The headline is actually “Post Office Might Miss Retirees’ Payment” but the click-on-me teaser at the WSJ reads Post Office Nears Its First Default. The use of the word “first” not very subtly implies that there will be more. And there will be.
Indeed, saying that the USPS “might” miss the $5.5B payment due in ten days is a bit too polite. They do not have the money and Congress has made it clear they will not act before the August recess. And there is a second $5.5B payment due at the end of September.
Which is not to say that missing these payments will cause much in the way of visible effect. They are, essentially, to make up an underfunding in the Postal Service’s pension plan. Skipping them may have serious long-term consequences, but for now the USPS can still buy diesel for its trucks and make payroll. For now.
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I am, as a general rule, an identity theft skeptic. Of course, I know it is a real problem, I just think the smoke to fire ratio is very high. The fear, stress, and peculiar behavior that ID theft causes in consumers is out of all proportion to the actual danger.
Part of the reason the fear outstrips the danger is a widespread misunderstanding about who is the usual victim of identity theft. It is generally not the person whose identity is stolen, but the financial institution that gets defrauded in part two of the operation.
And the fact that it is generally large and sophisticated outfits that are the victims leads to the other reason the fear is overdone. ID theft is just not that easy to pull off. It takes a fair amount of effort and cleverness to get a credit card in somebody else’s name, and then the reward is merely that you can charge things for a short period, possibly lasting only hours, before the card company catches on and shuts you down. That is a tough way to make a living.
Or so I thought. Turns out there is one very large financial institution that you can cheat with only the minimum of ID thieving effort. It is called the Internal Revenue Service.
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Imagine a business losing $1B a month. Its brand name is well known by consumers, but associated with bureaucratic inertia and occasional acts of workplace homicide. Management has a scheme to massively cut costs and modestly raise prices that, with luck, may return the company to break even five years from now.
Would you like to own a share of this outfit? Too late. You already do.
The inevitable, if not imminent, demise of the US Postal Service is one of the recurring themes here at BMA. Aside from affording me the opportunity to poke fun at Washington, and make predictions that are safely in far off in the future, I keep returning to the topic because it is an example of one of the core ideas of this blog, that vague and wishful thinking is no match for the reality of dollars and cents.
The Post Office is in serious trouble. If it were a normal corporation with private creditors it would almost certainly be in Chapter 11 by now. Deficits are large and getting larger. The top line is shrinking quickly.
Mail volumes are down 23% since 2007. And that decline is part of a long term trend, not some short-term effect of the Great Recession. Overall volumes peaked in 2006, but first class mail, which is is the real money maker for the USPS, peaked in 1999.
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Time to follow up on a few topics I have written about in the past and mention a few more tidbits not worthy of entire posts.
On Friday, the Consumer Product Safety Commission recalled another half million electrical DIY books to add to the million or so recalled from the same publisher in January. Some of the books were originally published in the 1950s. No explanation of why this batch was overlooked nine months ago. Also still no word on what, exactly, is wrong with them.
I had some fun with this in January, but darker thoughts are now creeping into my head. Is it just me, or is anybody else uncomfortable with the idea of a government agency recalling “dangerous” books?
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In March I wrote a post explaining how and why the US Postal Service had begun to slowly circle the drain. It had the impact on policy makers that my more clever posts usually do, which is to say none at all. So here I am trying again.
The USPS is a business (term used loosely) with high fixed costs and a variable income. That means that what it costs to run the operation is not particularly tied to the amount of business being done. It is a setup that is typical of transportation companies, not just postal services but also, for example, airlines. (And telecoms and media companies, BTW.)
When revenues are growing, all is well. Incremental income is mostly profit, since the overhead has been paid for. But when the trend is in the other direction, an irreversible death spiral often results.
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