Miscellany: 6/27/12

Quote of the Day  
As we let our own light shine, 
we unconsciously give other people permission to do the same. 
As we are liberated from our own fear, 
our presence automatically liberates others.
Nelson Mandela

USPS: Hunger Strike--Against Pre-funding?

Retiring Congressman Dennis Kucinich (D-OH) is on board. What principle is he supporting? Genocide in Africa? Democratic rights in Iran or China? No--pre-funding retirement health care for the USPS: "The Postal Service is unfairly required to fully fund 75 years of retiree health care benefits in 10 years with an annual $5.5 billion payment. If only the prefunding requirement were eliminated the Postal Service would be on a path to prosperity."

This blog is not sympathetic with the USPS postal workers and let me count the reasons why:

• "UPS (Union) - about 60-66% of their total operating costs are labor. FedEx (non-union) - about 45% of their total operating costs are labor. USPS - 80-85%"  Dennis Ross (R-FL). (Some will argue apples and oranges, that the world is complex, e.g., here; I am very aware that the Congress interferes with more efficient operations (surprise! surprise! Crony capitalism is never a good policy! "In 2009, USPS management tried to cut costs when it considered closing 3,000 postal outlets, but this number was reduced to 157 after complaints by members of Congress."), but the inconvenient truth is that only Wal-Mart hires more people, and the USPS' monopoly cash cow product, peaking in 2006, first-class mail, is in permanent decline, not unlike what we are now seeing in similar paper vs. digital delivery, e.g., magazines, newspapers, etc.: "On April 22, 2010, Postmaster General John Potter announced the USPS will lose $238 billion over 10 years." 
• "One in four post offices bring in, on average, a mere $52 in revenue per day and serves about four people. A full quarter of the 31,000 post offices operated by USPS operate at a loss and the 13,000 offices now under review have less than one hour of work per day, on average." Donahoe said, according to ABC. "Officially, the USPS studied 211 centers and decided 183 of them should close to cut costs." (Ross above).
• According to CATO, about 85% of postal workers are under lucrative collective bargaining agreements, which pick up higher shares of health and life insurance than even other federal employees (which, of course, are greater than in the private sector). We could talk about the total compensation on 2009 compensation for USPS primarily semi-skilled labor force of $79K vs. $59.9K in the private sectors. "This pay advantage is most pronounced in benefits, which are expected to increase in the future due to growing pension and health care costs"

Let us review what IRET has to say:

Many foreign postal services are profitable, according to data from the Universal Postal Union (UPU). Those posts have adjusted successfully to the upheaval in the postal market caused by electronic diversion and the last recession. Before enactment of the Postal Accountability and Enhancement Act of 2006 (PAEA, P.L.109-435), which established a front-loaded 10-year contribution schedule for reducing the unfunded retiree health care liability,  the U.S. Postal Service had been promising generous retirement health benefits to its workers without setting aside any money to pay the costs it would owe in future years;  the Service followed the pay-as-you-go approach, which means not funding promises when they are made but waiting until the bills later come due.. Because the Service was ignoring a very expensive fringe benefit in its income statement, its reported costs were artificially low and its reported income artificially high. The unfunded retiree health care obligation had mushroomed to $74.8 billion by September 30, 2006. The absence of pre-funding would reduce transparency, be unfair to future mail users, and almost certainly lead to a taxpayer bailout. The U.S. Postal Service is burdened with massive unfunded obligations for retiree health care: an estimated $46.2 billion at the end of 2011.

OPM estimated that if retiree health care financing had reverted to pay-as-you-go in 2010, the Postal Service’s pay-as-you-go expense would have been only $2.3 billion in 2010 but almost tripled to $6.4 billion by 2020. If PAEA had not moved toward pre-funding, insolvency and the need for a massive taxpayer bailout would be virtually inevitable for USPS, although that might not have become clear to the public for several more years because of pay-as-you-go’s lack of transparency.

Before going on, if you think $46.2 billion for the USPS is bad, think about how social security and Medicare under-funding of $41T. So let's review: USPS and its unions knew that people are living longer and that a large percentage of its workforce is Baby Boomers. Health care expenses for retirees are escalating not just because of increasing numbers and longer lives but inflationary cost pressures. What the USPS was doing before 2006 was failing to put enough funding aside. If retirees were retiring uniformly over time, health care costs were stable, retirement health costs had been explicitly set aside across a postal worker's career,  and USPS had a viable business model going forward, the story might be different. (And, of course, the unions knew there would be a day of reckoning: they failed to protect their members by ensuring adequate set-asides. Perhaps they were counting on the taxpayers bailing them out. I don't think so...)

So the federal government failed to hold USPS management accountable prior until PAEA for inadequately setting aside enough money for retirees. It's not like we can go back in time and retroactively get that money from past budgets: those are sunk costs. They have to come from ongoing and future revenues. It doesn't make a lot of sense to stretch out payments (something IRET suggests) if the first-class delivery revenue trend continues to drop. We need to get the unfunded liability reduced as much as possible by the postal customer, not the taxpayer. And, as I'm sure others have pointed out  (including CAGW), eliminating one day of delivery a week could cover a good chunk of the liability, and we could also reduce another chunk by eliminating the retiree health benefit for new/younger workers (only 1 in 7 private-sector workers have a comparable benefit; right now the public sector solution for those is Medicare enrollment).

Where do I stand? PRIVATIZE! PRIVATIZE! PRIVATIZE! As CAGW notes, "Finland, Great Britain, New Zealand, and Sweden have eliminated their government monopoly on mail service, and Germany and Holland have privatized their postal delivery services.  The U.S. would benefit from similar measures." The Constitutional post office provision has been an anachronism for decades as the US has a well-developed infrastructure of roads and other means of transport. The digital age has made first-class mail increasingly obsolete.

This concept of playing "Mother, may I" when it comes to closing military bases or post offices, regulating the costs of stamps, dictating uniform delivery costs, restricting package size, delivery times or 101 other things is a mess. You can't run a business with the Congress twisting one arm behind your back. What absolutely boggles the mind is how progressives, seeing how the federal government has mismanaged the simple  business of delivering mail, believe that it can manage health care for a nation...





Explaining the Creation of Original Quotes

• "The law is a balloon: when the target is squeezed, crime is displaced."
• "The law is a dam: it is as strong as the lawmaker's weakest assumption."
• "The law is Chinese whispers where justices have the final word."

One of my UH office mates, Bruce, knew that I had an interest in creative writing; I haven't heard from him in a while. He was a Rice University graduate and had multiple audit certifications (including CPA, internal and/or EDP); our other office mate, Minnie, also was a CPA. My best friend Tim from Catholic Newman, an accounting professor at USD, of course was a CPA, and my baby sister is a CPA. (And I'm sure a newly graduated nephew will soon be, if not already.)  I am the weakest link: I hold a mere 12 graduate hours of accounting.

Bruce has had a fascination with the Myers-Briggs Type Indicator, and we have different styles. (MBTI is based on Jung's typology. You can find an online battery here. For anyone interested in my type, click here and my career matches here (no, no, no--not the law!) I like being in the same group as Stephen Hawking, Madame Curie, William Buckley, Calvin Coolidge, JFK and Thomas Jefferson.  But Hillary Clinton, Mike Dukakis and Woodrow Wilson? I don't think so.... I think I better hire The Mentalist.) Some of the discussion is spot on. I'm also a Capricorn and left-handed. I will admit to a certain mischievous contrarian streak; I'm the kind of guy whom will walk under a ladder, break a mirror on purpose, step on a crack, talk to a pitcher throwing a no-hitter, etc.

Bruce was intrigued by my creative process and output: how does someone go about writing something like a short story? How do you decide what to put in, what to leave out? Like any great accountant, Bruce is very detail oriented. George HW Bush had a problem not getting that "vision" thing. Like Jesus, Bastiat and others, I have a knack for writing parables, fables, and/or other short stories. One of my unpublished short stories, for instance, involves a swerve on the take that Europeans came to the Americas in part to civilize the savages, to convert them to Christianity. (Remember the infamous swerve ending to the Twilight Zone episode "To Serve Man"?) Bruce attributed his relative difficulty in doing the same kinds of things to his different cognitive style.

To be honest, I can't explain the creative process, but I think most regular readers have seen it in action, e.g., my recent parody of the Fed Reserve ("The Fed Prints On") to Sonny Bono's "The Beat Goes On", my plays on words and ad libs. (Note: I think some of my funniest bits are right in the middle of a commentary, not just my Political Humor segment. Not many people can pull it off; I think the best politician at it was Bob Dole. I would do it in lecture all the time. (In part, I used it to check on whether the class was paying attention.) I often do it with a deadpan delivery. One never knows the reaction; I've had delayed reaction laughter, and I remember a company lunch when my mild-mannered Indian developer colleague couldn't stop laughing hysterically (I whispered to him what I would bring to the just-announced St. Patrick Day's potluck); this unnerved the HR person talking at the head of the table.

More seriously, when I started this segment I followed up yesterday's segment with my twists on law quotes with 3 new ones (above); there are a couple more I'm working on, but writing a poem or a quote is like being a sculptor with words. It's not a matter of trial-and-error; for example, I may focus on a word or theme and I'll suddenly see the pattern fall into place.

So let me explain 3 of yesterday's quotes; I haven't normally commented on my original quotes: it's almost like trying to explain a joke. If the reader reads other meanings to my quotes based on his or her own life experience, I'm okay with that.

• "Shame may restrain what law does not prohibit." - Seneca

What I believed Seneca was saying here was a point I was raising in discussions about regulations, in particular a progressive author's rigorous defense of Big Nanny meddling: e.g., unscrupulous meat producers putting rat feces in their sausages. So you need inspectors, etc. The implication is without a federal inspector, private sector sausage makers will take any and every opportunity to put disgusting things in their sausages. The point is that a verified public revelation of rat feces in a company's products in a competitive processed meats market might decimate a company's sales--without the government raising a finger to that end.

I contemplated the word "shame": if a company's products can be shameful, can't the law be shameful, too? Say, for instance, where in the purported interest of public safety, a TSA professional inappropriately touches an elderly woman or young children? What if SCOTUS actually believed  that the presumption is in favor of of the protection of individual's person and property from arbitrary searches by coercive government? It would be better not to make any such laws from the start:

• "What prohibits a law may restrain shame."

The second is a twist on one of Jesus' favorite metaphor: "By their fruit, you will know them". Jesus is clearly, from context, referring to the fate of men at the judgment after one's passing. It's not enough to say the right things: words are cheap. What have they actually done with the gift of their lives? Good deeds? Or self-serving ones?

One of the discussions here is that Jesus anticipates that the bad man will attempt to argue his way into heaven. One predictable approach is to argue that he fulfilled all the formal requirements of religious laws: he always went to church every week, he contributed to the church, etc. Now, in my take, I want to go beyond religious laws and talk about the law in general. Can we evaluate the law, just like we judge man? What makes for "good" versus "bad" law? Just like the evil man can argue that he may have done a wrong thing, but his intent, his heart was in the right place, can we apply the same critique to the law? Say, for example, we have progressive legislation intended to promote the welfare of poorer individuals (for instance, welfare payments) Now if we argue that progressive legislation is good, shouldn't it also contribute to the development of the virtuous man, e.g., self-reliance, hard work, etc.? Or does it involve moral hazard and contribute to one's undue dependence on other people? Does it corrupt the human spirit? Maybe if his stomach is full, the law has been successful, but that's not enough if in that process, we lose a fully contributing member of society. A full stomach is a tactical success; perpetuating failure or impeding moral development and independence is a strategic failure.

• "By the fruits of the law should you know it. Good law does not yield vice, and bad law does not yield virtue. If the law corrupts men, it should be repealed, condemned to the fire." (reflection on Matthew 7:16-23)

Finally, I have created a bear metaphor. (At last! I have written something Sarah Palin can relate to...) What I'm clearly wanting to say is that I consider lawmaking inherently troublesome: I know enough to be wary of unintended consequences, the hidden costs of bad laws. From what I understand, if confronted by a bear, you want to draw as little attention as possible; you certainly don't want to mess with cubs. I was initially thinking in terms of crony capitalists and other interest groups (e.g., unions, AARP, etc.) approaching legislators: they are equally dangerous. I didn't like the way the metaphor worked by having the special interests approach the bear's lair. So, what I did was focus on the aftermath. I'm subtly implying the mother is the crony interests, not a lawmaker: the symbolism of a lawmaker attacking voters doesn't work.

I hope that the reader picks up on the symbolism of the cubs: laws resulting from the morally corrupt relationships between lawmakers and crony interests. The "mother" is, of course, the vested cronies or interest groups which will do all they can to protect their corrupt gains. I use the term "prudent" (NOT "courageous" or even necessary) because the righteous man will surely be attacked if he attempts to approach the "cubs", i.e., repeal or reform the law. The last part is meant to suggest is the only time we can rest against the creation of bad law is when a legislature is not in session.

• "A lawmaker is like a bear emerging from his lair, and the wise man avoids his attention. The cubs may look harmless, but the prudent man keeps his distance: he knows that the mother is watching, even if he does not see her. The vigilant man waits to rest until the bears hibernate."

Musical Interlude: My Favorite Groups

Tom Petty & the Heartbreaker, "Learning to Fly"