph Corbett. But it got help as shipping and package volume for the busy holiday season increased 4% compared to the prior year.

Still, the service is in trouble. The key culprit remains a 2006 congressional mandate, under which it has to pre-fund healthcare benefits for future retirees. The USPS has been borrowing billions of dollars from taxpayers to make up for the shortfalls…

The Postal Service on Wednesday unveiled a plan to end Saturday delivery of mail, a move which is expected to save $2 billion a year, a drop in the bucket compared to the $16 billion loss the organization reported for 2012.

The US has about 5-times the population of the UK.  So if we multiplied their losses (in US dollars) by 5 it comes to $316 million.  A far cry from the $16 BILLION lost in 2012.  The U.S. Postal Service has a far greater crisis on its hands than the Royal Mail.  And it goes to that unfunded retiree health care plan that the U.S. government is now forcing them to fund.  Compounding the problem of email and electronic bill paying.

Employers who provide retiree pensions and health care benefits are supposed to put money aside for their current workers’ retirement.  In accounting terminology, this retirement expense should be expensed on the income statement (lowering profits) with a credit going to the balance sheet to show the money owed.  A liability.  When a person retires and starts incurring retirement costs the employer pays for these and debits that liability account.  Reducing it.  And credits a cash account.  Reducing it.  When an employer pays a retiree it should be entirely a balance sheet transaction.  Completely off the income statement.  With no impact on profitability.  This payment should reduce their cash balances.  As well as their liability account for retirees.  For as they pay their retirees it reduces what they owe their retirees.

The U.S. Postal Service didn’t do this.  They simply paid and expensed these retirement benefits as they incurred them.  Greatly understating their retirees’ costs.  And overstating their profitability.  Leaving a massive unfunded retiree health care liability.  Funding this massive unfunded liability is bankrupting the U.S. Postal Service.  Or rather these massive retiree costs they were hiding off the books are now bankrupting the U.S. Postal Service.  Unions want to go back to NOT funding these retirement costs.  And have the U.S. taxpayer bail them out.  Just like they bailed out the UAW retirement plans when GM and Chrysler went bankrupt.

The U.S. needs not only to privatize portions of the U.S. Postal Service like the UK they also need to privatize pensions and health care plans.  Like most businesses have.  Give employees money to put away for their own retirement needs.  For the old ways just don’t work anymore.

Funny how progressives hate all of the other old ways.  Like thrift, going to church, waiting until marriage before having sex, etc.  But pensions?  Retiree health care benefits?  No, when it comes to these things they’re all for going back to the Fifties.

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Even Cutting 28,000 Jobs will not help the USPS Compete against the Internet

Posted by PITHOCRATES - May 27th, 2012

Week in Review

The United States Postal Service (USPS) hates the Internet.  Before the Internet they had a monopoly in the letter industry.  If you wanted to send Granny a letter you had to go through them.  There’s only one problem with a monopoly.  Because they have a captive audience they don’t have to innovate.  They don’t have to improve anything.  Just make a lot of money.  And give your employees generous wage and benefit packages.  Just like the railroads did.  Before trucks came around, that is.  The trucking industry nearly destroyed the railroad industry.  But the railroads learned how to compete.  They helped redefine the transportation industry that now includes trains, ships and trucks.  The railroads are back.  Stronger than ever.  And making money.  But is it too late for the USPS?

The Internet is the USPS’ trucking industry.  It has all but destroyed the snail mail industry.  To survive the USPS has to do what the railroads did.  Reinvent itself.  Reinvent the industry they participate in.  If they can.  And they better hurry.  Because their monopoly is gone.  Not from other people entering the snail mail business.  But by new technology that created a better alternative to the snail mail business.  The Internet.  And it’s tap-dancing all over the USPS (see U.S. Postal Service offers buyouts to 45,000 workers by Emily Stephenson posted 5/25/2012 on Reuters).

The mail agency, which lost $3.2 billion in the first three months of 2012, plans to begin this summer moving mail-processing activities away from smaller sites to reduce annual costs.

As part of that plan, the Postal Service will offer $15,000 in two installments to full-time mail handlers who take early retirement or leave the agency, USPS spokesman Mark Saunders said on Friday…

The Postal Service has been hit hard by tumbling mail volumes as more Americans communicate online and by massive payments for future retiree health benefits…

The agency needs to reduce its workforce by 150,000 people by 2015, Saunders said. Consolidating and closing processing facilities, which will continue through 2014, could eliminate up to 28,000 jobs and save $2.1 billion a year, the Postal Service has said.

Saunders said he could not speculate how many mail handlers would take buyouts this year, but added that the change “will not affect mail service.”

It’s not enough.  If you annualize that $3.2 billion quarterly loss that comes to a $12.8 billion loss for the year (4 X $3.2 billion).  Cutting only $2.1 billion per year will not solve their problems.  They’ll still have an operating deficit of approximately $9.6 billion.  And if the Internet doesn’t go out of business in the foreseeable future these numbers are only going to get worse.

It’s pretty interesting that a company can cut 28,000 jobs without affecting its business operations.  Why, it’s almost as if they never shrunk their labor force all these years that their business has shrunk.  It’s as if 28,000 people have just been sitting around waiting for the work to pick up again.  While collecting a paycheck.  And while the USPS pours billions into a pension plan for their future retirement.  Hmm.  I wonder if this could have anything to do with that $3.2 billion quarterly loss. 

The clock is ticking.  While the USPS is still struggling to compete with email texting is giving email a run for its money.  And it just may be that the USPS is not as nimble as the railroad industry in pulling up its tracks and laying them on the road to profitability.

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The U.S. Postal Service is One of the Biggest and Least Successful Companies of All Time

Posted by PITHOCRATES - May 5th, 2012

Week in Review

The U.S. Postal Service (USPS) may not be part of the government.  But it sure acts like it is (see As a private firm the US Postal Service would rank 35th on the Fortune 500 list, but it would also be bankrupt posted 5/5/2012 on The Economist).

AT THE bottom of its press releases the US Postal Service brags that if it were a private company, it would rank 35th on the Fortune 500 list. Were it a private firm, it would also be bankrupt. The service loses $25m a day.

Hit hard by the recession and the march towards electronic mail, the Postal Service is in desperate need of reform…

A normal business could not operate like this. Over three-quarters of America’s post offices do not make a profit. Take, for example, the office in Alix, Arkansas, which last year cost $48,452 to run and brought in just $3,642 in revenue. Its earnings may be thinned by the presence of eight other post offices in an 11-mile radius. Under the Senate bill, the Alix office would remain open…

A more pressing concern for the service involves payments into a health-benefits fund for the future retired…

The focus will now shift to the House, which is considering a postal-reform bill of its own. Its author, Darrell Issa, a Republican from California, plans to end Saturday delivery and establish a financial-control board with a mandate to cut costs. His bill would take politics out of the process by creating an independent commission to oversee the closure of post offices. And it would aim to bring the pay of postal employees into line with the private sector.

The solution is easy to some.  Get rid of email.  Text messaging.  And paying your bills online.  That’s the solution they’ve used elsewhere in the economy to protect a dying industry from a higher quality, lower cost competitor.  They used tariffs to protect the U.S. automotive industry.  And as a result they have lost all but a fraction of the global market.  They’ve passed labor laws favoring higher cost union labor.  And chased manufacturers out of the country.  The Labor Department sued Boeing for building a new 787 Dreamliner plant in a nonunion state.  Because they wanted those planes to be built with costlier union labor.  Making them less competitive with Airbus.  Who continues to expand their market share.  So why not get rid of email?  It would be no more foolish than past solutions.

Of course, they can’t do that.  Too many young people enjoy emailing and texting.  And everything else in the digital world.  They can increase the price of a car or a plane ticket without it affecting your every waking moment.  You can’t do that with the Internet.  For the American youth have a fever.  And the only prescription is more Internet access.  Or more cowbell.  And if you take that away to save something they don’t use that will come back to bite them in the buttocks in the first election following that action.  And that’s a problem.  Because the youth don’t care about past institutions or economics.  Their world is centered on them.  And if you mess with their immediate pleasures in life they will punish you at the polls.

So the solution to the USPS may have to be a real solution.  To address the real problems.  Which are simple.  There isn’t enough paper mail to support the current size of the USPS.  Or the current budget.  So you’re going to have to close some offices.  Some sorting centers.  And other infrastructure.  Most important of all you’re going to have to cut the payroll.  Letting people go.  And reducing their pay and benefit packages for those who stay.  Including those for retirees.  Like they do in the real world.  It’s either that or figuring out a way to put a stamp on an email.  Which past postmasters have thought about.  And are no doubt thinking about again.  If they can just figure a way to blame George W. Bush.  Or the Republicans.  Because young people already hate them. 

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The British Government takes over Royal Mail’s Underfunded Pension Fund for Short-Term Deficit Reduction

Posted by PITHOCRATES - March 18th, 2012

Week in Review

The U.S. Postal Service (USPS) is going broke.  Why?  Two reasons.  People email and text today.  Even pay their bills online.  So they’re not mailing letters.  And every piece of mail the people don’t mail is lost revenue for the USPS.  Which can be a problem in an organization that has a high overhead.  And an aging and retiring workforce.  Which brings us to the second reason.  Pensions.  Just like in Britain (see Government to take on Royal Mail pension to pay down debt by Matt Falloon posted 3/19/2012 on Reuters).

Chancellor George Osborne will use a 28 billion pound ($44.36 billion) asset transfer from taking on the Royal Mail’s pension fund to pay down government debt next year, a government source said on Sunday.

The transfer of the state-owned mail company’s pension scheme – subject to European Union approval and due to be announced in next week’s budget – will reduce the government’s budget deficit next year, while the liabilities from the scheme, worth 37.5 billion pounds, will show up on the government’s accounts across the next two decades as they are drawn on by scheme members…

In the long run, however, there will be an overall cost to the Treasury from the transfer because the scheme’s liabilities outweigh its assets.

The Royal Mail is no different than the USPS.  People are emailing, texting and paying their bills online in Britain, too.  Which means neither 20th century postal service can make it in the 21st century.  They both need to reinvent themselves.  And fast.  But the LAST thing either nation should do is to bail out their postal service.  Not when each nation is struggling under record deficits.  For this will only delay the day of reckoning.  And make it far more costly.  Allowing greater losses to accrue.  In the face of growing pension payouts.

Short-term fixes for long-term problems is very bad policy.  It’s what we call kicking the can down the road.  It doesn’t fix any problems.  It only makes them more difficult to fix.  Burying the country under ever growing deficits.  And placing incredible tax demands on taxpayers not even born yet.   So you know the Americans will follow suit.  And bail out the USPS.  Because of late they seem to have a penchant for making bad decisions.

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President Obama uses Class Warfare to Increase Spending and Reward Political Cronies

Posted by PITHOCRATES - September 19th, 2011

They have Learned in the UK that Government can’t Pay for Everything

China may be subsidizing high-speed rail.  But in the UK, the government is moving the other way.  Because it is just too costly (see Arriva Trains: Fare rise in Wales 2% lower than England posted 9/19/2011 on the BBC News Wales).

The Welsh Government has told Arriva Trains Wales it can increase prices by 1% above the inflation rate.

Last month the UK government announced an average increase in England of 3% over inflation…

Tony Miles, from Modern Railways magazine, said the decision was good news for Welsh commuters but it would impact on the Welsh Government’s budget.

He said: “This is a policy decision by the Welsh Government, which is very much in line with their outlook that the burden of financing public transport should fall more on taxpayers centrally than on the individual passengers…

“The UK Government wants to shift the cost of the railways more away from taxpayers and towards users.

The UK went farther down the socialist road than the Americans.  They nationalized a lot of their industries.  Nationalized their health care.  And, of course, their transportation.  Now there are efforts to reverse this.  Continuing on the work of the great Margaret Thatcher.

There are some in the UK that have a novel idea.  To let people pay for a train ticket.  If they want a train ticket.  Imagine that.  Paying your own way.  How fair.  And rational.  But not all are keen on the idea.  For in Wales they want everyone to pitch in and pay for train tickets.  Even those who don’t ride on the train.

They have learned in the UK that government can’t pay for everything.  And some are now trying to undo years of government growth.  In transportation.  And elsewhere.  To unleash more free market capitalism.  That they were so kind to introduce to the Western World all those years ago.

Was the Great Depression the Worst Economy Ever before Obama Took Office?

In America, though, government continues to grow.  Even with election losses.  And economic malaise (see End of Recession Doesn’t Mean Good Times Return Right Away by David Johnson posted 9/19/2011 on Random Samplings).

Numbers just released by the Census Bureau, however, illustrate that while the recession may technically be over, household economic conditions did not improve…

During the 2010 calendar year, median household income was $49,445, 2.3 percent lower than in 2009 after adjusting for inflation.

The Obama administration’s Recovery Summer ended the Bush recession in 2010.  Or so they say.  The unemployment rate is still above 9%.  If you factor in the underemployed and those who’ve given up looking for a job it’s closer to 16%.  And real household income is down 2.3%.

But just imagine how bad things would have been if Obama didn’t end the Bush Recession with his Recovery Summer.  People would be saying that the Great Depression was the worst economy ever.  Until Obama took office.

To end the Bush recession Obama spent $800 billion in ‘stimulus’ spending.  Which failed.  Because he’s asking for another $450 billion stimulus package.  Despite the first one failing.  Well, it may have failed to stimulate the economy.  But it did stimulate government.

Only Union Jobs are Good Jobs in the Obama Admin because only Union Jobs Fill Democrat Coffers

So we know that their stimulus spending fails to stimulate the economy.  But why?  Is it because they don’t understand things economic?  Or is it because their stimulus has more political goals than economic?  Perhaps it’s both (see Illinois among worst states to do business: Survey by Ameet Sachdev posted 9/19/2011 on the Chicago Tribune).

Illinois ranked among the three worst states for business, according to a survey of U.S. corporate executives released Monday…

Taxes and high costs were among the factors that contributed to the state’s poor showing in the survey. California was deemed to have the worst business climate, followed by New York and Illinois.

So California, Illinois and New York have the worst business climates.  Because of taxes and high costs.  No surprise, really.  For these are big blue Democrat states.  With big blue Democrat cities.  And big public sector unions.  At both the state and municipal levels.  Which is why they have such high taxes and costs.  Those public sector pension and health care benefits are absolutely killing their economies with the high taxes required to fund them.

The Democrats can say what they want.  But they are not business-friendly.  They are only friendly to political allies.  Unions.  Teachers.  And public sector employees.  Which is why businesses want to leave these Democrat areas.  Not to exploit cheap labor.  But to stop their own exploitation by these Democrat strongholds.

Illinois recently increased its income tax rate, which has prompted several companies, including Chicago-based CME Group, to consider leaving the state.

Texas, North Carolina and South Carolina were viewed as having the best business climates, according to the survey.

Boeing built their new 787 Dreamliner plant in South Carolina.  But the Obama administration is trying to shut that plant down.  Why?  Because they don’t like South Carolina.  Or its people.

You see, all jobs are not good jobs.  As the Obama administration sees it.  And these new South Carolinian jobs are not good jobs.  Because they are nonunion jobs.  No union means no union dues.  And no money to flow into Democrat coffers.  So the Obama administration has nothing to gain politically.  And that’s why they are using the power of the National Labor Relations Board to shut that plant down.  And make Boeing expand production in Seattle.  Where the jobs will be union jobs.  And union money will flow into Democrat coffers.  Via union dues.

President Obama and the Democrats Prefer Crony Capitalism over Free Market Capitalism

We call this crony capitalism.  Some may even say extortion.

Crony capitalism is the opposite of free market capitalism.  Where merit wins the day.  In crony capitalism, though, it’s who you know.  And what kind of political power you have (see Obama administration ‘pressured Air Force general to change testimony’ by Toby Harnden posted 9/16/2011 on The Telegraph).

According to Republicans on Capitol Hill, General William Shelton, head of Air Force Space Command, told them in a closed session the White House urged him to alter his testimony about the Pentagon’s concerns about a new wireless project by a satellite broadband company…

LightSquared, based in Virginia, is funded by the multi-millionaire Philip Falcone, a frequent donor to Democrats. The satellite and broadband communications company plans to build a nationwide, 4G phone network that many generals believe would seriously hinder the effectiveness of high-precision GPS receiver systems used by the military…

The row over the allegedly improper intervention came as a Republican-controlled House of Representatives Committee investigated a federal loan guarantee to Solyndra, a solar firm also tied to a major Democratic contributor, which failed after receiving a half-billion US government loan guarantee.

A spokesman for Gen Shelton said that his testimony was “his own, supported by and focused purely on documented tested results”.

LightSquared insisted it had not sought to interfere with the properly regulatory process. The White House said reviewing congressional testimony was routine.

Interesting.  The White House says this is just routine.  Which it apparently is.  Whether you’re funneling tax dollars to a green energy company.  Connected to a rich Democrat donor.  Or trying to throw a contract to a communications company.  Also connected to a rich Democrat donor.  Even if it compromises national security.

It’s just business.  And our politicians are just business people.  In the business of rewarding political friends.  In return for generous campaign contributions.

So much for hope, change and transparency.

If You Confiscated all the Rich’s Income it would Wipe out Obama’s Deficit…for One Year

Crony capitalism.  A little extortion.  Mixed in with a generous helping of class warfare.  In other words, Obama politics (see Obama calls for broad tax increases by Stephen Dinan posted 9/18/2011 on The Washington Times).

President Obama on Monday proposed a deficit reduction plan that calls for about $3 in new tax increases for every dollar in additional spending cuts as he seeks to put his imprint on the ongoing talks with Congress over reducing the government’s staggering debt…

“This is not class warfare, it’s math,” Mr. Obama said in the White House’s Rose Garden as he laid out the outlines. “The money’s got to come from some place.”

Real incomes are down.  Unemployment is still above 9%.  If you count the underemployed and those who have given up looking for work the actual number is closer to 16%.  So how best to create more jobs to help people go back to work?  And boost those real incomes?  Well, if you’re a member of the Obama administration, you raise taxes.

But this won’t help the employment numbers.  So why do it?  Because it is class warfare.  Despite the president’s denial that it is.  For there is no other reason to do this.  It won’t help the economy.  And it won’t help reduce the debt.

If you took all income from those earning $200,000 or more you’ll be lucky to get $2 trillion.  At least this is all they had in 2008.

(Source:  SOI Tax Stats – Individual Income Tax Rates and Tax Shares)

See?  You can raise tax rates to 100% on the rich but it won’t help.  If you confiscated all their income you’d raise a lot of money, yes.  Enough to wipe out the Obama’s $1.6 trillion deficit.  For one year.  But it will be $1.6 trillion the following year.  Unless you cut spending.  Because you can take this money only once.  Unless these people agree to keep producing all this wealth as indentured servants.  Which I don’t see happening.

So Broke that We Must Raise Taxes but not too Broke that We can’t Throw $7 Billion to the USPS

So it is class warfare.  And cronyism.  Helping those who help them.  With taxpayer dollars.  Which is why they need to raise taxes.  Not to retire the debt.  But to help their political supporters (see President Obama deficit plans back ending Saturday mail by Ed O’Keefe posted 9/19/2011 on The Washington Post).

The White House is also calling on Congress to return $7 billion that USPS paid into a federal retirement fund to the delivery service to help pay for other retirement and health-care costs. Obama’s plans also would allow the Postal Service to raise stamp prices beyond the rate of inflation to better match the cost of delivery…

Though the Postal Service is a self-funding entity that doesn’t accept taxpayer dollars, it is a significant piece of the unified federal budget because its workers and retirees draw benefits from federal workers’ compensation, retirement and health-care accounts.

The country is so broke that it must raise taxes.  But it is not too broke that it can’t throw $7 billion to Obama’s friends in the USPS.

We are Regressing back to the Totalitarian Regimes of the Old World

All this talk about balance approach to deficit reduction?  And getting the rich to pay their fair share?  It’s all class warfare. To increase taxes.  To keep funding important political constituencies.  It has nothing to do with deficit reduction.  The numbers are just too large to be able to reduce the deficit with taxes alone.  You have to cut spending.

And this just isn’t going to happen with Democrats in power.  Because government spending is their lifeblood.  Their economic policies don’t work.  And they’re not designed to work.  They have but one purpose.  Politics.  Rewarding political favors.  With taxpayer dollars.

And they will sacrifice anything to keep spending.  The economy.  Our real incomes.  Our national security.  Even the American Dream.  Our liberty.  For we are regressing back to the totalitarian regimes of the Old World.  Where, if you’re not politically connected, you are fast becoming a second class citizen.

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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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The future of the USPS is questionable, Ditto for Obamacare

Posted by PITHOCRATES - August 12th, 2011

New Technology has Destroyed Snail Mail 

A government established monopoly is having problems.  Revenues are down.  Costs are up.  The United States Postal Service (USPS) is virtually insolvent.  And they’re looking to take some desperate action (see Postal Service proposes cutting 120,000 jobs, pulling out of health-care plan by Joe Davidson posted 8/11/2011 on The Washington Post).

The financially strapped U.S. Postal Service is proposing to cut its workforce by 20 percent and to withdraw from the federal health and retirement plans because it believes it could provide benefits at a lower cost.

The layoffs would be achieved in part by breaking labor agreements, a proposal that drew swift fire from postal unions. The plan would require congressional approval but, if successful, could be precedent-setting, with possible ripple effects throughout government. It would also deliver a major blow to the nation’s labor movement.

You can’t blame this on outsourcing of American jobs.  Only the USPS can deliver first class mail.  And it’s not free trade.  It’s just progress.  New technology has destroyed snail mail.  People email.  Text.  Pay their bills on line.  And where competitors (UPS and FedEx) were allowed to compete the competition blew them away.

In a notice informing employees of its proposals — with the headline “Financial crisis calls for significant actions” — the Postal Service said, “We will be insolvent next month due to significant declines in mail volume and retiree health benefit pre-funding costs imposed by Congress.”

During the past four years, the service lost $20 billion, including $8.5 billion in fiscal 2010. Over that period, mail volume dropped by 20 percent.

And they can’t afford their health care.  Unless they can somehow raise revenue.  By forcing people to use mail instead of new technology.  But that’s not likely to happen.  Revenue is not much of an option here.  People have just stopped using their services.  And you can’t fix that by raising the stamp price.  You have to cut costs.  To reflect that 20% drop in business.

In a white paper on health and retirement benefits, the USPS said it was imperative to rein in health benefit and pension costs, which are a third of its labor expenses…

The USPS said the programs do not meet “the private sector comparability standard,” a statement that could be translated as meaning that government plans are too generous and too costly…

 “Unfortunately, the collective bargaining agreements between the Postal Service and our unionized employees contain layoff restrictions that make it impossible to reduce the size of our workforce by the amount required by 2015,” according to the optimization document. “Therefore, a legislative change is needed to eliminate the layoff protections in our collective bargaining agreements…”

 “We are absolutely opposed” to the layoff proposal, he said. “We are opposed to pulling out of the Federal Employees Health Benefits plan.”

It will be an interesting debate.  On the one hand, you can understand how employees don’t want to lose any pay or benefits.  But on the other hand, there is no other option.  Unless people start using first class mail again.  Because you can’t raise taxes to solve this problem.  They are not part of the government.  Even though a monopoly, they have to function as a business.  Which means costs can’t be any greater than needed to support a given revenue.

Without Competition, Nothing gets Better

Obamacare will be a lot like the USPS.  It will have out of control costs.  That will forever outpace revenues (i.e., taxes).  And it will be no doubt be a dysfunctional bureaucracy.  As all government agencies are.  As all monopolies are.

Competition makes everything better.  Therefore, without competition, nothing gets better.  Because it doesn’t have to.  That’s why the USPS lost so much business.  Because technology created better ways to do things.  So the old monopoly stagnated.  Still trying to do business with an out of date business model.  As Obamacare will do to health care.  Because it won’t have to do anything better.  And, unlike the USPS, the government can keep raising taxes to meet those out of control costs.

If there is an Obamacare, that is.

With the Individual Mandate, there is no Choice

Another court has ruled the individual mandate of Obamacare unconstitutional (see A Stunning Victory for the Constitution over Obamacare by Todd Gaziano and Robert Alt posted 8/12/2011 on Heritage).

This afternoon, a three-judge panel of the U.S. Eleventh Circuit Court of Appeals in Atlanta ruled that the individual mandate in the Patient Protection and Affordable Care Act (PPACA), more commonly known as Obamacare, is unconstitutional…

In short, the Obama administration has lost its battle to delay review of the individual mandate until after the 2012 election.  Until today, there was at least a chance that the Supreme Court would pass on the case until after its forthcoming term, but now, with a split between the Eleventh Circuit and Sixth Circuit, the High Court will have little choice but to take the case and resolve the fate of the forced-purchase mandate.  After over a year of delaying tactics, the Obama Administration has no more options to slow-walk the constitutional end-game for the mandate.  Our best estimate is that the case will be argued either in late March or in April 2012.  The Court will issue its decision near the end of its term in June, during the presidential candidate nominating season.

The Obama administration has been delaying this till after the election because this won’t help the president’s reelection chances.  During the debate to pass Obamacare, they insisted that this mandate wasn’t a tax.  But, instead, it was just commerce.  Like forcing people to buy car insurance.

But not everyone drives a car.  And those who don’t?  They don’t buy insurance.  And are not compelled to do so.  So there is a choice.  With the individual mandate, there is no choice.  Which is why the U.S. Eleventh Circuit Court of Appeals in Atlanta ruled it unconstitutional.

So this places this uncomfortable subject in an election year.  Where the Obama administration will argue in court that the mandate is a tax after all.  Which government does have the power to do.  But, of course, this will mean they were not telling the truth during the Obamacare debate.  So there’s that uncomfortable truth coming out.  And the possibility that his signature accomplishment may get overturned by the Supreme Court.  Which also won’t help his reelection chances.

You couldn’t ask for a Better Spending Cut than Obamacare

One can almost hear the cries for the government to take over the USPS.  So we can bailout the USPS with our tax dollars.  Which would probably not be a good thing what with S&P downgrading our debt because of excess government spending. 

And we really don’t need to dig our debt hole any deeper with Obamacare.  Perhaps the recent court ruling will save us from that.  And in the process restore our credit rating.  For in Obamacare lies that additional $2 trillion in spending cuts S&P wanted.  And the best part of it is that it’s all future spending.  No one will lose anything by cutting Obamacare.  You couldn’t ask for a better spending cut.  No one loses.  Except, of course, Obama.

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Obamacare and the United States Postal Service to have a lot in Common

Posted by PITHOCRATES - May 29th, 2011

Obama Slams the United States Postal Service (USPS)

Back during the Obamacare debates, way back in 2009, the public option was still on the table.  President Obama tried to soothe people’s worry about the public option putting private insurance out of business.  He said it was ridiculous to worry about such a thing.  Because federal monopolies can’t do anything well.  And that private business will always provide a more superior service than a government provided service.  Strange way to advance his case for more government involvement in health care.  But he said it.  And gave an example of a poorly run government monopoly providing no threat whatsoever to its private counterparts.  The United States Postal Service (see The President and the Postal Service by Ed O’Keefe posted 8/11/2009 on The Washington Post).

“I mean, if you think about it, UPS and FedEx are doing just fine, right? No, they are. It’s the post office that’s always having problems.”

President Obama is right.  FedEx and UPS are doing just fine.  And, just as he said, it is the USPS that is having the problems.  As always.  To quote Obama.

FedEx is Profitable

FedEx’s shipping volume in their fiscal third quarter set a record.  And their revenue and margins are looking pretty good, too (see FedEx offers strong outlook for this quarter and beyond by Lynn Adler, Reuters, posted 3/17/2011 on msnbc).

FedEx Express volumes were at an all-time fiscal third-quarter high, and “Ground is knocking the cover off of the ball with both volume and yield gains,” [John Koczara, portfolio manager at AMBS Investment Counsel] said.

“We expect continued positive yield trends to improve revenues and margins in the fourth quarter and in fiscal 2012,” said Alan Graf, [FedEx] chief financial officer.

One thing for sure, it doesn’t look like the public option, the USPS, is giving FedEx any problems.  Confirming what Obama said.  FedEx is doing just fine.  Score one for the private company.

UPS is Profitable

Now, FedEx is good, but there is someone even better.  And it isn’t the USPS (see UPS Profit Tops Estimates, Sees Record in 2011 by Reuters posted 2/1/2011 on CNBC).

United Parcel Service, the world’s largest package delivery company, reported a quarterly profit that beat estimates and forecast record-high profits in 2011, sending its shares up 4 percent.

Doesn’t look like the public option, the USPS, is causing any heartburn for UPS.  Unless they consume too much champagne and caviar courtesy of their record profits.  Score another one for the private company.

The USPS is Sucking Air

With FedEx and UPS booming you’d think that the USPS would be booming, too.  So are they?  Are they posting record profits in the latest quarter?  Not quite (see Sun is setting on rural post offices by Kevin Murphy posted 5/28/2011 on Reuters).

The postal service is losing $23 million a day and is $15 billion in debt, its allowed limit, said Rich Watkins, spokesman for its Mid-America District. The service has cut about 100,000 positions through attrition in the past three years and consolidated sorting and other operations, he said.

The postal service is in such bad financial condition that it may not be able to make a $5.5 billion prepayment for future retiree health benefits due September 30, Postmaster General Patrick Donahoe told a Senate subcommittee last week.

Unlike the private companies, FedEx and UPS, who are doing very well, the USPS is sucking air.  That’s private company: 3; government monopoly: 0.  Which is pretty amazing considering that they have a legal monopoly enforced by the federal government.  Only they can deliver letters.  Unfortunately, they do that so inefficiently that postal customers have found alternatives.

The U.S. agency has lost business to electronic mail and to private sector competitors like FedEx and the United Parcel Service.

That’s the problem with a monopoly.  Always trying to do something the way they did it a generation ago.  Meanwhile, people have turned to email and text messaging.  And paying their bills on line.  Because it’s cheaper.  And easier.  No postage required.  No envelopes.  No trips to the post office.  No muss.  No fuss.  And you can send pictures and video in today’s digital world.  You can’t do that with first class mail.  At least, not with a lot of additional cost.

Of course, they can compete with FedEx and UPS.  Because you can’t send packages electronically.  But the one thing the USPS can do well they still can’t do as well as FedEx and UPS.  We need to fix the USPS.  It needs to be reformed.  To meet the needs of today’s generation.  And tomorrow’s.  But that’s one thing that a government monopoly just can’t do well.  Change.  Or be efficient.  Or provide a service that people demand.

The Public Option will be a lot like the USPS

President Obama was right in 2009.  The government can’t do anything well.  And when they compete against private industry they fail miserably.  In fact, these government run enterprises are so bad that only government intervention can maintain their monopoly.  For awhile.  Because when something is that bad, even government intervention can’t prevent the inevitable.

Which begs the question why did Obama use the USPS-FedEx/UPS analogy to promote the expansion of government into the private health insurance industry?  What’s his argument?  Don’t worry about the public option.  It’ll be as horrible as the USPS that it won’t harm the private insurance market.  But we will pattern the public option after the USPS.  Because only the public option will provide affordable, quality health care.

Yes, the public option will be that remarkable.  It’ll be both horrible and the best thing since sliced bread.  Depending on who the government is talking to at the time.

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