'Cause I Said So…

A Change of Vision Needed At The USPS

Posted in Bureaucracy, Business, Finance, Free Markets, Government, Regulation by kevinsoberg on August 9, 2011

Once again, we’re hearing about problems at the United States Postal Service. The Postal Service is still having difficulty staying profitable delivering the mail. The majority of items delivered by the service has changed over its history from individual letters, to bills, to bulk mail advertising. However, the change in the Post Service’s customers has not been reflected in the way the Service operates.

There has been talk of ending Saturday home delivery of mail. It would be an immediate admission to what is no longer possible, but it does not go near far enough. It does not sufficiently increase efficiencies. It is merely a stop-gap measure to stem the bleeding associated with the failed current business model. What is really needed is a change in vision. What will the Postal Service of tomorrow be? Will it be a shrinking shade of its former self, or will it be a lean efficient money-making machine?

Any company operating in the private sector knows it must meet the needs of its customers, or risk going out of business. So, private companies continually update their business models to meet the changing needs of their customers. The USPS has not done this. It has lost sight of who its customers are and what they need. It no longer has a cogent business model.

Now, the US Postal Service already operates as two separate businesses with differing modes of operation. The Postal Service everyone thinks of is the traditional post office, with its service of General Delivery of letters and packages to all addresses in the country. The other, more recent, business done by the Postal Service is Express Delivery, the high-speed delivery of letters and packages. Most people don’t realize these two businesses operate simultaneously, but quite differently.

The business of General Delivery is a constitutionally mandated function of the federal government. This function was meant to guarantee communication across all of the states from within and without the US. To affect this, the Postal Service gives regular service, delivery and pick-up, to all US addresses, and charges rates which subsidize the costs of less profitable areas of operation. Even those areas with low populations have equal access to this form of communication, according to its governmental function. This service is operated as a virtual monopoly.

The Express Delivery business operated by the USPS has a completely different business model. Instead of offering daily service to all US addresses, service is strictly scheduled according to the need for deliveries. Pick-up service is by appointment or according to schedule from specified locations. The rates charged may be based on the cost of the individual service, though the USPS does advertise flat rates based upon the speed of service. It operates in a highly competitive field, with companies such as FedEx and UPS.

Obvious differences aside, the main difference between these business models is who is seen as the customer. Express Delivery correctly perceives the senders, those charged the fees, as the customers, while General Delivery incorrectly sees the receivers, those at the addresses, as the customers. How else could they justify daily service, regardless of need, to every address? Would you return each day to a customer making little or no use of your service, or would you instead focus on those paying for your service?

So, the obvious solution to General Delivery’s unprofitability is to end daily service to every address.

Instead of seeing the physical address visited each day as the customer, the service should focus on the people paying for delivery. The vast majority of mail is generated by companies and organizations sending large quantities of bills and advertising. They should be the daily focus of the Service’s attention. Luckily, those generating the majority of mail already have service based upon volume, either by scheduling pick-up or by dropping off their mail.

The service of mail pick-up and delivery to all other US addresses should remain regularized, but should be reduced to three times per week. The number of mail carriers would be reduced by almost half (sorry, guys). The miles driven each day would be reduced by half (without need of green technology). This one simple change would almost double the efficiency of the remaining carriers.

The actual customers of the service, those paying, could still receive daily service, while homes would still be serviced regularly. It would reduce how often people had to check their mail. The biggest inconvenience would be a one day delay in delivery of an item having no guaranteed delivery date. Those individuals who demand daily delivery of their mail may purchase Post Office Boxes for the privilege.

In the old days, it mattered if you received your mail on a given day, like the 1st or 15th of the month. Today, accounts are deposited electronically. All you may receive in the mail is a statement. If you pay your bills by mail upon receipt, you are unaffected. If you wait until the last-minute to pay, do it electronically or in person. If you need a letter delivered in town tomorrow, send it overnight or by courier.

The greater efficiencies gained by the reduction in unnecessary deliveries and its concurrent staffing will reduce the cost of General Delivery. The previously experienced cycles of increased postal rates followed by reduced traffic will end. The costs associated with an ever-growing population making ever less use of the current home pick-up service of mail will be lowered. It will allow the public to continue enjoying the regular home delivery of mail, subsidized by the Postal Service’s real customers.

Law of Unintended Consequences: A Cautionary Tale

Posted in Bureaucracy, Free Trade, Libertarianism, Lobbyists, Taxes by kevinsoberg on February 18, 2010

Politicians like to think they can make economic decisions on our behalf with no downside. As usual, the “smart people” can create the biggest mistakes when trying to “do good.”

Here’s one for you. Almost since the Louisiana Purchase, the federal government has had a system of tariffs and duties on the import of sugar to the US. Originally, it was to maintain sugar prices for growers in the new Louisiana Territory, thereby keeping slave prices high. In 1934, an import quota system was added to existing tariffs and direct farm subsidies. In one shape or form, these protections for domestic sugar growers have been in place to today.

These protections are deemed necessary because the American South is not the ideal growing environment for sugar cane. Cane much prefers the moisture, warmth and sun of the tropics to the short growing season of the semi-tropical regions of the Gulf Coast of Louisiana, Florida and Texas. The resulting plants are much smaller and less productive than those grown in the Caribbean, and Central and South America.  In addition, there are the higher labor costs of the US farmer and farm worker.

The result of political intervention in the sugar market is a US price triple the world price. A 1-cent increase in sugar prices costs US consumers in excess of $200 million in increased food costs. The vast majority of this extra profit goes to the growers all at the expense of US consumers. Food costs have a disproportionate effect on lower and middle class consumers, who have less elasticity in spending ability and less disposable income.

What is the rationale politicians and the industry give for higher than necessary food prices for Americans? Food security. All of our food must be grown domestically to ensure a safe and ready supply. Really. As if in time of national emergency, we couldn’t easily secure sources of sugar in our backyard. I can think of better uses for this argument, such as domestically producing a much greater share of our own hydrocarbons. (Drill here, drill now. But that’s for some other time.)

I’m a big believer in open markets. Why should we be giving aid (alms) to countries like Haiti? They could be producing a commodity product for sale to our market. We’re being hit three times for money: payments to farmers, higher prices and foreign aid. Why not skip the middle men, save money and create opportunities for our neighbors? Sounds good to me.

If artificially high food prices were where this tale ended, it would be bad enough. However, there are other issues as a result of this tinkering with our markets. They are the transformation of the US diet and its possible health effects.

Food processors, like every other enterprise, try to maximize profits and minimize costs. Well, if one of your major ingredients was kept artificially high, what might you try to do? Substitute it, possibly? That’s exactly what they started doing.

Processors began replacing sugar with an invention of US food scientists, high-fructose corn syrup. Look at the label of almost any processed food product from baked goods to bottled soda. You will see high-fructose corn syrup. You may also see sugar, but probably not. Unless it’s a dry, powdered product, sugar has all but been replaced with this sweet liquid.

Use of high-fructose corn syrup (HFCS) as a major sweetener began in the US as a response to high domestic sugar prices. HFCS is produced from corn, the largest crop in the US, and was created as one of a myriad of uses for the huge domestic corn crop. It was introduced as a secondary sweetener, and its use as the primary sweetener in the US food market was unforeseen.

HFCS is made in a three-step process. First, the corn is physically abraded to open up the starch molecules. Second, the starch molecules are treated with chemicals to break up the starch molecules until it is a liquid solution of mostly glucose, which is standard corn syrup (ex. Kayro) and is less sweet than cane sugar (sucrose).

Okay. Big deal. What’s this got to do with anything? Well, here’s the problem. We weren’t built to consume mass quantities of fructose. Fructose cannot be used by our bodies directly. It must go through an enzymatic process to change it to glucose, which is our “common carrier” of calories. Yeah, sucrose, cane sugar, is not strictly glucose either and must be converted for use. Big difference though, sucrose is a glucose molecule bonded to a fructose molecule. There is a 50:50 ratio of glucose to fructose in sucrose. We were built to metabolize this ratio and can do it, continually, to no ill effects (assuming no medical issues). What glucose / fructose ratio do you think is used to achieve the teeth-hurting sweetness of most bottled beverages?

Another thing, while fructose is sweeter on our tongues than is sucrose, it takes longer for it to be processed to glucose. This results in our uptake of glucose to lag behind our consumption of fructose. Our hunger, or “sweet tooth”, takes longer to be sated. We end up consuming larger amounts of the food stuff before our body tells us we’re done. Also, there’s been studies associating high fructose consumption to all kinds of negative health issues. I’m not going to get into all that. Look into it yourself, if interested.

Here’s the kicker, in November 1984, Coke and Pepsi announced their switch to HFCS from cane sugar. Pepsi had been using a blend for years, so no major issue. However, Coke for all its years had been using cane sugar, exclusively. Coincidentally, the following Spring, New Coke was introduced with HFCS, not sugar. Even after “Original Formula” Coke was reintroduced, HFCS was the sweetener. All remaining soft drink manufacturers soon switched to HFCS.

Today, unless you buy a soft, energy or sports drinks from a boutique bottler, you are consuming HFCS. Take a look at the time lines involved. When did we start hearing about our kids getting so “portly”? Seems to me it was after the HFCS takeover. Now, kids like sweet stuff. I did, and ate tons of it. “Kids don’t get any activity, right?” Hey, I had video games, TV and books. It’s not like we were out on some hamster wheel all day long.

What fundamentally changed for kids, and for all of us? Might it be our diet? I can’t think of anything more basic than that. You know of Occam’s Razor, right? It’s the principle that when given a selection of hypotheses, you choose the one that requires the least assumptions. How’s this: our diet affects our health.

Without any forethought or understanding of possible negative outcomes, politicians, lobbyists and entrenched interests have worked to change the way and what we eat. To what result? We shall see. Thanks guys.

Not Sure About That “Deep Bench” Idea

Posted in Bureaucracy, Career Politicians, GOP, Politics, Taxes by kevinsoberg on February 10, 2010

Over the years of following politics and public policy, from Republican ascendency, to fall, to now maybe return, I’ve heard from the political professionals in the New York/ Washington corridor the following refrain: The GOP needs a deeper bench.

I don’t know about that. Oh, I understand the idea. Republicans need more elected officials at the state and local level. There they can build impressive resumes to run against Democrat career politicians when seeking higher and ever higher office. Supposedly, this will give the GOP a “deep bench” (sports metaphor for lots of potential candidates) that can be called on at any given time to seek office.

Sounds good in theory, but I’m skeptical. Not that it’s a bad thing for the GOP to have an extensive list of people willing to seek elected office. My skepticism is of career politicians, regardless of party. I don’t know if you’ve noticed, but long-term involvement in government changes a person’s outlook and attitudes. I’ve coined a phrase for this phenomenon: Chronic Government Service Syndrome (CGSS).

In most parts of the country even Democrat local officials are relatively conservative. How many local politicians get elected promising to raise taxes and spend it wastefully? Over time as they work their way up the political ladder to Congress their mind is altered and they end up voting for, as an example, Obama’s statist agenda. Want examples? Harry Reid and Tom Daschle were originally pro-life, deficit hawks, but many years of office later…

Don’t think I’m just picking on Democrats. The Republicans in Congress during George W. Bush’s Presidency are perfect examples of CGSS run amuck. Except for relative rookies, most congressional Republicans went along with Bush’s domestic agenda, including increased deficit spending, Medicare expansion, and (so-called) immigration reform, at least until their constituents raised a big ole ruckus. Most of these politicians had been in one or another elected office for over a decade, some most of their lives.

CGSS is the result of prolonged exposure to the political machinations most deem necessary in doing one’s job as an elected representative. These influences are felt at all levels of government. The longer one’s in office, and the higher the office held, the stronger the affects.

How is your local politician affected by this? Isn’t he a neighbor? He might be a friend. He’s not an absentee member of your community who spends most of his time hundreds or thousands of miles away. How can he possibly be like those career politicians in Washington or your state capitol? Well, just imagine the following conversation:

Citizen: Alderman (City Councilperson, whatever…), I’ve been running this program of late night basketball at our church’s recreation center during the summer to give kids something to do, and to keep them out of trouble.

Politician: Great idea! You’re doing the Lord’s work. How’s it going?

Cit: We’ve had an overwhelming response. That’s the problem. It’s gotten so big it’s outgrown our facilities.

(Here’s where it takes a possible turn.)

Option 1 (Personal Favorite):

Pol: Why don’t you reach out to other congregations to create simultaneous programs at other churches? It would spread out the kids and create opportunities for inter-congregational competition. Also, it could foster ecumenicalism between denominations.

Cit: I hadn’t considered that. I was thinking the city might let us use those big courts at the local park.

Pol: I understand your thinking, but it’s just not financially feasible. The agencies involved are already operating on tight budgets. It’s probably best to keep this program self-run. As a matter of fact, I’ll speak to my minister and put him in touch with you.

Cit: Well… thanks anyway. I’ll consider what you’ve said.

Option 2 (Not bad):

Pol: Really? What are your plans?

Cit: Well, I’ve been thinking about it. The city has those big Public Courts that go unused after dark. Is there a possibility we can have access to them?

Pol: I’m not sure. Yes, they are there, but there are budgetary considerations. Parks and Recreations would have to have available funds for staffing and electricity. Also, I’m not sure the neighborhood would appreciate a bunch of kids and more road traffic without an increased police presence.

Cit: Well, there would be volunteers from the church…

Pol: I know, but it could open up the city to liability issues. Tell you what I’ll do… I’ll speak to the Mayor/ City Manager and see if there is any wiggle room in the existing budget.

Cit: Thank you. I understand there may be problems. Any help you can give would be much appreciated.

Option 3 (All too often…):

Pol: That’s terrible! Is there any way I can help?

Cit: Well, you have those big Public Courts going unused after dark…

Pol: You’re absolutely right! A program like that deserves access to the city courts. They are for “The Public.” What else are these kids to do? It shouldn’t cost much, and I’m sure there’s a federal/ state program for “at-risk” youth we can tap. I’ll have my staff contact the grant writers at City Hall and see what is available. If there isn’t something, I’ll contact our Congressperson/ Legislator to see if they can earmark some funds for this important program.

Cit: Gee! You’ve really gone above and beyond my expectations. You can count on my support come election time.

Now, don’t think me too cynical, but how many local politicians would prefer the third version of this conversation to take place? Sorry to say, but after the initial election most politicians seem bent on re-election. Even those originally elected with the attitude represented by the first two options could grow weary of disappointing constituents. Why should they when other funding sources are readily available?

Most politicians probably didn’t seek office with any strong ideological grounding. Maybe, most of them just wanted to “get things done.” If in the course of “getting things done” they’ve had to tap other funding sources, well, so be it. If they can’t ask constituents to directly pay for services they (may or may not) request, perhaps there’s somebody else they can ask who is more than happy to “generously” hand it out. All’s the better, right?

A moment to rant about taxing and spending in America:

Unfortunately, the lion’s share of tax money in the U.S. is collected by Washington. It not so slowly became this way since the passing of the 16th Amendment, the Income Tax. Over this time, the federal government began edging out states and localities for access to tax dollars (the Feds get first pickings and they take it out of your paycheck). As a result, citizens have become less likely to approve state and local tax increases (the closer the government, the more say we have).

Simultaneously, Washington began “revenue sharing” with the states. “Sharing” being just a fancy way of saying, “We’ll let you have some back, if you spend it how we tell you.” At first, this was fine with most states. They were either bigger and richer (and got to tell the yokels how to spend the money) or were smaller and poorer (and what are a few strings when the money is free?).

Every governmental body has a full-time staff dedicated to writing grant requests to federal and state agencies. The existence of these agencies is to spend “other people’s” money on “worthy” projects. Most of the state agencies are just funnels for federal dollars allocated under “block grants.” These grants are money “given” to the states to spend, as long as they chip in matching funds and follow miles of rules and regulations.

So, we’ve come to a situation where we elect people to take our money, under penalty of law, to some far away capitol. These people decide how much (if any) of our money we get back and how it must be spent. The Founders’ original plan for the flow of tax money has been reversed, reducing our sovereign states to virtual administrative districts of a central authority. In addition, for the partial return of our money, we get to pay the (generous) salaries of an endless number of middle men whose jobs are to constantly meddle in our affairs.

The cause and effects of CGSS:

Do you remember what your dad said about you eating bread and salad at the all-you-can-eat places? “That’s how they get you!” Your dad was right. He didn’t pay $9.99 for you to load up on rabbit food. You were there to eat the meat and potatoes.

Well, a politician has been “got” the moment he buys into the idea in any way that taxation can or should take place at a different level of government than that at which the money is spent. We don’t tax just one locality to pay for the military. A federal purpose requires federal tax money be spent on it. The same logic applies to local and state purposes. The citizens of California shouldn’t be taxed to pay for roads or schools in West Virginia, or vice versa.

Everyone knows there’s no such thing as “free” money. However, seventy-five years ago in the midst of the Depression it must have seemed almost free. It’s a different world today. Now, there exists an intricate web of rules and regulations surrounding all “grant” money. How much money is actually consumed with ancillary costs associated with meeting requirements to get (or continue getting) the “free” money? Additionally, how much local control and personal liberty is lost as the price paid for accepting this “generosity?”

As an example, there exists a law, signed by George H.W. Bush, called “The Americans with Disabilities Act” (ADA). Put aside the Constitutional, ideological and ethical arguments about this law. If you receive any federal money in any way shape or form, directly or indirectly, you are affected. Guess what? Even if you don’t, you’re still affected because your local and state governments are.

How are you affected? Labor laws were changed, everywhere. Building codes were changed, everywhere. Educational requirements were changed, everywhere. Cost of government at all levels was increased, everywhere. Oh, did I happen to mention… EVERYWHERE?

How is it possible that one law can have such an effect that we are still witnessing its implementation twenty years after it was signed? Does the federal government really have that kind of all encompassing power? Though some portion of the ADA has to do with direct federal authority, most of its provisions have to do with an indirect power, the power of the purse-strings. States and localities were told,”If you want to continue receiving money from us, you will implement these regulations, including changing your laws and codes, as we see necessary. Oh, by the way. We’ll keep watch on you, forever. You’re welcome.”

That’s how they get us. You want federal highway dollars? Sure, but change your speed limits and drinking age. You want the school lunch program and federal education money? OK, here’s a list of approved foods and your curriculum. Oh well, “He who pays the piper calls the tune,” right?

If you’re a politician and answered “yes,” you may have CGSS. Sorry you have to be reminded, but the government’s money was actually taken from somebody. Somebody is the citizens of your states. They are the ones who pay, twice. They pay, with their life, the taxes over-collected by the federal government, and then again, with their liberty and sovereignty, for a return of a portion of their own money.

So, the problem with the call for a “deep bench” for the GOP, and with career politicians in general is CGSS. Do we want more people who have bought into the notion that it’s okay for a government to buy off its people with their own money? Instead, shouldn’t we seek people who’ve lived and worked in the world outside of government? Shouldn’t we find people who understand that governments have no money of their own, who believe in the founding principles of this country? We need to elect people who know that just because they’ve done it this way for decades doesn’t make it right. We need real change, but really for real this time.