November 2009


The United States Postal Service announced this week that they lost $3.8 billion in the most recent fiscal year which ended September 30th.  This follows losses totaling $7.8 billion in the previous two years.

In order to keep operating the quasi-governmental agency borrowed money from the U.S. Treasury and now owes the government $10.2 billion.

Federal law allows the Postal Service to borrow up to $3 billion per year- but the total debt can’t exceed $15 billion which means the agency will reach that cap in less than two years if they borrow the maximum amount each year.

That would give the Postal Service a little time to get their feet back on the ground but with an estimate that they will lose another $7.8 billion in the next year alone the clock may have already run out.

The problem for the postal agency is that they are a slow moving government behemoth trying to compete in a fast moving world.

Granted they have taken steps to cut costs by slashing 40,000 jobs, but they still have over 700,000 employees.

One of the biggest costs is retiree health insurance payments.  As the automakers and other corporations have discovered retirees are living far longer than originally predicted, the plans are far too generous and trimming the benefits is a political nightmare.  The Postal Service losses would have been even greater had the government not given the Service a $4 billion break last year but they aren’t likely to continue to do that in an era of soaring deficits.

One proposal that the Postal Service has made is to eliminate Saturday mail delivery.  This could save between $2 billion and $3.5 billion per year depending on which estimates are used.

Normally a business would be able to cut back and maybe face the wrath of some customers but with the Postal Service this proposal has raised not the ire of regular customers but politicians bent on protecting their districts.

One politician who has come to the rescue is Danny Davis (D-IL) who is supporting a government bailout to keep the Postal Service afloat.   We all know how well those government bailouts work.

Admittedly the Postal Service is in a tough spot as their mandate is to deliver mail to every address in the country.   That is a very expensive proposition.  It costs far more money to deliver to rural and remote areas than cities and suburbs where homes and businesses are clustered closer together.

But why should those that choose to live further away be subsidized by others who live in what I’ll call a more cost efficient delivery area?

Over the years UPS and FedEx have added rural and home delivery surcharges to reflect the added cost of delivery to those addresses.  The airlines have cut service to areas that aren’t profitable and in some locales cities are actually paying them to provide service.

In a true free market why shouldn’t people pay for the cost of delivery?

Another major challenge for the Postal Service is an increasingly electronic world where e-mail and text messages have largely replaced mail.

Mail volume fell by 26 billion pieces in the last fiscal year, no doubt affected by the recession and is expected to drop another 11 billion this year.  That is not a recipe for success.

So while mail volume is dropping like a stone some brilliant person in the Postal Service thought that selling greeting cards would be a great way to add revenue.  Has anyone checked the state of greeting card sales?  Even those are going electronic

The best solution will be to privatize mail delivery.  Yes that will probably mean higher costs for everyone but at the same time it will probably mean less junk mail and for environmentalists a greener planet as less paper is used- saving forests and less greenhouse gas emissions as mail delivery will no longer be mandated to every address in the country.

 

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Speaker of the House Nancy Pelosi faced off on Saturday against entrenched Republicans and reluctant blue dog Democrats and managed to pull together just enough votes to pass the president’s health care reform bill.

Pelosi couldn’t resist gloating about the victory by claiming that it was a bipartisan effort thanks to the lone GOP vote from Louisiana Rep. Anh “Joseph” Cao who joined the Democrats once it became clear the bill would pass with or without his vote.

At first blush this claim looks pretty ludicrous.  After all how can anyone in their right mind say that one vote out of 220 represents a true bipartisan effort?  But Pelosi was right she was just focusing on the wrong set of votes.  Thirty nine Democrats stood up to Pelosi and voted against the bill which represents a far greater percentage of the overall vote than the one Republican on the other side.

President Obama promised to reach across the aisle and end the bickering that had become the the norm in Washington.  Instead his actions have only widened the divide as evidenced by Saturday’s vote in the House and it will probably be an even tougher fight in the Senate.

Now that the House has put the health care vote behind them many of the Democrats who voted in favor of the bill will now be forced to defend their votes to angry constituents when they face re-election next year.

If the momentum built up from the tea parties continues into next year’s election November 2010 could be Obama’s Waterloo.

 

What a difference a year makes!  Just last November then Sen. Barack Obama fueled by anti-Bush and anti-Republican sentiment swept fellow Sen. John McCain to capture the White House.  Exuberance and optimism filled the air as the Democrats also increased their numbers in the Senate and House giving them a feeling of invincibility as they planned to roll back the Republican agenda of the previous eight years.

After his inauguration in January everything started to go downhill fast.  Obama’s promise to not employ lobbyists in his administration was undone by a series of waivers,  the vaunted transparency initiative to make government more accountable is still stuck in a web of secrecy as the administration has learned that being too transparent also means exposing how the government really runs which isn’t a pretty picture.

Obama also promised an ethical administration but has been bogged down by ethical lapses that should have been resolved in the vetting process but were either ignored or overlooked.

In addition to the administrative issues that have dogged Obama during his first year in office have been the legislative failures with both the climate change and health care reform bills that formed the centerpieces of his agenda proving to be far more contentious that he expected and forcing him to abandon his pledge of bipartisanship that he made during the campaign.

Of course Obama’s biggest failure to date has been the economy.  As part of his hope and change strategy he led his supporters to believe that he knew how to turn the economy around and get people back to work.  Well he has been in charge for almost ten months now and despite a promise that unemployment wouldn’t top 8% if his $787 billion stimulus bill was passed the Labor Department announced today that the rate was 10.2% last month marking the first time in 26 years that it had topped the 10% mark.   Home foreclosures have been hitting new records every month despite the actions of the White House to provide relief.   Yet despite these failures he continues to push for more government aid in the hope that it will actually do some good.

But on Tuesday voters including many of those who voted for Obama one year ago started to abandon him in droves in the Virginia and New Jersey gubernatorial elections.

In Virginia former Attorney General Bob McDonnell cruised to a surprisingly easy win capturing 58% of the vote and bringing with him fellow Republicans for Lt. Gov. and Attorney General.  Plus the GOP picked up six seats in the House of Delegates by ousting Democrat incumbents in Democrat strongholds.

New Jersey was a tighter race as incumbent Gov. John Corzine struggled to overcome corruption scandal issues and managed to garner just 44% of the vote  in a heavily Democrat state.

The White House downplayed the results and said the election wasn’t about Obama but local politics.  If that’s the case then why did Obama make five visits to New Jersey and do robocalls for Corzine if it wasn’t at least partially about him?  Or consider the odd statement the White House put out about the potential loss Creigh Deeds was facing in Virginia by saying that if Deeds loses it was due to the fact he didn’t align himself closely with the president.

Democrats also point to exit polls that showed a majority of voters saying they approved of Obama and that the economy and jobs were the major factor in the results.  Well maybe I’m missing something here but isn’t the president largely in charge of the economy  and jobs?

As Charles Krauthammer pointed out in his column today the myth that Obama’s victory last year signaled an FDR- like realignment was demolished by Tuesday’s results.

In Virginia where Obama won by six points, Bob McDonnell won by 17 – a 23 point swing.  In New Jersey went from plus 15 for the Democrats to minus 4- a 19 point swing.

The key to this change of sentiment was the independent voter.  Last year independents swung narrowly for Obama but in Virginia they voted Republican by a 33 point margin and in New Jersey by an even more shocking 30 points considering the make up of that electorate.

I guess Obama and the Democrats can take some solace in capturing the seat held by former Republican Rep. John McHugh.  But even that is somewhat illusory.  They won 49-46 with about 5% going to the Republican who dropped out and then supported the Democrat.  For a Conservative Party candidate to enter the race late, receive no money from the RNC  and then almost pull out a victory isn’t a big victory for the Democrats.  They’ll hold that seat until the next election, but it is far more likely that the GOP will reclaim it if they run a real campaign.

The only Democrat that I saw that was willing to be honest about the results Tuesday was Sen. Mark Warner of Virginia who said they got “walloped”.

Now that the bloom is off the rose will the Democrats and Obama try and listen to the voters in an effort to save themselves embarrassment next November?  Don’t bet on it.