The game is afoot

WARNING!!! This article contains shrill language and images. Parental discretion is advised.

I never cease amazement at the despicable ruin our country is falling into, institutions one after another succumbing to our owning/investing class. These are the rent seekers. They provide a useful service – reallocation of capital – and otherwise live quite well off the efforts and savings of others. They call themselves “investors,” “job creators,” “hedge funds,” “capital management firms,” and have even absconded with the honorable word “entrepreneur.” In normal times they are useful to us, but given too much power become predators rather than servants.

Wall Street banks have fallen. Financial ratings agencies wear tarnished badges, and can no longer be trusted.* Poor people have been targeted with credit card debt, and home owners saw their savings disappear in the 2007 meltdown. Even college students are now an indentured class, owing mountains of debt for which there is never, ever an escape clause.**

The latest institution targeted is the Postal Service.

We were driving down LaMar valley in Yellowstone Park a few years ago, and came upon a rare sight. An elk had been taken down, and there feeding on the carcass were grizzly bears, wolves, a coyote, a timid black bear nearby, ravens and, of course, American eagles. This image is apropos, as the venerable Post Office is being taken down.

The methods are as seedy as Wall Street itself – defund***, dismantle, engorge, and then vamoose.

The defunding mechanism is the Postal Accountability Act of 2006. Under this law the Postal Service is required to fund 75 years of medical benefits for employees in ten, which requires annual payments to the treasury in excess of $5 billion. The stern requirement is unique to that entity – no other government agency is so burdened.

Without the funding requirement, the Postal Service is doing fine, operating in the black. It needs to scale back, as the Internet has indeed hit its first class mail revenue stream. It will have to close some distributions centers, retire some workers, perhaps close some post offices, but is otherwise working as intended.

But rent seekers have it in site. Dismantle! Let the private sector work its magic!

The problem is that the private sector is not equipped to run such a large enterprise profitably. The Postal Service as it is structured does not need to reward investors or pay exorbitant salaries and bonuses. To run it in the manner of a private busiess it will need higher rates and probably a good chunk of subsidy. Current plant and equipment will have to be turned over to private operators, and if past predicts future, that will be done at pennies on the dollar. Even then it will have a hard time fulfilling the mission of universal service. Private companies depend on market segmentation, offering better service to some at higher rates, and excluding those who cannot afford such service. That’s why government delivers mail. It can do so democratically. It need not be profitable. If we want it structured to break even, it is easily done. If we subsidize it, why even sweat? It’s a public entity, so public subsidy is not an unusual matter.

Mail is a legitimate government function. The private sector cannot fulfill government functions equitably, even efficiently. For universal access to utility-like services, we need government.

The mission of the Postal Service is universal service, and to provide such service means that low-volume outlets need to be kept running. No private company will do that. The Postal Service is unionized, and millions of men and women have made a good living in the past. In our brave new world, the idea of workers banding together, of ordinary people earning a decent living and having job security is abhorrent.**** Maybe that, or they are not productive enough, like rent seekers are.

Then there are the externalities. Generally this word encompasses negatives – companies that don’t show the cost of pollution on their profit and loss statement. But with the Postal Service externalities actually benefit us. So important is commerce facilitated by the Service that the founders saw fit to include the postal service in the Constitution itself.

The hounds are baying. If the Postal Service is taken down, its assets will be auctioned off, likely to some private power center with political muscle. It will then be bled in Bain Capital manner, with assets re-sold at prices far beyond their cost. Unions will be eliminated – we learned with GM that contracts are not quite so sacred when unions are on one side. Service will be curtailed, consumer costs will soar. Bankruptcies will ensue.

Just a prediction. Perhaps, then, someday, with Ben Franklin as the brand icon, the old Postal Service will be re-founded and rebuilt. For now, as with everything from phone service to garbage collection, we have to endure private jackals and screeching angry birds as they feast on yet another corpse.
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*In Georgia in 2002 a law was passed to protect consumers from bank fraud in the issuance of mortgages. Standard and Poor’s immediately threatened to stop rating Georgia mortgages unless the law was repealed. This was in 2002!
**Since banks are guaranteed repayment, they are relieved of exercising prudence in making these loans.
***The Obama Administration is currently in phase one of its attack on Social Security, defunding. They are using the payroll tax holiday to do so. History has taught them that full frontal attacks on Social Security do not work.
****The most despicable example I ever saw of this was an attempt by restaurant owners in Montana to reduce the state minimum wage to include tips, in effect, taking employee tips as their own. Eesh! In-mouth vomiting ensues.