They really shouldn't allow Obama to speak without a teleprompter.

 

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http://www.bloomberg.com/apps/news?pid=20670001&sid=aJ01reSCujDQ

 

Obama Goes Postal, Lands in Dead-Letter Office

Commentary by Caroline Baum

 

Aug. 18 (Bloomberg) -- “UPS and FedEx are doing just fine. It’s the Post Office that’s always having problems.� -- Barack Obama, Aug. 11, 2009

 

No institution has been the butt of more government- inefficiency jokes than the U.S. Postal Service. Maybe the Department of Motor Vehicles.

 

The only way the post office can stay in business is its government subsidy. The USPS lost $2.4 billion in the quarter ended in June and projects a net loss of $7 billion in fiscal 2009, outstanding debt of more than $10 billion and a cash shortfall of $1 billion. It was moved to intensive care -- the Government Accountability Office’s list of “high risk� cases - - last month and told to shape up. (It must be the only entity that hasn’t cashed in on TARP!)

 

That didn’t stop President Barack Obama from holding up the post office as an example at a town hall meeting in Portsmouth, New Hampshire, last week.

 

When Obama compared the post office to UPS and FedEx, he was clearly hoping to assuage voter concerns about a public health-care option undercutting and eliminating private insurance.

 

What he did instead was conjure up visions of long lines and interminable waits. Why do we need or want a health-care system that works like the post office?

 

What’s more, if the USPS is struggling to compete with private companies, as Obama implied, why introduce a government health-care option that would operate at the same disadvantage?

 

Obama Unscripted

 

These are just two of the questions someone listening to the president’s health-insurance reform roadshow might want to ask.

 

Impromptu Obamanomics is getting scarier by the day. For all the president’s touted intelligence, his un-teleprompted comments reveal a basic misunderstanding of capitalist principles.

 

For example, asked at the Portsmouth town hall how private insurance companies can compete with the government, the president said the following:

 

“If the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren’t subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete.�

 

Self-sustaining? The public option? What has Obama been doing during those daily 40-minute economic briefings coordinated by uber-economic-adviser, Admin Summers?

 

Capitalism Explained

 

Government programs aren’t self-sustaining by definition. They’re subsidized by the taxpayer. If they were self-financed, we’d be off the hook.

 

Llewellyn Rockwell Jr., chairman of the Ludwig von Mises Institute in Auburn, Alabama, and editor of LewRockwell.com, put it this way in an Aug. 13 commentary on Mises.org:

 

“The only reason for a government service is precisely to provide financial support for an operation that is otherwise unsustainable, or else there would be no point in the government’s involvement at all.�

 

Rockwell sees no “economic reason for a government postal system� and would abolish it.

 

Of course, there’s the small matter of the U.S. Constitution. Article 1, Section 8, grants Congress the power “to establish Post Offices and Post Roads.� A series of subsequent statutes gave the USPS a monopoly in the delivery of first-class mail. Congress thought that without such protection, private carriers would cherry-pick the high-profit routes and leave money-losing deliveries in remote areas to the post office. (In those days, the USPS covered most of its expenses with revenue.)

 

Less Bad Option

 

It was only through exemptions in the law that private carriers, such as UPS and FedEx, were allowed to compete in the delivery of overnight mail.

 

Short of a constitutional amendment or a waiver from Congress, we are stuck with the USPS.

 

But back to our storyline. Everyone makes a mistake or flubs a line when asked questions on the spot, including the president of the United States. We can overlook run-on sentences, subject and verb tense disagreement, even a memory lapse when it comes to facts and figures.

 

The proliferation of Obama’s gaffes and non sequiturs on health care has exceeded the allowable limit. He has failed repeatedly to explain how the government will provide more (health care) for less (money). He has failed to explain why increased demand for medical services without a concomitant increase in supply won’t lead to rationing by government bureaucrats as opposed to the market. And he has failed to explain why a Medicare-like model is desirable when Medicare itself is going broke.

 

The public is left with one of two unsettling conclusions: Either the president doesn’t understand the health-insurance reform plans working their way through Congress, or he understands both the plans and the implications and is being untruthful about the impact.

 

Neither option is good; ignorance is clearly preferable to the alternative.

It was an amusing Freudian slip, but nothing more.

 

The flawed logic in the example is that UPS and FedEx don't even provide the same type of service as the USPS does, so they really aren't in direct competition. It was UPS, FedEx, and formerly DHL keeping each other honest, not the post office.

 

 

 

They do provide the same service. USPS also provides next day delivery, express mail, etc, and at a lower rate. His point is dead on. He isnt saying the post office is some ideal business. He is saying its a cheaper alternative that hasnt driven the private sector out of business.

 

Another example is the existence of the public defender's offices that many cities have. Free attorneys havent driven private defense attorneys out of business either.

 

It is meant to undercut the argument that if you introduce a public option, private options cant compete.

The USPS was designed to be an entity sustained mostly without direct government funding. It might be receiving a government bailout (all parcel services are in trouble right now) but it was intended to be mostly revenue independent. Will the private companies be receiving bailouts? FedEx has reported losses and DHL has been forced to end domestic package pick-up and delivery.

 

Where are most of these revenues coming from? The USPS still has a monopoly over first class mail and has legal price protection from private competitors for expediated deliveries. How much of their revenue is pegged to first class deliveries? Can FedEx or UPS ship corporate junk mail and catalogues? First class deliveries have been declining and now USPS is running huge deficits.

 

FedEx, UPS, and DHL have considerable international shipping markets for businesses. My lab ships and receives (the entire hospital does) countless temperature sensitive specimens, hazardous goods, and perishable items on a daily basis (both domestically and internationally). You can't do business with USPS even if you wanted to. They won't ship them.

 

In my business, there's also some areas where the USPS is not a viable, or even possible, option, especially Internationally. This only shows that there's a place for other private carriers in a market driven system with one entity receiving subsidies. These 3 other carriers aren't geared to compete with an entity(even without subsidies) in the arena of delivering first class and junk mail. DHL lost out based on normal free market conditions versus their main competitors, FedEx and UPS. DHL's business model wasn't as strong, and they became a malinvestment(in the US market). FedEx and UPS are doing fine, thank you, any downturn in profits is part of a normal business cycle.

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I think Flying Mollusks point is valid, especially in light of the constitutional mandate to provide postal service.

The Post Office example is flawed for many reasons:

 

The Post Office is floundering financially, so to use it as an example for a public option for health care puts a bad spin on the fiscal viability of a public option.

 

Parcel services do a better job at providing their product than health care ever could. Getting something clearly labeled 12345 SW 67th Street Unit 890, Anywhere USA does not require anything remotely resembling judgment on the part of the service provider.

 

Also, the USPS does not compete with UPS, FedEx, DHL, etc. etc. The USPS has a complete monopoly on certain forms of delivery and the express / priority mail shipments are actually transported by UPS and FedEx. Lets read that again... UPS and FedEx are the actual service providers for Priority Mail and Express Mail, the USPS just brands it and handles the consumer service.

You misunderstand what I'm saying. I'm not denying that the private sector (FedEx) is thriving while the USPS is suffering. I'm saying that this isn't an applicable model under which we can view a health care public option.

 

Obviously, I'm aware of the importance of the international market for the private carriers, because I've experienced this first-hand. There isn't an apples to apples market in which the public and private entities are competing. The USPS has an enforced monopoly over first-class delivery, it's primary market. FedEx and UPS have huge market demographics that the USPS does not even touch.

 

The USPS is likely struggled predominantly because of institutional inefficiency and because the market it monopolizes has been whithered away over the years by electronic messaging. FedEx's losses are likely attributed to decreased online purchases, decreasing business at Kinko's, or general symptoms of the fiscal downturn.

 

However, if the USPS were actually treated like a self-sustainable entity, it would be out of business or bought out by another carrier. Whether or not a private carrier wants to touch the first-class market is immaterial.

 

Obama says that a public option won't hinder the private sector if it is "self-sustaining." The USPS followed this model and now it's in debt over $10 billion. If this were a self-sustained entity, it would vanish instead of being at the receiving end of the inevitable Congressional bailout. If the USPS won't go quietly, will a public option? Members of Congress acknowledge that a public option would run deficits for the first several years because of a small initial client-base. What will happen if the deficits exist in five years? Ten? Twenty? Will there be no bailouts? Legislation passed that will protect the public option by giving it ownership over certain markets? If the private companies will be so "fine" as Obama insinuates none of these measures should be considered. At this stage, the private market will have to compete against tax dollars and government regulation.

 

On the other hand, if the public plan plays by identical rules to the private competitors, where is the benefit? Either way, it's foolish to draw comparisons to an entity as poor as the postal service and suggest that it enter a market that makes up 1/6th of the US economy.

 

 

 

He isnt pointing to USPS as an indication that all public models don't have problems but to indicate that the mere presence of a cheaper public altenrative in the express delivery market hasnt caused all consumers to stop going to private options. You wrote a lot of different distracting tangents, but never argued the central point. FedEx and UPS provide next day and express delivery. USPS does so too at a cheaper rate because of subsidies. Both options still exist. FedEx and UPS still make money from this service.

 

EricWiener, I actually didnt know USPS doesn't engage in the shipping, and FedEx/UPS do. If that's the case though, the point is still valid. The existent cheaper public option, with all its advantages, did not cause consumers to flee to the public option.

 

Thats the central point. It is not true that 100% of the time, consumers will buy a cheaper public option over a more expensive private option if given a choice. The point is that these private business keep getting business. I would not buy government cheese over private cheese if they sold it in the stores. Id pay the extra money for better cheese.

 

That would be more so in healthcare because a)the stigma associated with the public option would keep people going to the private sector and b)people argued that Medicare would cause the elderly to not purchase private health insurance, but wealthy ones do.

Camel's nose in the tent?

 

Is that the same as getting your foot in the door?