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.

 

President Bush who has overseen the largest government bailout in U.S. history admitted on CNN that he had to abandon free-market principles to save the free-market system and to make sure the economy didn’t collapse.

Yet according to a report from Celent, a Boston-based firm that provides information to the financial services industry the claims of a credit crisis by Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke had no basis in fact.

As a result of the abandonment of free-market principles the Bush administration has saddled the U.S. taxpayers with an unprecedented level of debt of up to $11 trillion by some estimates with no end in sight to the government’s willingness to fund future bailouts and turn our economy into a socialist system which it already resembles.

The president was admittedly battered and bruised over the last few years by a generally unpopular though mostly successful war, large losses in congressional and senate seats and a constant hammering by the liberal press.  But through it all Bush stayed the course economically and allowed the free-markets to operate and flourish.  Now even that is gone.

What is even more galling was when Bush told CNN that “I feel a sense of obligation to my successor to make sure there is not a, you know, a huge economic crisis. Look, we’re in a crisis now. I mean, this is — we’re in a huge recession, but I don’t want to make it even worse.”  Since when is the outgoing president obligated to help his successor especially when he is from the other party?

I don’t want to see this country suffer any more than we already have, but since Obama promised to fix our economic woes then Bush should let him do his “magic” and not give him a boost, especially since Bush’s help is a betrayal of conservative principles.

Later today I will be attending a speech being given by the president on building a foundation for the future.  The problem is that Bush’s recent policy moves have severely weakened the foundation of our economy and whatever he says is likely to ring hollow.

The gay boycott hasn’t begun but the Sundance Film Festival has already decided that they need help with next year’s event to be held at the end of January.

Thanks to the slow economy corporate sponsorships have slipped and that has pinched the festival’s organizers so they are now seeking $1.5 million in state aid.  Money which the state doesn’t have.

The festival which is estimated to have brought in close to $60 million in economic activity to Utah is important in a time when business activity is slowing down.  However it seems that the Sundance officials have caught bailout fever thinking that they are so important to the state that they deserve public money to operate their festival.

I’ll bet the thought of actually scaling back the festival due to a shortage of funds sent shivers through the spines of the festival’s organizers.  After all how could they possibly look less ostentatious for the Hollywood hoi polloi that frequent Park City every year?  Would Sundance lose it’s cachet?

Rather than go after public money, Sundance should go back to its founder Robert Redford and his Hollywood pals and get them to pony up the money they need.  But then again that would be so-responsible.

For all that talk about the $700 billion bailout package and what it will ultimately cost taxpayers the Federal Reserve gave us a glimpse recently when they announced that the mortgage debt they took over in teh Bear Stearns rescue has been written down from $29.5 billion in June to $26.8 billion at the end of September.  That’s $2.7 billion in just three months or a  decrease of $900 million per month.  If that keeps up taxpayers would see nearly $11 billion in losses after a year.

The Fed is counting on the market stabilizing and for a return to normalcy in the credit markets but that is far from assured at this point.  Another problem is that taxpayers really don’t know what is in the Bear Stearns portfolio.  There could be some reasonably good debt that will regain its value but there is just as big a chance that much of the debt is of poor quality and that the writedowns will continue for the forseeable future.

It looks like we have truly mortgaged our future with the government rescue plans and our children and grandchildren will pay a very heavy price for this folly.

In Hamlet Lord Polonius offers his son dome advice as he returns to school;

Neither a borrower or a lender be;

For  loan often loses both itself and friend,

And borrowing dulls the edge of husbandry.

Perhaps John  McCain would have benefited by having read some of this sage advice before announcing his own economic rescue proposal during Tuesday night’s presidential debate.

As if it wasn’t bad enough that our government has already bailed out Fannie Mae, Freddie Mac and insurance giant AIG at taxpayer expense and the president signing the $700 billion bailout bill now McCain is jumping on the bandwagon in an effort to lure voters to his side.

Under McCain’s plan the government would purchase some $300 billion in mortgages at their full value and then re-write them to take into account the current home value and make the payments more affordable to homeowners.   It sounds great if you are a homeowner who is struggling to meet mortgage payments and is now upside down due to falling home values but why should taxpayers foot the bill for someone else’s mistakes?

Most of the homeowners who are in trouble purchased more home than they could afford thanks to easy credit and low interest rates that were only guaranteed for a short period of time.  When the rates reset to market rates suddenly these homeowners found themselves rapidly falling behind on their mortgages.

Now in desperation to attract voters McCain has come up with a scheme to help out these troubled homeowners by turning the government into a mortgage lender and servicer.  How in the heck does that benefit most taxpayers?  Neither the mortgage holder or the borrower will lose undet this plan as the government will essentially make them whole. That’s financial responsibility?

Or what about homeowners who used the inflated value of their home to borrow more money and are really in the hole.  The taxpayers are supposed to bail them out as well.  I have a friend who is in sch a fix.  He borrowed against his home  to fix it up for sale and when it came time to sell the market was far too soft for the price he sought.  He has lowered his price several times but is now at the point where if he did sell he would owe the bank money so he is considering walking away from the house.  While I have sympathy for him I think he should pay the price for being overly optimistic on what price his house would fetch.  A the same time at least he borrowed to legitimately improve the home.  Most home equity borrowers took their  booty and spent it on vacations and investments that have now turned south putting them further into debt.  Now they too are looking for the government to bail them out as well.

Who’s to say that the McCain plan isn’t just another step along the path to socialsim?  Since when does a capitalsit society ask the government to step in and in essence nationalize the financial system?

Yes this economic crisis is painful.  Costs for food and energy are putting a squeeze on the middle class like they haven’t seen since the Carter years.  Fear and panic on Wall Street is as bad as it has been since the crash in 1987 if not 1929 as politicians of all stripes have preferred to to put their fingers in the dike rather than take strong decisive action to calm the markets.

The end result is that this plays right into the hands of liberal Democrats who stand to clean up in November and pick our pockets starting in January.  Voters should beware of what they wish for when they vote for change next month.