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2011 December 04 Sunday
US Postal Service To Slow First Class Mail

A newly proposed plan to cost half the US Postal Service's mail processing centers and a small percentage of local post offices will only save $3 billion out of an expected $14 billion deficit next year. No more next day mail. That makes first class less valuable of course and will further hasten its decline.

WASHINGTON — Facing bankruptcy, the U.S. Postal Service is pushing ahead with unprecedented cuts to first-class mail next spring that will slow delivery and, for the first time in 40 years, eliminate the chance for stamped letters to arrive the next day.

A more rational approach would be to close the vast majority of local post offices and move their services into pharmacies, Wal-Marts, K-Marts, and other stores. That way employees of the stores can do postal transactions when needed with much lower labor costs. European countries have adopted this approach. So why not the US? Congressional representatives are more interested in satisfying postal union workers and other groups that want the status quo.

The focus on measures that slow the delivery of mail is being done because the USPS has more latitude to make changes in this area without Congressional approval. But slower delivery lowers the value of mail which will of course accelerate the decline in usage of mail. That's got upsides though: The USPS financial crisis will intensify and so Congress might feel enough pressure to vote authority to the USPS to shut down most local post offices.

The head of the USPS wants to escape from no-layoff contract clauses it foolishly agreed to with unions.

Donahoe is calling for emergency legislation to remove the USPS from layoff protection agreements it has entered into with unions.

The postal workers are spending about $12 per employee to buy influence with Democrats in Congress.

Unions for postal workers contributed $7 million in the 2010 elections, 90 percent to Democrats, according to the Center for Responsive Politics, a Washington-based research group.

I'm surprised they don't spend even more. Though the demand for their services is dropping so rapidly that the best they can do is delay their layoffs. Still a whole year of delay is worth more to each employee than $12.

My advice: Make your personal contribution postal service cost cutting. Move more billing online. Every time something comes in the physical mail ask how you can stop that source from sending you more mail. Here are ways to cut the flow of junk mail:

Update: Hey, some web sites provide easy ways to opt out of junk mail and catalogs for your physical mail box. Some associations of direct mailers have online forms for turning off the junk. I just went thru and listed myself on DirectMail.com's Mail Preference Registry. Opting out there is easy to do. I also registered (more steps required) for the DMAchoice.org mail preference service of the Direct Marketing Association (which one web page claims can cut your junk mail by 75%). Once you've registered and logged back in from the email response you need to go into each category and click on the bottom right button on each category to opt out of the entire category. You can also selectively do steps for individual companies listed there. Those are my first two steps to cut back on junk mail. If you are like me and rarely find anything useful in junk mail I suggest you do likewise.

Update II: To get rid of credit card or insurance mail offers use OptOutPrescreen.com which tells Equifax, Experian, Innovis, and TransUnion credit report firms not to use your credit info to help credit card and insurance companies know to mail to you.

Also, you can turn off Valassis Red Plum and Cox Target Media ValPak. For other web pages and also email addresses to send opt-out junk mail requests to see the Ecycycle.org opt-out suggestion list, the WikiHow Get Rid Of Junk Mail,and the Privacy Rights Clearinghouse fact sheet on junk mail.

Less mail means fewer distractions from life.

By Randall Parker    2011 December 04 09:08 AM Entry Permalink | Comments (3)
2011 August 13 Saturday
Obama Supporters Want More On Economy

Obama's allies think (incorrectly) that he could make a bigger positive impact on the economy.

With President Obama’s reelection on the line, Democrats are increasingly anxious about what they see as his failure to advance a coherent and muscular strategy for addressing the nation’s economic ills.

The political class in America have not yet figured out that we have big problems that aren't solvable. Their great expectations go unmet and they think it must be due to a lack of leadership. But the problem is with their expectations given the conditions.

Growing numbers of Obama’s allies, beyond the liberal activists who have expressed disappointment in the past, contend that he has trimmed his sails too much since the party’s electoral defeats last fall. This sentiment has sharpened in the wake of the negotiations over the debt ceiling, when the president accepted Republican demands for spending cuts without obtaining guarantees of tax revenue increases, which he said were necessary for a “balanced approach.”

These criticisms are unfair for a basic reason: A mere President of the United States can not fix what is wrong with the US economy. Getting to this state of affairs took decades. Some of the changes that brought us to where we are were inevitable.

The inevitable and problematic changes mostly involve resource depletion. Peak Oil and other resource limits to growth can't be avoided. Other limits to growth are looking pretty unavoidable as well.

Other problematic changes in theory could have been avoided with wiser and less corrupted leadership. For example, total debt rose from 150% of GDP in the 1960s for decades until peaking over 350% of GDP as the real estate bubble began to burst. The rise in total debt began in earnest in the late 1970s and continued across multiple presidents of both parties and many Congresses. Bill Clinton and Bob Rubin contributed to it. But so did George W. Bush. Obama inherited a problem decades in the making as a result of bad policies with bipartisan elite support. That debt overhang problem has a long way to go to unwind.

Harvard economist Kenneth Rogoff (he who co-authored This Time is Different: Eight Centuries of Financial Folly) sees the debt as such a huge burden that it will stifle growth for years. Rogoff advocates inflation in order to reduce the size of the debt. Well, Obama can't turn on the inflation. Debt deleveraging takes years, especially when accumulated debt is over 3 times GDP. Unless the US government cuts its deficit all that is happening now is private debt is getting converted into public debt. Arnold Kling correctly argues government policies aimed at speeding deleveraging via mortgage modifications are likely to do damage. We have no easy way out of where we are now.

Similarly, the immigration policies supported by a bipartisan elite for decades have created a US labor force increasingly less able to compete. While Obama supports these policies he's not their architect and he's coming in at the tail end of their history. The Left refuses to even recognize that immigration is a drag on per capita income. That drag will grow even if all illegal immigration were to stop today.

The many limits to growth have few quick fixes available to address them. Technological advances might eventually provide us with a way around the limits to allow growth to resume. But those advances aren't coming soon enough. Conditions will get much worse for years (possibly decades) before they get better.

Update: Since the economy is unfixable and yet economic well-being is key to popular approval of government it is not surprising that people are losing faith in government. Obama is still trailing the Republicans in the race to the bottom of total loss of faith in government.

Confidence in Obama to make the right decisions for the country’s economic future is down 10 points, to 33 percent, since January. Confidence in congressional Republicans, at 35 percent in January, dropped to 18 percent.

The voters will toss out incumbents and things still will not get better. Then the voters will toss out some more incumbents. Again, stagnation will continue. American politics has become a zero sum game because the pie isn't growing as fast as the populace.

By Randall Parker    2011 August 13 10:09 PM Entry Permalink | Comments (10)
2011 July 09 Saturday
Big Infrastructure Budgets Routinely Overrun

Virginia Postrel (who was much shorter in person than I expected - her mind is tall though) reports on a study that found large public works infrastructure projects very frequently go way over projected budget and deliver far fewer benefits than projected.

“Cost overruns in the order of 50 percent in real terms are common for major infrastructure, and overruns above 100 percent are not uncommon,” Bent Flyvbjerg, a professor of major program management at the University of Oxford’s Said Business School, writes in the Oxford Review of Economic Policy. “Demand and benefit forecasts that are wrong by 20-70 percent compared with actual development are common.”

Flyvbjerg says the projects that most overestimate their benefits and most underestimate their costs get funded. Oh and public passenger rail and urban projects have especially big overruns. Why is that not surprising to me? Because passenger rail advocates tend to be zealots. They don't look critically at their great love. Read the full article for other good points of interest.

Given that politicians are going to continue to lade out the pork spending at our expense what's needed are independent agencies with engineers, accountants, MBAs, and the like who critically analyze infrastructure project proposals and present more accurate measures of costs and benefits.

For example, imagine a mechanism where existing government agencies or non-governmental organizations are chosen by lottery to analyze a big infrastructure proposal (e.g. a light rail project or high speed rail project) of some state or local agency. If the project goes forward anyhow and goes over budget as the independent agency predicts then the independent agency should get a financial reward from the agency that originated the project.

There are problems with my first version of this idea. Like, an independent agency would be tempted to project a cost overrun just out of hope it would get it right and make money. How to incentivize the independent agency to estimate the cost correctly? The closer the final cost is to the independent estimate the bigger the reward? One problem with this sort of a reward system: the better the reputation of the independent agency becomes the less likely it becomes projects will get built so their accuracy can be measured and rewarded.

Update: Also see Reihan Salam on how the Federal Railroad Administration drives up the cost of rail.

Update II: How about China? It is cited by high speed rail advocates as an example of enlightened leadership for its big build-out of high speed rail lines. But fares are so high that few can afford to ride and safety is an issue too. Also, lots of corruption has accompanied the construction of the rails. Passengers end up in buses and other cheaper ways to get around.

By Randall Parker    2011 July 09 12:33 PM Entry Permalink | Comments (6)
2011 May 28 Saturday
US Postal Service Insolvent

Update: Want to cut back on the size of bloated government bureaucracy and save money for yourself and make the economy more efficient? Want to shrink an agency that employs over half a million people? Move all your banking, bill-pay, and other correspondence online. Then see at the bottom of this post for ways to cut your burden of junk mail. Some steps are easy to do. Also, every time you get junk mail see if they have a web site and then go to it and look for a way to cut off junk mail from them. I've just done this for half a dozen places.

The US Postal Service is bleeding billions of dollars because people are shifting to online everything (ordering, online bill-paying, and online correspondence with friends, businesses, governments, etc). In spite of this its most recent union agreement granted its overstaffed unionized workforce cost-of-living salary increases and raises and a no layoff clause. The USPS wants escape from having to set aside money for future retiree health care benefits.The USPS, unlike most employers, actually pays retiree health care benefits - at your expense. This Businessweek article takes a long look at the depth of the problems at the post office.

The USPS has stayed afloat by borrowing $12 billion from the U.S. Treasury. This year it will reach its statutory debt limit. After that, insolvency looms.

On Mar. 2, Postmaster General Patrick R. Donahoe warned Congress that his agency would default on $5.5 billion of health-care costs set aside for its future retirees scheduled for payment on Sept. 30 unless the government comes to the rescue. "At the end of the year, we are out of cash," Donahoe said. He noted that the unusual requirement was enacted five years ago by Congress before mail started to disappear.

Bricks-and-mortar post offices and hand-delivered mail are so 20th century. Why bail out a relic from the past? I rarely even look at what I get in the mail because months go by between the arrival pieces of mail that matters. In fact, as the ratio of useless-to-useful mail has gone up into the hundreds it is a problem that I do not want to look thru hundreds of mail items just to find one letter that matters. You have the same problem? Then on top of this we are supposed to subsidize our getting pelted with junk mail?

How can this be? Money politics. Bribery has bought (or at least rented) friends in the Democratic Party.

Democrats receive the vast majority of the contributions made by postal workers' unions, according to campaign finance records, so they tend to be sympathetic. President Barack Obama inserted a proposal in his 2012 budget to absolve the USPS of $4 billion of its retiree health-care liabilities in 2011.

The union's influence-buying has yielded them a no-layoffs contract. So Postmaster General Donahoe has to take a much more gradual approach to cost cutting.

He wants permission from Congress to cut weekly delivery from six to five days, which he says will save $3 billion a year. He says he wants to reduce the USPS’s headcount by 20 percent over the next five years through attrition; the agency’s union contracts prohibit layoffs.

Donahoe isn't legally allowed to close a post office just to save money. Really. The US government can't run a business. Donahoe wants to shift post offices into small presences in stores where store employees (non-union usually) can service the sporadic flow of customers. Makes sense. Could be done much faster and save billions of dollars. The article cites examples of European nations which have outsourced most post offices to convenience stores and other retail outlets. These European nations forced their postal services to compete. We need their reforms here. Read the full article for details.

The US government is running a massive and unsustainable deficit. Economic growth will not save the government by boosting tax revenue. We are now in a low growth era. The liability side of the balance sheet (accumulated debts, Peak Oil, aging population, and declining skill sets of work force due to immigration) are going to swamp whatever is going right. Therefore the US is headed for a sovereign debt crisis. Really, our governing class needs to start acting like we are in a real crisis.

Update: Hey, some web sites provide easy ways to opt out of junk mail and catalogs for your physical mail box. Some associations of direct mailers have online forms for turning off the junk. I just went thru and listed myself on DirectMail.com's Mail Preference Registry. Opting out there is easy to do. I also registered (more steps required) for the DMAchoice.org mail preference service of the Direct Marketing Association (which one web page claims can cut your junk mail by 75%). Once you've registered and logged back in from the email response you need to go into each category and click on the bottom right button on each category to opt out of the entire category. You can also selectively do steps for individual companies listed there. Those are my first two steps to cut back on junk mail. If you are like me and rarely find anything useful in junk mail I suggest you do likewise.

Update II: To get rid of credit card or insurance mail offers use OptOutPrescreen.com which tells Equifax, Experian, Innovis, and TransUnion credit report firms not to use your credit info to help credit card and insurance companies know to mail to you.

Also, you can turn off Valassis Red Plum and Cox Target Media ValPak. For other web pages and also email addresses to send opt-out junk mail requests to see the Ecycycle.org opt-out suggestion list, the WikiHow Get Rid Of Junk Mail,and the Privacy Rights Clearinghouse fact sheet on junk mail.

After taking the steps above after a month to wait for the flow to stop I am going to make it a habit to look at all remaining junk mail and go to their web sites to try to get off their lists. My hope is to make arrival of physical mail a rare event.

By Randall Parker    2011 May 28 01:15 PM Entry Permalink | Comments (10)
2010 October 21 Thursday
Reihan Salam: Make Government More Cost Effective

Reihan Salam says the question of how to make governments more productive gets far too little attention. I agree with Reihan.

But before asking taxpayers — any taxpayers — to dig deeper, I’d gently suggest that we look at public bureaucracies. If the Milwaukee Public Schools spend twice as much as choice schools to deliver the same results in terms of reading and math scores, I’d say MPS can dig deeper, ideally be restructuring compensation and giving workers more autonomy. If one-fifth of public dollars spent on infrastructure are essentially wasted, as Barry LePatner argues in his brilliant new book Too Big To Fall, which I’ll discuss in greater detail soon, I’d say the bureaucracies we’ve placed in charge of public construction projects can dig deeper, ideally by doing a better job of sharing data and using life cycle assessments. If we could reduce Medicare expenditures by 8% per year by creating a competitive pricing system, I’d say the federal government can dig deeper by making a commonsense reform that will leave the quality of Medicare unchanged if not markedly improved. 

Of course some libertarians argue that ineffective government is better than effective government. But that's not a serious position. One might as well as argue for anarchy if you really believe that. Certainly some things that government intentionally does are damaging. So if productivity of those damaging activities goes up we'll be worse off. But quite a few government activities are beneficial to the vast majority. Examples of useful functions of government: Catching criminals, keeping criminals in jails, fixing roads, stopping polluters, catching terrorists in order to prevent terrorist attacks, tracking habitat destruction.

Governments do some things that libertarians do not approve of as government activities such as funding the medical care of retirees. But that's not an argument for neglecting how well government performs this activity. The prospects for convincing the majority of the population to oppose this activity of government seem extremely slim. So I tend to approach this issue with the thought that better policies for just how to deliver medical care to oldsters could benefit the entire population. Changes in government policy on how it funds medical care have the potential to change incentives in ways that result in more rapid innovation to cut costs or to create better treatments that cure more diseases. So given that government is going to do an activity doesn't it make sense to support policy changes that boost the total benefit we get from the activity?

One can find no shortage of advocates for more spending and even some advocates of less spending. But far fewer political activists or policy wonks or politicians spend much time thinking about how to spend more effectively and efficiently. The two sides of the political spectrum spend so much time battling each other for power that the cause of good government receives far too little attention. Yet the US economy and government finance are on course for a fiscal disaster. We need substantial increases in the net benefit delivered per taxpayer dollar spent. We need government programs to create better incentives on the private sector.

Reihan says the competing images of government workers as villains or heroes are simply not useful to the cause of improving government. We need a more nuanced view that enables us to improve the incentives on government workers and agencies.

Why does no one care about how public money is actually spent? Part of it has to do with the fact that abstractions are appealing, particularly to conservatives but also to at least some egalitarian liberals who find abstract arguments for a more progressive tax regime more engaging than serious discussions of how public bureaucracies work. If we think of public employees as actual people who respond to incentives yet who generally want to do their jobs well — I can’t help it because I grew up around public employees, two of whom were my parents — you have a different perspective than if you think of public employees as cash-hungry villains or, more to the point, as selfless heroes constantly attacked by the tax-phobic right.

Better law enforcement has the potential to save the American people billions of dollars per year. For example, in the last year the FBI has and the US DOJ have busted several Medicare fraud rings. The Miami area has lots of Medicare fraud and some of the large scale fraudsters are getting caught.

Federal agents arrested four Miami-Dade healthcare operators early Thursday in one of the nation's biggest Medicare fraud cases, charging them with scheming to fleece $200 million from the taxpayer-funded program by billing for bogus mental health services.

Lawrence S. Duran, 48, of North Miami, and his company, American Therapeutic Corp., were charged along with other employees in a conspiracy indictment. The Miami-based company's chief executive officer, Marianella Valera, 39, was also among the defendants named in the indictment.

Yet billions still get lost to fraud every year.

Although Medicare under the Obama administration has improved technology to weed out fraudulent claims, the agency still loses billions of dollars yearly to fraud because it generally pays bills quickly without verifying them.

So I wonder: How many dollars of fraud are avoided per dollar spent on enforcement activities? If the ratio is greater than 1 then the US government is not spending enough on enforcement. The same holds for any other way that the US government loses money to fraud.

Armenia organized crime groups are ripping us off for big money in Medicare.

Armenian-American gangsters created a fictitious medical world, complete with fake doctors and fake patients, which they extended across the US in a scheme to defraud the Medicare system of more than $100m (£62.9m), federal prosecutors said yesterday.

The Armenian criminals operate nationally.

They then set up bogus offices and, using stolen beneficiary information, began billing for procedures that never occurred, according to a Department of Justice news release. Nationwide, the ring operated at least 118 phony clinics in 25 states and billed Medicare for some $163 million, officials said.

More Miami Medicare fraud:

Marquez, a former Miami Springs High pitching ace who almost played in the Major Leagues, was sentenced Thursday to 19 ½ years in prison for healthcare fraud. He schemed to bilk $48.8 million from Medicare by submitting false claims for purported HIV therapy.

Marquez's seven clinics in Miami-Dade and Orlando were paid $21.6 million, which he must repay the taxpayer-funded Medicare program.

Michigan Medicare fraud:

Collins, 39, pleaded guilty in May 2010 to one count of conspiracy to commit health care fraud. Collins admitted in court documents that he was responsible for submitting or causing the submission of approximately $6.96 million in false or fraudulent claims to the Medicare program between August 2007 and October 2009. According to the plea documents, in the late spring or early summer of 2007, Collins was hired by co-conspirator Muhammad Shahab to work as a nurse at Patient Choice Home Healthcare Inc. Patient Choice purported to provide home health services, including physical and occupational therapy services, to homebound Medicare beneficiaries.

According to plea documents, Collins solicited Medicare beneficiaries for Shahab and Patient Choice and offered them cash kickbacks in exchange for their Medicare patient information and signatures on medical documents. Collins admitted that he knew the beneficiaries he recruited were neither homebound nor in need of physical therapy services. Collins also admitted in court papers that he knew Patient Choice used the beneficiaries’ Medicare information to bill Medicare for physical therapy that was medically unnecessary and/or never performed.

Alex Tabarrok says we could save big time as a nation by doubling the number of police.

More generally, when one combines estimates of police effectiveness that come from myself and Klick, Steve Levitt, Bill Evans and Emily Owens and others with data on the costs of hiring police, it's clear that police are a bargain.  We could double the number of police in the United States and the costs of crime would fall by substantially more than the cost of police.  (Reallocating police and prison space from drug users to violent criminals would also help.)

We could get many benefits from government dollars spent more wisely.

By Randall Parker    2010 October 21 10:28 PM Entry Permalink | Comments (6)
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