–Why postage is really, really ignorant

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Amazing, isn’t it, how many areas of our lives are touched by the ignorance of Monetary Sovereignty.

Washington Post
Senators unveil bipartisan Postal Service rescue plan
Andrew Harrer/BLOOMBERG

A bipartisan Senate bill introduced Wednesday would give the U.S. Postal Service about $7 billion to pay for employee buyouts and other debt, allow a renegotiation of postal worker health-care benefits and require two years of studies before ending Saturday mail deliveries.

The plan, a modified version of proposals previously introduced by Sens. Thomas R. Carper (D-Del.) and Susan Collins -(R-Maine), will be considered by a Senate committee Wednesday.

The bill refunds about $7 billion that auditors agree the Postal Service has overpaid into federal worker retirement accounts. The money would be used in part to offer buyouts of up to $25,000 to as many as 100,000 eligible postal workers, with the rest of the funds put toward other debt.

Refunding the money “is not a bailout,” Sen. Joseph I. Lieberman (I-Conn.) said. “It’s the result of a legal analysis that everybody agrees with, that this was in fact an overpayment by the Postal Service” into the Federal Employee Retirement System.

House Republicans disagree. They consider any attempt to refund the Postal Service with money from federal retirement or health-care accounts would be a taxpayer-funded bailout.

The Senate bill also would scrap a 10-year payment schedule that requires the Postal Service to pay about $5.5 billion annually to prefund future worker retirements. The bill would spread out those payments over 40 years, significantly reducing the annual obligations that postal officials say cause much of the agency’s cash shortfalls. The Postal Service also would be allowed to renegotiate a new health-care plan with its major worker unions to help cut costs.

Short-term spending legislation passed last month by Congress gave USPS until Nov. 18 to make its annual prefunding payments. Aides said Wednesday that they did not know whether the Postal Service would get another extension or be forced to make the payment this month.

If the bill passes, plans to end Saturday mail deliveries would have to wait at least two more years until USPS and postal regulators further study the potential effects on customers and industries that rely on six-day mail deliveries.

The Postal Service also would have to scrap the delivery of mail to some doorside mailboxes in favor of sidewalk, curbside or centralized neighborhood boxes. The bill also would force the USPS to further study the effects of closing post offices and mail processing facilities — a move that postal officials said could save billions of dollars in operating costs.

“Without taking controversial steps like these, the Postal Service simply isn’t going to make it,” Lieberman said. “That would be terrible.”

Terrible, indeed. The post office provides one of our government’s most important services. How in the name of idiocy, was it decided that this particular federal agency must run a balanced budget? Why?

Shall we now demand that the U.S. Supreme Court run a balanced budget? Shall Congress and the White House run balanced budgets? Must the military, the FAA, the CIA, the FBI, FEMA and the other 1300 federal agencies each run balanced budgets?

The federal government very simply, should make the post office a free service, paid for by federal deficit spending. Here’s a little secret for you. Those dollars you spend on postage stamps do absolutely nothing to help the federal government spend. They do not pay for post office expenses. And as we have seen, the federal government can give the postal service dollars at will.

The only thing accomplished by postage costs is to reduce the use of the postal service. Is this a worthwhile goal? Is reducing the number of postal workers (thereby increasing national unemployment) a worthwhile goal? Is cutting Saturday deliveries a benefit to America?

Postage is a tax on mail users. All taxes are anti-stimulative in that they remove dollars from the economy. As always, those who do not understand Monetary Sovereignty do not understand economics.

I award 1 dunce cap to whomever first decided the post office must run a balanced budget, and to the politicians who continue this harmful charade. This will be my 1066th dunce cap awarded. Not running short, yet. Still sustainable. Still “prudent.” Still living within my means. And the value of each dunce cap has not gone down.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com


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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

18 thoughts on “–Why postage is really, really ignorant

  1. Don’t forget though, you need to consider the ends they’re aiming for with their actions. In this case, it’s to corporatize the post office so that some corporation can quadruple the price, drop the efficiency by 85% or so, and add a department that removes valuables (illegal shipping items will be confiscated – and sold for value), and another to open and read items mailed by or to known terrorism suspects (patriots, veterans, known firearms owners, Constitutionalists, etc.). That one would no doubt be a government contract. A business “philosophy” that robs the poor, the old, sick, aged and dying of their savings and insurance whenever possible isn’t about cavil at robbing the mail. They’d steal children’s piggy banks if they could find or manufacture an excuse. After all, pennies add up…

    Actually, I’ve met wealthy people before and something they all had in common was that they’d push – hard! – for discount! A millionaire just out for a walk talked a street vendor down for a falafel; another pushed and pushed to get a discount off of a remodeling job from the owner of a small company that consisted of the owner and two employees. They really DO scrimp and skimp and push and argue just to save pennies, and a hard-won “victory” of over a small independent or even a street vendor seems to be as much of a triumph as half a mil on a real estate deal. And pitiful in a way. Oh, and another commented to me once that 8% was all anyone should ever give as a gratuity in a restaurant, and then only if the service was exceptional. Maybe that’s it: to do someone who works hard for pennies OUT of a few of them feels good to them somehow.

    Ian

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    1. Ian,

      Your generalizations about wealthy people are puerile and offensive. The rich are no more or less enamored of discounts than anyone else. You neglect to mention all the wealthy that give billions to charity. I wouldn’t be surprised if the host of this blog is “wealthy” and I guess sharing his knowledge with us at no charge is another example of the wealthy being greedy and cheap.

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  2. The reduction of the postal service is yet another relentless drive toward an austere America, a drive guaranteed to extend the gap between rich and poor.

    Add it to the reduction in Social Security benefits, Medicare benefits, Medicaid benefits, reduced support for universal health care, the reduction in the GAO, reduced support for education, infrastructure maintenance, reduced research — and we speed toward a nation of have-nots and haves, with a huge gulf between.

    Ironically, the belief in the need for austerity seems to be supported as ardently by the poor as by the rich. For the poor, it probably is a matter of economic ignorance; for the rich it’s a matter of economic malevolence.

    The Tea/Republicans are the most blatant, but the Democrats participate too, in what I see as the darkening of America.

    Rodger Malcolm Mitchell

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    1. I think this is a weak argument. The real reason that the post office is having trouble is because people aren’t sending mail. Should the government spend money? Yes. But it should spending it on the tings that people most desire. I don’t think that Saturday mail delivery ranks very high these days

      I live in a rural area. How about some fiber so that I can get high-speed Internet? That would keep some people employed for a while.

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  3. Given email, UPS/FedEx, small local messengers/courier services, who’s to say the US Post Office isn’t crowding out innovation and efficiency in the first class mail category? The USPS owns a monopoly on the category. $0.49 a stamp may be too low a price for someone like FedEx to move in and make a profit initially, but there’s more potential for innovation down the line.
    Back in the days of the Pony Express there seemed to be a real need for a Federal Postal service as no private entity could or would service remote or distant communities. That longer seems to be the case. While I agree laying off thousands of postal workers won’t help our economy, but it also doesn’t appear to be an efficient use of resources.
    Some industries, like national defense, you would never want to privatize, or private industries like health insurance probably should be nationalized, but postal service seems like a service that doesn’t require Federal hand-holding.

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  4. There are two sorts of government activity. First those which a country decides should be free at the point of delivery, e.g. state education, the supreme court, the military (and health care in the case of most European countries). Second, there are activities which are supposed to act commercially but which happen to be government owned.

    Postal services are an example of the latter. Plus postal services are in competition (at least in the UK) with various private letter and parcel delivery firms. Thus I don’t see the case for subsidising government owned postal services.

    Deficit spending should take the form of channelling money direct into household pockets (e.g. Warren Mosler’s payroll tax reduction). Plus it is legitimate for some deficit spending to be channelled to the “free at the point of delivery” areas of government.

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  5. Ralph,

    Your “two kinds” is an artificial, meaningless comparison. Medicare is health care insurance that also is sold commercially. Social Security is a form of annuity sold commercially. The government maintains canteens for soldiers. At one time, and still in many countries, the army sells its services to individuals. In many cities around the nation, individuals, the cities, pay for their streets. So what?

    The real question is: Would America be better off if the government paid for “X” or if the private sector paid?

    In my opinion, America would be better off if the federal government paid for: Medicare for all, a more beneficial Social Security and all postal services. You may disagree, and I respect that. But please don’t draw a meaningless line at “supposed to act commercially.”

    Think of what is better for America, and why.

    Rodger Malcolm Mitchell

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  6. Rodger,
    You said
    The federal government very simply, should make the post office a free service
    Why stop at that? Why can’t the federal government make food and groceries free, housing free, transportation (cars and gasoline) free.
    Where do you draw the line and why would you draw a line ?

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    1. The only limit to federal spending is inflation. I draw the line at an inflation that cannot be controlled with interest rates.

      By the way, the government already gives food, housing and transportation free to select people. It’s not as outrageous and you may think.

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      1. besides, as technology continues to improve and more and more people lose their jobs due to what used to be called “technological unemployment,” at some point, the government is going have to give food, housing, & transportation to more than just a “select group of people.”

        or let them starve to death or kill them thru war…

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  7. Rodger,
    It is not clear that inflation can be controlled by interst rates and you have never made it clear. All you have is a theory.

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    1. You are correct, that it is only a theory, and I can think of at least two reasons why I might be wrong:

      1. The MMT people disagree with me, and in fact think raising interest rates actually causes inflation by raising production costs
      2. Inflation seems directly related to oil prices rather than to interest rates. (https://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/)

      So yes, it is possible inflation cannot be controlled by raising interest rates except for one small detail: The Fed, in fact, has controlled inflation very close to its target 2%-3% rate by using interest rates, and the biggest inflation since 1971 was cured with a massive increase in interest rates.

      One could argue that other factors (?) have actually caused these effects, and it would be instructive to see evidence of those other factors.

      Meanwhile, even if I am wrong, and inflation cannot be controlled with interest rates, we still could control it by cutting deficits. Since inflation is not now a threat, I suggest increasing federal deficits, which will grow the economy, and allowing the Fed to continue fighting inflation, and only if and when that fails, reduce deficit spending.

      Don’t cripple the economy and force austerity, by reducing deficit spending now, based on an unwarranted fear of deficit-caused-inflation at some unknown time in the future.

      Rodger Malcolm Mitchell

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      1. The deficit isn’t nearly the threat that system-shock is, and yet system-shock is exactly what you are proclaiming as the solution. What happens if we pay off $15.6 trillion in debt tomorrow using newly created fiat currency? Answer: all the foreign creditors cash in all their dollar denominated assets and use them to buy up American capital goods and commodities. All those dollars then come rushing back to America and flood the market, driving up prices overnight. Why? Because dollars and dollar denominated assets would no longer serve their function as a store of value for those foreign holders of US cash and debt, so they’ll rush to exchange their dollars for things that do serve as a store of value, namely capital goods and commodities.

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        1. Federal debt is not paid with “newly created fiat currency.” Here is how the government borrows:

          1. The lender, let’s say China, deposits already existing dollars in its checking account at the Federal Reserve Bank.
          2. China then requests the appropriate number of dollars be deducted from its checking account and added to its T-security account at the Fed.

          That’s it. China now has “lent” the U.S. dollars and owns T-securities. Now here’s how we pay off China’s T-security:

          China’s T-security account is debited and its checking account is credited. Period.

          Federal “borrowing” is much, much different from personal borrowing.

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  8. The postal service does have real costs that have to be borne by someone (if “paid for” is not the right terminology). It uses real resources, including that pesky oil thing.

    Making postal service free to users will increase the demand for it. Will people begin writing letters to each other on paper again, abandoning email? Not likely. Will advertisers maintain their current volume of “junk mail”, or will they increase it and make it the same percentage of traffic in the postal system as spam email is on the Internet, which is about 90-95%, I hear?

    Postage is what they call a “user fee” rather than a tax, although I grant that for many purposes, including macroeconomic analysis, there is not so much of a distinction. The point is that it falls only on those who use the service, rather than generally on the entire population, which I think is a good thing in this case.

    A better scheme would be to charge the receiver of the mail rather than the sender, but allow him to reject (without paying) anything he doesn’t want.

    Surely there are enough useful things the government could provide “for free”, more than enough to make you want to (pick your solution to) control inflation, without doing free postage for spammers.

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