Tag Archives: economics

How the U.S. Postal Service Can Save Itself

Posted on by
3

Five tips for avoiding bankruptcy/bailout.

USPS LogoIt’s pretty big news, every once in a while, that the U.S. Postal Service (USPS) — which is not funded by tax dollars — is on the verge of going broke. Then they raise rates by a few pennies and the hubbub dies down.

Until next time.

I think the big problem with the USPS is that it’s unable to keep up with changes in technology that make its core business model nearly obsolete. After all, the main business of the post office is to provide mail delivery service. In the past, this included personal and business letters, bills and bill payments by check, postcards, and other bits of correspondence. Letters have been mostly replaced by fax and email. Bills and bill payments are being replaced by online billing and bill payments. And who sends postcards in the age of smartphones when you can share vacation pictures as you take them via MMS or email?

As technology moves on, the USPS’s services are less and less needed. But does that mean they’re not needed at all? Of course not. (Not yet, anyway.)

Bad management and spending practices by the USPS are what’s putting it in peril these days. Simply said, the USPS needs to cut costs and raise revenues. Here’s what I propose:

  • Raise prices on bulk mail. It’s widely known that the USPS gives huge discounts to big customers — the same people who fill your mail box with what most of us consider “junk mail.” Not only is this extremely wasteful, but the USPS isn’t making nearly as much money delivering it as it could. I propose that they raise the rates on bulk mail — possibly even making it just as costly as first class mail. The result: fewer organizations will find it cost effective to mail their marketing materials to people who likely don’t want it anyway. The USPS will carry less of this material, thus reducing its costs. And for the remaining organizations that continue to utilize the service, the USPS will likely generate the same (or more?) revenue.
  • Stop trying to compete with FedEx or UPS. Let’s face it: for sending something overnight, FedEx is not only the best deal, but it’s got the most reliable service. Not long ago, the USPS couldn’t even guarantee overnight delivery from Wickenburg, AZ to a major city like Berkeley. FedEx could. As for shipping parcels, I recently shipped a 33-pound computer that I sold on eBay; UPS was half the price of USPS. Yet every time I go into the post office, I see advertisements pushing their services. The USPS should focus on what it does best: deliver small pieces of mail quickly and efficiently throughout the US. That means concentrating on its affordable Media Mail, First Class, and Priority Mail services.
  • Stop advertising. Come on — we all know that the post office exists. We all know what it does. You don’t need massive advertising campaigns to get customers. If I have to mail a letter or document and it doesn’t need to get there overnight, I’ll use USPS. And about those big color posters in the post office pushing your overnight services — see my previous point.
  • Stop giving away free packing materials. I’m talking about those priority mail envelopes and boxes. I know someone who used USPS priority mail boxes to pack when she moved. And no, I’m not kidding. She kept going to the post office and taking boxes. Not a single thing was mailed. I’m not saying that the USPS should stop providing them; I’m saying that they should charge a fee — even something small, like 50¢. It’s worth the money to customers — I’d definitely pay it — and it will generate more revenue while reducing waste.
  • Reduce mail delivery to three times a week. This is the ultimate in cost cutting measures. Unfortunately, it also causes job losses. But guess what? Real companies reduce their workforce to save money; why shouldn’t the USPS? The way I see it, they could deliver to business and commercial addresses on Monday, Wednesday, and Friday and use the same carriers to deliver to homes and residential addresses on Tuesday, Thursday, and Saturday. People who think they really need daily mail delivery can get a post office box, which would receive mail every day as it’s sorted at the post office. Not only does this reduce the cost of delivery, but it could increase revenues from post office box rentals.

So that’s five tips that will help reduce costs while increasing revenues. Why can’t the USPS utilize some combination of these? I think the results will make a huge difference in the continued operation of the USPS as a solvent business.

Comments? Have your say.

News Flash: I am NOT a Helicopter Cost Consultant

Posted on by
5

File this in the Whiskey-Tango-Foxtrot file.

Yesterday, I got the following email message from someone I don’t know:

as of this date if i were to buy a used R22 with approx a 1000 hrs on it how much would the total operating costs be per hour if i were to fly 100 hours a year including reserve money for future overhaul

Yes, I did write a blog post in December 2010 titled, “The Real Cost of Helicopter Ownership,” where I detailed the actual operating costs of my R44. But does this guy honestly think I’ll make the same calculations for any helicopter for anyone who asks?

Regardless of what he thinks, the answer is no.

Congress Has the Whole Tax Thing Wrong

Posted on by
7

According to Warren Buffett, higher taxes for the super rich doesn’t kill jobs.

This morning, I was very pleased to read the words written by a voice of reason: Warren Buffett. Buffett is one of the richest men in the world, a man who built his fortune through investing. This article in the New York Times, “Stop Coddling the Super-Rich,” is his attempt to talk reason to the U.S. Congress using facts.

He writes:

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.

While this isn’t news, what’s refreshing about it is that it’s being stated by one of the “mega-rich,” a man who paid $6.9 million (not a typo) in taxes last year. He points out that while his 2010 tax bill was 17.4 percent of his taxable income, other people in his office paid 33% to 41% (with an average of 36%) of theirs.

Tax PictureIt’s the percentages that are important here. Imagine a taxable income of $100K. 17.4% is $17,400. But 36% is more than double that: $36,000. Is it fair that someone with a taxable income of $40 million like Mr. Buffett, who gets to keep about $33 million of that after taxes, should be paying a lower tax rate than someone making $100K who only gets to keep $64K after taxes?

If you don’t know the answer to that question, maybe the picture I provided here for you will help?

(By the way, I’m all for a flat tax and still can’t figure out why we can’t have one. The rate would likely be low enough that folks earning under $200K would save money. And wouldn’t it be nice to figure out your taxes by yourself in an hour instead of paying someone else to do it for you?)

Mr. Buffett goes on to tear apart the argument that higher taxes for the super-rich prevent them from investing or kill jobs:

I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

These are facts from history, not vague guesses based on economic theories. And since Mr. Buffett has a reputation as someone with financial prowess, I’d tend to take his word on the situation before the word of the self-serving morons we’ve elected to Congress — career politicians who would rather lie to the American people than do what’s right for all of us.

Of course, all this makes me wonder why Congress is so insistent that taxes not be raised, even for the wealthiest Americans — people like Buffett who wouldn’t mind a tax increase if it helped the country out of its financial woes. Whose bank accounts are the members of Congress protecting? Their own? Their friends in major corporations who fund their campaigns?

They’re obviously not interested in protecting the bank accounts of the majority of the American people. With unemployment hovering around 9% nationwide, millions of people are tapping into savings, losing their homes, and giving up on the “American Dream.” Yet the government continues to subsidize the oil industry, which continues to reap record profits, offer tax breaks to companies that send American jobs overseas, and enforce a tax code that gives tax breaks to the mega-rich. (By the way, is it a coincidence that the oil industry donates generously to political campaigns? I think not.)

As the Debt Ceiling debates of July 2011 proved, the American Congress is dysfunctional. I really believe that all incumbents should be voted out of office in the next few elections. Start again with a clean slate, hopefully with people who care about their constituents.

But what can we do until then? Contact your Representatives and Senators. Tell them that you think Warren Buffett is right: that the mega rich should be paying the same percentage of taxes as the rest of Americans. If you email them, link to the New York Times piece I quoted here. Tell them to read it and learn. Remind them that they’re working for all of the American people — not the corporations who fund their campaigns.

We need to turn this country around and it’s obviously not going to happen if we wait for our dysfunctional Congress to do it for us.

And in November 2012, remember to vote for someone who has the American people at the top of his or her agenda — not partisan politics.