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.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , ,

FT119: “To save American jobs the Left tries to keep out low-priced Mexican imports but does little to keep out low-priced Mexican labor.” -Old Pithy

Posted by PITHOCRATES - May 25th, 2012

Fundamental Truth

The Left opposes Cheap Mexican Labor in Mexico but they like having it in the U.S.

One of the more interesting things about the political left is their inconsistency about their opposition to free trade.  They opposed the North American Free Trade Agreement (NAFTA) because they said all the good manufacturing jobs would go south of the border.  They said Mexicans work too cheap.  And that was unfair to the American worker.  For the American’s generous wage and benefit packages could never compete with the Mexicans who are willing to work for so much less.  With NAFTA rich American capitalists would just screw their American employees and move their operations to Mexico.  Where they would exploit the poor hapless Mexican workers.  Forcing them to work at a fraction of the American wage and benefit package.

Of course that’s not the way the poor hapless Mexican workers see it.  They loved those manufacturing jobs.  Because those jobs had some of the most generous wage and benefit packages available in Mexico.  They flooded those factories.  And the lucky few to get those jobs did quality work.  The things they made in these Mexican plants were as good as anything in the U.S.  And they cost less.  Allowing the American consumer to buy more.  Which raised the standard of living for everyone.  The American consumer.  And the Mexican consumer.  The only ones who lost were the few working in those U.S. plants that closed.  Who became bitter.  And demanded the government impose tariffs on those low-cost imports.  To save American jobs.  While lowering the standard of living for the American consumer.  And the Mexican consumer.

So the Left opposes this cheap Mexican labor.  In Mexico.  They don’t seem to mind it so much, on the other hand, when it’s in the U.S.  The Left opposes building a wall on the border.  They oppose asking for proof of citizenship from anyone who looks Mexican in a region with a high concentration of illegal aliens.  They oppose requiring a photo I.D. to vote.  They oppose deportations of illegal aliens who’ve been living and working in the U.S.  While they are in favor of blanket amnesty for those here illegally.  And providing them a fast-track to U.S. citizenship.  Which is rather odd considering the way the Left feels about that cheap Mexican labor.  So why are they opposed to imports manufactured by low-cost labor while they are in favor of bringing that low-cost labor into the United States.  For either way it will displace a higher-paid U.S. worker from a job.

The Lost Tax Revenue from Abortion and Birth Control comes to about $155 Billion per Year 

 Yes, that is a good question, isn’t it?  Some, I’m sure, will say once those illegals become legals they’ll join unions.  Which would make them no longer cheap labor.  Perhaps.  But with the decline in U.S manufacturing there aren’t a lot of union jobs anymore.  It is more likely that they will go to where there are good manufacturing jobs.  In the nonunion South.  So it is likely they would add further pressure on those high union wages and benefits.  So why, then, would the Left want to grant citizenship to those here illegally while at the same time opposing cheap Mexican labor?  Two reasons.  Abortions.  And birth control. 

As it is in most things in life it’s about the money.  The Left likes to tax and spend.  Well, not so much like but love.  It’s what they live for.  They want to spend money to provide pensions.  Health care in retirement.  And now health care before retirement.  They want to spend money to end poverty.  They want to spend money to give everyone a college education.  They want to spend money to subsidize green energy.  They want to spend money for school lunches, childcare, art, public television/radio, birth control, abortions, etc.  If it’s something they can spend money on they want to spend money on it.  Of course to spend all of this money you need what?  That’s right.  Money.  And two of the Left’s defining issues have actually reduced the available money to spend.  Birth control and abortion.

According to Public Agenda the number of abortions increased during the Seventies until they totaled approximately 1,300,000 by the end of the decade.  They stayed at or above this level for a little over a decade and then started falling in the late Nineties.  Let’s take one year of these numbers and crunch some numbers.  If 1.3 million abortions didn’t happen and the women carried these babies to term and they earned the median income of $46,000 (and paid $7,530 in federal income taxes) today that would have come to an additional $8.4 billion in tax revenue per year.

According to the Guttmacher Institute there were 62 million U.S. women in their childbearing years (15-44) in 2010.  Approximately 62% of these women were currently using birth control.  Bringing the number of women using birth control in 2010 to 38,440,000.  If birth control was unavailable let’s assume 50% of these women would have stopped having sex.  And let’s assume the women who continued to have sex became pregnant and carried their pregnancy to term.  Bringing in 19,220,000 new babies into the world.  Based on the median salary of $46,000 they would have contributed another $145 billion in tax revenue.  Added to the lost tax revenue from abortion that comes to a grand total of $155 billion in lost tax revenue per year.  Over a decade that comes to $1.5 trillion.

Granting Amnesty to Millions of Illegal Aliens can make up for Lost Tax Revenue due to Birth Control and Abortion 

During the Obamacare debates the Congressional Budget Office (CBO) projected the cost of Obamacare over a 10-year period at $940 billion.  They have since revised that up to $1.76 trillion.  The opponents of Obamacare say it is too costly.  With a national debt of already $15.7 trillion we simply can’t afford to pay for Obamacare.  The proponents of Obamacare have been using questionable accounting practices to get that number down.  Such as collecting new taxes before paying any benefits in some of those years in that 10-year projection.  But the interesting thing to note here is that these discussions would be moot had it not been for birth control and abortion.  Which has cost the nation in tax revenue what Obamacare will cost.

These numbers are only crude calculations.  A more detailed mathematical analysis would have produced a far greater number in lost tax revenue.  Because the population would have also been expanding.  So the numbers used as constants in the 10-year projections above would have been growing larger in each year of that 10-year projection.  And producing larger amounts of tax revenue in each of those 10 years.  This is why Social Security worked so well for the first few decades.  There was a growing population.  And there was always far more new workers entering the workforce than leaving it.  What changed that was birth control and abortion.  And people choosing to have smaller families.  Not a bad thing in itself.  But this decision to have smaller families has doomed Social Security and Medicaid.  For they created those programs based on larger population growth rates.  That simply no longer exist.  And the only way to fix that is by having a lot more babies quickly.  Or for the baby boomers to die off quicker.  Which critics of Obamacare say Obamacare will help do via death panels.

Or you could try something else.  You can jumpstart the population growth rate by granting amnesty to millions of illegal aliens.  To make up for lost tax revenue due to birth control and abortion.  And what makes the illegals from Mexico so attractive to the Left is that many of them are devout Catholics.  Thanks to the Catholic Spanish Empire who brought their language, culture and religion to the New World.  And Catholics frown upon the use of abortion and birth control.  But this can be a risky bet for those on the Left.  Yes, they could really boost the population growth rate.  And they may get these new citizens’ votes in the early years out of gratitude.  But eventually the Left’s attacks on religion may eventually make these people vote Republican.  So they may get a large increase in tax revenue to spend.  Just as they lose power in Washington.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Unemployment, High Taxes, Obamacare, Uncertainty, Public Sectors and a Snow Crisis

Posted by PITHOCRATES - January 3rd, 2011

Obama Saves our Economy with 10% Unemployment and Job Killing Obamacare

The departing White House economist, Larry Summers, says that if it wasn’t for President Obama, the economy would be in a mess.  Unlike the near 10% unemployment stagnant cesspool it currently is.  Others say he may have stabilized the economy, but he is smothering the recovery because of the patent anti-business policies of the Obama Administration (see Judging Obama’s economics by Robert J. Samuelson posted 1/3/2011 on The Washington Post).

The trouble is that Obama, having stabilized the economy, weakened the recovery. What’s missing from Summers’s valedictory is any sense of contradiction between the administration’s ambitious social and regulatory agenda and the business confidence necessary for hiring and investing. Of course, the connections existed. The health-care law raises hiring costs by requiring in 2014 that all firms with more than 50 employees provide health insurance or be fined. The law brims with complexities and uncertainties that make it hard to estimate the ultimate costs. Will firms with, say, 47 workers eagerly expand beyond 50 if that imposes all the extra costs? It seems doubtful.

Woe to the business owner after 2 years of President Obama.  Obamacare.  It’s going to cost business big.  But how big no one knows.  Even the people who wrote that monstrosity.  As Dave Barry so eloquently wrote (see Dave Barry’s 2010 Year in Review posted 1/3/2011 in the Miami Herald).

The centerpiece of this effort is a historic bill that will either (a) guarantee everybody excellent free health care, or (b) permit federal bureaucrats to club old people to death. Nobody knows which, because nobody has read the bill, which in printed form has the same mass as a UPS truck.

In a word, uncertainty.  It’s anyone’s guess.  And that’s a pretty big variable to put into a business plan.  Better to circle the wagons and wait and see.  And by wait and see I mean don’t expand.  Don’t build.  Don’t hire.

But just think how worse things would be if it wasn’t for Obama.

High Unemployment and High Taxes – They Usually go Together

And this on top of some of the highest corporate tax rates in the world (see Pat Toomey says U.S. has highest corporate tax rates in the world posted 1/3/2011 on The St. Petersburg Times’ Politifact).

On the Jan. 2, 2011, edition of NBC’s Meet the Press, Sen.-elect Pat Toomey, R-Pa., cited a striking statistic in urging the United States to lower its corporate tax rates.

That striking statistic?

“We should be lowering corporate tax rates because we have the highest in the world right now.”

They fact checked.  There are different taxes to look at (statutory, effective, excise, payroll, etc.).  Their conclusion?

Still, if you rate Toomey on his specific wording by looking at “corporate tax rates,” he’s right that the U.S. does now have the highest corporate tax rates on the books, at least among the biggest industrialized democracies, which is most economists’ typical yardstick. So we rate his statement Mostly True.

Uncertainty.  High taxes.  And they wonder why unemployment hovers at 10%.

Tax and Spend Creates Business Uncertainty

And taxes won’t be coming down any time soon with the Obama administration.  The national debt has never been higher (see National Debt Tops $14 Trillion by Mark Knoller posted 1/3/2011 on CBS News).  And the Obama administration wants to raise the debt ceiling.  Because they want to keep on spending. 

You need to pay for spending.  With debt, printing or taxes.  All of which will add cost to business.  More debt increases interest rates.  Printing money causes price inflation.  Taxes just plain add costs.  And they pass all those costs on to you.  The consumer.

But it’s the uncertainty that plagues business. Yes, it’s bad.  But will it get worse?  Probably.  So business hunkers down.  They don’t expand.  They don’t build.  And they don’t hire.    Not for the indefinite future.  Until they have some sense of what’s to come. 

To Save Obamacare Obama Tries to Hide the Facts

Even the Obama administration know they’re not helping the economy.  And they know that Obamacare is a train wreck.  So they’re doing everything they can to lie to the people.  To get their propaganda front and center.  How?  They’re paying Google with our tax dollars to alter ‘Obamacare’ search results (see HHS is Paying Google with Taxpayer Money to Alter ‘Obamacare’ Search Results by Jeffrey H. Anderson posted 1/3/2011 on the Weekly Standard).

Obamacare is bad.  Even they know it.  So they’re trying to control Internet content.  Scary, isn’t it?  Censorship can’t be far behind.

A Snow Crisis is a Terrible Thing to Waste

FDR exploded the size of Big Government.  He gave birth to the nanny state.  But one thing he didn’t do was to neuter private business.  And empower the public sector employees.  He knew if you were going to partner with Big Labor you needed big taxes.  You get big taxes from businesses.  And from their employees.  In other words, it all trickles down from business.  If you shut down business, you shut down everything.

Today, though, it’s all different.  They don’t just take from business. They eviscerate business.  To feed the public sector.  Who produce nothing.  They just consume tax dollars.  And live a far better life than you or I.  Case in point, the NYC blizzard (see Sanitation Department’s slow snow cleanup was a budget protest by Sally Goldenberg, Larry Celona and Josh Margolin posted 12/30/2010 on the New York Post).

Selfish Sanitation Department bosses from the snow-slammed outer boroughs ordered their drivers to snarl the blizzard cleanup to protest budget cuts — a disastrous move that turned streets into a minefield for emergency-services vehicles, The Post has learned.

That’s your public sector.  When the mayor forces them to live like the rest of us they protest vehemently.  Taking advantage of a crisis, they paralyze a city.  Prevent emergency services from using the streets.  Because they’re not happy with wage and benefit packages similar to the private sector.  So they protest.  And ask for our support in their struggle against unfair labor practices the mayor is using against them.

Solidarity, Brother?  Or are you Giving me the Finger?

Even their union brethren have had enough.  And that says a lot (see Labor’s Coming Class War by William McGurn posted 1/4/2011 on The Wall Street Journal).

In theory, of course, organized labor is all about fraternal solidarity. For many years, it is true, private-sector unions supported collective-bargaining rights and better benefits for government workers, while public-employee unions supported the private-sector unions in their opposition to legislation such as the North American Free Trade Agreement in the 1990s.

Suddenly, it’s a different world. In this recession, for example, construction workers are suffering from unemployment levels roughly double the national rate, according to a recent analysis of federal jobs data by the Associated General Contractors of America. They are relearning, the hard way, that without a growing economy, all the labor-friendly laws and regulations in the world won’t keep them working.

The union trades are among the biggest group of laid off workers.  And while they sit unemployed waiting to pick up a call, the public sector goes on.  Living extremely well.  And the high taxes to pay those fat wage and benefit packages are killing business.  The very business they need to build stuff.

What’s more, “blue-collar union workers are beginning to appreciate that the generous pensions and health benefits going to their counterparts in state and local government are coming out of their pockets,” says Steven Malanga, a senior fellow at the Manhattan Institute. “Not only that, they are beginning to understand the dysfunctional relationship between collective bargaining for government employees and their own job prospects.”

And while the public sector bitches about pay cuts in their jobs, unemployment soars among the union trades.  I once complained about my wage and benefits until I met the man who had none.  So don’t go looking for the solidarity on the picket lines.

Over in New York, meanwhile, newly inaugurated Gov. Andrew Cuomo faces a similar battle. Mr. Cuomo campaigned on a cap on property taxes and a freeze on state salaries, both anathema to the powerful state-employee unions. As the New York Times reported last month, however, in this showdown Mr. Cuomo may have found a surprising ally in the 100,000- member Building and Construction Trades Council of Greater New York. Maybe not so surprising: The Times says unemployment for these workers is running at 20%.

These union employees at least provide value.  They build things.  And build them very well.  Sure, you can say some are overpaid.  And maybe some are.  But one thing you can’t say is that they haven’t been sharing any of the sacrifice during these down times.  Unlike their public sector brethren. 

In some ways, this new appreciation for the private sector is simply back to the future. FDR, for example, warned in 1937 that collective bargaining “cannot be transplanted into the public service.” In the old days, unions understood economic growth. Mr. Malanga points to AFL-CIO President George Meany’s strong support for the JFK tax cuts as an example.

These days the two types of worker inhabit two very different worlds. In the private sector, union workers increasingly pay for more of their own health care, and they have defined contribution pension plans such as 401(k)s. In this they have something fundamental in common even with the fat cats on Wall Street: Both need their companies to succeed.

By contrast, government unions use their political clout to elect those who set their pay: the politicians. In exchange, these unions are rewarded with contracts whose pension and health-care provisions now threaten many municipalities and states with bankruptcy. In response to the crisis, government unions demand more and higher taxes. Which of course makes people who have money less inclined to look to those states to make the investments that create jobs for, say, iron workers, electricians and construction workers.

Big Government and the Public Sector can’t Exist without Business

To tax and spend you need big piles of tax money.  Which anti-business policies won’t give you.  And raising tax rates will hurt business and consumers alike.  Which also won’t give you big piles of tax money.  Ditto for excessive government debt and printing money.  They all kill economic activity.  And we’re killing our economy.  Which is shrinking that pile of tax money.  And this is causing cities and states budget problems.  Requiring a reckoning with their public sector employees.  Which is going so badly that the public sector unions are now finding themselves an island unto themselves.  No one is feeling pity for these pampered prima donnas.  Even their fellow union workers in the building trades are abandoning them.

Things are bad.  But they can get worse.  If we try to bail out the public sector.  We do that and we’ll end up like Greece.  The only difference being that there won’t be anyone to bail us out.  So that’s not an option.  We have to cut spending.  Before we end up like Greece. 

We need to repeal Obamacare.  Cut taxes.  And stop attacking business.  If we want jobs.  And prosperity.  For one fundamental truth in life is that business can exist without the public sector.  But the public sector can’t exist without business.  Someone has to pay all those taxes.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Obama Calls for Dems and GOP to Cooperate, Wants to Keep Governing against the Will of the People

Posted by PITHOCRATES - January 1st, 2011

Liberals Always Call for Bipartisanship when they Lose Elections

When Nancy Pelosi and her Democrats won in the 2006 midterm elections, it was the end of conservatism.  They said so.  When Obama won in 2008, he advised those across the aisle that elections have consequences (see The roots of Obama’s demise by Marc A. Thiessen posted 10/25/2010 on The Washington Post). 

The decline of the Obama presidency can be traced to a meeting at the White House just three days after the inauguration, when the new president gathered congressional leaders of both parties to discuss his proposed economic stimulus. House Republican Whip Eric Cantor gave President Obama a list of modest proposals for the bill. Obama said he would consider the GOP ideas, but told the assembled Republicans that “elections have consequences” and “I won.” Backed by the largest congressional majorities in decades, the president was not terribly interested in giving ground to his vanquished adversaries.

When the far left lies and tricks voters to elect them, they confuse that for a mandate.  When the truth of their policies comes out, though, they lose subsequent elections.  Then demand that Republicans work with them.  For the best interests of the American people.  Unlike Nancy Pelosi.  Or President Obama.

When liberal Democrats have the majority in Congress, bipartisanship means that Republicans should accept being the Democrats’ bitch.  When they’re out of power, it means something completely different.  That Republicans shouldn’t govern like Democrats.  Governing roughshod all over the opposition party.  Why?  “Because,” they say.  Pouting.  (They really don’t have anything better.  They just HATE not having power.)

It was Always about Growing Government, not Improving the Economy

And as the new year begins, President Obama is giving us a Bill Clinton wag of the finger (figuratively), telling us to play nice.  Which is what bullies typically do when they lost their power to bully (see Obama: Dems, GOP must cooperate in new year by Julie Pace, Associated Press, posted 1/1/2011 on Yahoo! News).

In his weekly radio and Internet address, Obama said Saturday that lawmakers must return to Washington next week prepared to make serious decisions about how to grow the economy in the short run and stay competitive in the future.

“I’m willing to work with anyone of either party who’s got a good idea and the commitment to see it through,” Obama said. “And we should all expect you to hold us accountable for our progress or our failure to deliver.”

Not quite the ‘thanks but no thanks’ he told the Republicans 3 days after his inauguration.  And all that talk about jobs being job one?  And that laser like focus on jobs?  It was all bull [deleted expletive].  Unemployment went up after his stimulus plan to keep unemployment under 8%.  It’s still flirting with 10% some 2 years later.  But the size of government spending exploded.  Which is what the Left wants.  It’s what they always want.  So they got what they wanted.  The only problem is that some of their supporters believed they were trying to improve the economy.

The Public Sector’s Message to the Taxpayers:  Let Them Eat Cake

The liberal left comprises approximately 20% of the population.  That’s why it’s hard for them to win elections.  Especially after they’ve exploded government spending following an election win.  And that spending is bankrupting the country.  Our states.  And our cities.

A big chunk of that spending goes to support the public sector.  Public sector unions have made public sector jobs very cushy.  No one in the private sector comes close to their wage and benefit packages.  And no one in the private sector enjoys job security like they have in the public sector.  Until now.  In Wisconsin, the Republicans are in power.  And the public sector is getting nervous (see Wisconsin State Workers Fret, as G.O.P. Takes Over by Monica Davey posted 1/1/2011 on The New York Times)

But it’s just not in Wisconsin.  Public sector unions are nervous wherever Republicans have ascended to power.  Because they worry that the good times may come to an end.  And they may have to live like the rest of us.  Some are even predicting that we may see a little European rioting here in the United States (see Topic A: What will be 2011’s biggest political surprise? by Ed Rogers posted 1/2/2011 on The Washington Post).

The biggest political surprise in 2011 may come in the form of the shock produced by public-sector labor strikes and demonstrations that could stray into civil disorder as state and local governments cut budgets. Government workers could be laid off by the thousands, and millions of the beneficiaries of government-supplied salaries, pensions and benefits could see reductions in pay and program allowances they have been told to expect.

The same kind of protests that have rocked Paris, London and Rome could erupt in California, New York and Illinois.

When European Socialism cuts back on pensions, college tuition assistance, health care, etc., the beneficiaries of European Socialism burn cities.  And this anarchy may be coming to a city near you.

The schism between the governed and those governing could become greater than ever as the government tries to protect itself for its own sake and not for the public good. The millions of Americans who have lost jobs or face increasing economic uncertainty resent the relative posterity and security that government now provides for itself. President Obama will say he is for more “stimulus,” but even the money-making printing presses in Washington are at their limits.

It’s a master-slave mentality.  The masters are the public sector.  The slaves are the taxpayers.  And the masters have lost touch with reality.  They laugh at the poor suffering masses struggling to pay their taxes.  When advised of the taxpayer’s plight what do they say?  “Let them eat cake.”  (A reference to what Marie Antoinette reportedly said during the French Revolution.  While the upper classes had food, the lower classes were to be satisfied with oven scrapings.)

Pennsylvania Liquor Stores a Microcosm of Public Sectors Everywhere

Of course, the poor, suffering taxpayers would probably not be in such a foul mood if it wasn’t for the value they were getting for those high taxes.  That public sector sucks.  As any enterprise without competition does.  Why give a damn about what you’re doing if you’re the only caterer in town?

In Pennsylvania, you can only buy wine and liquor in a government store.  And the service stinks to high heaven.  The good people of Pennsylvania want to privatize their booze.  But the public sector union oppose privatization (see A Push to Privatize Pennsylvania Liquor Stores by Julie Pace, Associated Press, posted 12/31/2010 on The New York Times).

Like prisoners in the gulag, consumers here can only fantasize about buying their wine and liquor in a competitive free market. The Commonwealth of Pennsylvania has run the liquor stores for eight decades, a relic of the post-Prohibition era, when government thought controlling the sale of alcohol would limit consumption.

The legislature has consistently dismissed talk of privatizing the system, mainly because of opposition from the union representing the store workers and from groups like Mothers Against Drunk Driving and conservative teetotalers, all influential in the state.

And what’s the recourse for an angry people?

“This is insane!” said Bill Conrad, 68, a retired electrical engineer. “People are going to New York and Jersey” to buy alcohol.

And there it is.  Competition makes everything better.  Should you be lucky enough to live close to the state border.  Where I live, I can go to most any party store, some drugstores, even some supermarkets.  And you know what?  I can go to anyone and buy whatever I want whenever I want.  Private stores have competition so they have an incentive to keep their shelves stocked.  And their doors open for customers.

If you want to get an idea about how Obamacare will be, you can look at the liquor stores in Pennsylvania.  That’s what happens when the governments tries to run anything.

The Taxpayers Message to the Public Sector Employees:  Get a Job

The Democrats took a shellacking at the 2010 midterm elections.  The people have rejected their Big Government liberal agenda.  And they know it.  So they’re now trying to shame the Republicans into working with them to keep their Big Government dreams alive.  It’s either that or they have to figure out a way to get rid of those pesky elections.

But the public sector is bankrupting the country.  And the people paying the taxes to support that public sector are saying enough is enough.  They don’t like making sacrifices in their own life so others in government can live a better life.  Especially when they have to settle for such rotten service from the public sector they’re paying more and more to fund.

Their message to these pampered public sector employees?  The same parents have been telling their kids for ages.  Get a job.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

LESSONS LEARNED #43: “If business ain’t selling, business ain’t hiring.” -Old Pithy

Posted by PITHOCRATES - December 9th, 2010

Before Competition, the Big Three were Living Large

President Obama bailed out GM and Chrysler in 2009.  And why did they need financial help?  The same reason any company needs financial help.  They weren’t selling enough.

I had a finance professor who said few companies have a debt problem.  Companies struggle because they have a revenue problem.  They’re simply not selling enough.  And when a company goes into bankruptcy reorganization, they emerge with the same revenue problems.  Which is why so many still fail after reorganizing and slashing their debt costs.

For decades, the Big Three had a monopoly on the automotive market.  Wherever you lived in the world, if you wanted a car you bought a Ford, GM or Chrysler product.  So the Big Three could charge whatever they wanted for their cars.  That is, until the Japanese entered the market.

Unskilled Line Workers Living Better than Doctors

It was their great success that led to their downfall.  Selling cars with fat profits allowed the Big Three to pay fat wage and benefits.  And they did.  Then the UAW got greedy.  An unskilled line worker could own two houses, a boat, 2 new cars, take expensive vacations, own the latest in toys, etc.  They lived better than doctors.  And doctors were highly skilled.  They spent 8 years in medical school.  And spent a decade of their life paying off the debt from that medical school.  And to add insult to injury, doctors worked 80+ hours per week during that decade when they lived like paupers.  Line workers worked only 40.  And lived like kings.

It was nice work if you could get it.  And many did.  Before the Japanese.  But it all started to come apart in the 1970s.  When the Big Three were selling junk.  Cars that rusted out in a few years.  Unreliable.  Ugly.  These just screamed “we just don’t give a damn anymore.”  More money went to the workers.  Less into making quality cars people wanted.  No problem for the UAW.  I mean, who else were you going to buy a car from?

Hello, what’s this?  Honda?  What’s that?  I’m not sure but it costs less.  And looks pretty good.  Nice quality.  So why should I continue to pay more for less and buy this junk from the Big Three?  Or so went the thinking.  Yes, the Japanese had arrived.  And they were selling something the people wanted.

Fat Wage and Benefit Packages come back to Bite the Big Three in the Ass

So that was the beginning of the end.  Those fat wage and benefit packages for unskilled labor required higher sticker prices than the market was willing to pay.  So they sold fewer cars.  And the Japanese (and, in time, the other imports) sold more.

But it got worse.  Not only were their revenues falling, but their costs were rising.  The Big Three were around for awhile.  They had an aging work force that was retiring.  And getting sick.  Pension and health care costs soared.  Costs per car soared.  While the Japanese were enjoying economies of scales (the more you sell the less each unit costs to make), the Big Three were bleeding red ink all over their balance sheets.

I was in a meeting one time on the floor of an assembly plant.  I was staring at the part of the line where a worker threw insulation into the bottom of the trunk.  She threw in a pad.  Walked over to her coworker at the next station.  Chatted a bit.  Walked back to her station.  Talked to someone else.  Then threw a pad into the next car on the line.  I could just see the red ink bleed.

The Big Three screwed themselves.  In order to cover those fat wage and benefit packages for their unskilled workers, they have to sell cars for a whole lot more than their competition was.  And they couldn’t.  Imagine McDonald’s workers receiving the same wage and benefit packages as the UAW.  And cooking hamburgers at the same pace.  You’d have to wait in line for 45 minutes for your burger.  And you’d pay over $20 for a Quarter Pounder with Cheese.

Buying American is not Necessarily American

I often see those bumper stickers that ask, “Unemployed?  Keep buying foreign.”  Or something like that.  What these people don’t understand, or choose not to understand, is that more people buy cars than make cars.  Paying more for less helps the few people that build cars.  While they enjoy a very good life, the greater number of buyers of those cars have to get by on less.  So the economy as a whole gets worse.  To help a group of unskilled workers live a better life than our own.

Is that fair?  Making the majority subsidize a minority elite?  Unless you live in North Korea or Cuba, the answer is, of course, ‘no’.  So we choose to buy what gives us the most value for our money.  Which is why the Japanese upstart Toyota would see the day when they would sell more cars than GM.  And why did they reach this remarkable milestone?  Because they were selling what people were willing to buy.

Interestingly, the GM and Chrysler bailouts were not your run of the mill reorganizations.  By the power the government gave itself, they walked all over the Rule of Law.  These companies didn’t have a debt problem.  Not anymore, at least.  Because the government screwed the bondholders.  And who did they reward?  That’s right, those unskilled UAW line workers.  The reorganization gave them shares in the new company for no other reason other than being politically loyal to the Democrat Party.  They weren’t even in the line of secured creditors, but that didn’t stop them from jumping to the head of that line.  Remarkable, really.  The Rule of Law had become merely a suggestion.

And when the union sold those ‘gift’ shares of stock they funded their unfunded pension liabilities.  While retirees who invested their life savings into GM bonds lost everything and had to get a job at McDonald’s.  Because McDonald’s is always hiring.  Because they are always selling something people want to buy.

McDonald’s can still Hire during Bad Economic Times

Like my finance professor said, no company fails because of a debt/cost problem.  A debt/cost problem happens when something happens to revenue.  And the biggest reason a business has a revenue problem is because of competition.  Someone somewhere is selling more for less.  Giving the people more bang for the buck.

During bad economic times, revenue problems quickly turn into cost problems.  For some.  Auto manufacturers may idle a shift at an assembly plant, laying off hundreds.  Because there’s no point in making cars no one is buying.  And these manufacturers simply cannot afford to pay these fat wage and benefit packages if they’re not selling cars.

But not everyone has the same financial problems during a recession.  Some still hire during bad economic times.  McDonald’s for one.  Why?  A couple of reasons.  Their workers don’t belong to the UAW.  Because of this we can still call McDonald’s fast food.  And your typical McDonald’s worker doesn’t own two houses, two cars and a boat.  So we don’t have to pay $37.50 for a #2 combo meal. 

We’re buying what McDonald’s is selling.  So they can hire people.  Even during bad economic times.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , ,