Relevant and even prescient commentary on news, politics and the economy.

Pubic Opinion of the PPACA

A recent Kaiser Poll shows favorable results for the PPACA the first time since 2012. 43% have a favorable view of the PPACA and 42% have an unfavorable view of it. While the report shows a favorable view, it is within the margin of error (+ or – 3%) and not statistically significant (Click on the graph[s] for a larger version).

Public's View of PPACA has Improved

Even though the Public’s View is split and slightly favoring the PPACA, the percentage of people who wish Congress to finish implementation or expand the PPACA is 46% as opposed to those wishing to repeal or scale it back at 41%. This opinion has remained consistent for six months of the Kaiser survey.

Partisan Differences in What Should Be Done with PPACA

In how the PPACA is viewed plays mostly along partisan political lines with Democrats favoring it and Republicans opposing it. In total, it is an equal split favoring and opposing it.

Partisan Divide in Views of PPACA

Does the PPACA hurt, help, or have a direct impact upon you. Again, this plays along the partisan political beliefs of the people with Democrats claiming it helped as opposed to the Republicans claiming it hurt. In all three cases and taking into consideration the politics of the people, the majority claimed the PPACA had “No Direct Impact” upon them.

Perception of Personal Impact

In March 2015, the CBO recalculated and revised the expected costs of the PPACA downward. This went largely unnoticed and few people realize the PPACA would cost less than expected. 50% still believe it would cost more and another 15% said the same as originally estimated.

PPACA Is Costing Less Than Estimated

Interestingly enough is the agreement of the #1 priority for healthcare; all politics aside and by a super-majority, people want “drugs for chronic conditions to be affordable to those who need them. When looking at the Total picture, drug prices and hospital charges are other priorities people wish addressed.

Partisan Differences in Top Priorities

There is more to the Kaiser Survey which can be found here: Kaiser Health Tracking Poll: April 2015. Looking at Figure 6 of the survey, both Democrats and Republicans agree on making prescription drugs more affordable giving it the highest priority for Congress. Other priorities were making hospital costs more affordable and greater protections against out-of network doctors and associated costs; making sure provider networks were sufficiently large enough in the plans, and making information more readily available to patients about the price of doctors’ visits, procedures, and tests, such as hip replacements and MRIs.

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Cutting Taxes in Louisiana

Along similar lines as what Kansas has been doing with its budget for education, Louisiana has been cutting in favor of doling out large tax cuts and credits for business getting in return little if any economic impact. While A&E’s Duck Dynasty receives ~$330,000/episode from the state, Louisiana State University is preparing for additional budget cuts to meet the $1.6 billion State of Louisiana self-inflicted budget deficit much of which was caused by the state legislature and Jindal’s repeal of the balance of the Stelly Plan in 2008.

The state never had a history of stable revenue growth and was faced with shortfalls until the legislature came up with a plan to shift taxes from mostly a regressive sales tax to a progressive state income tax as well as other taxes. Income taxes grow faster than sales taxes growth as incomes repond faster in good economic times. The progressive Stelly Plan raised taxes on higher income brackets in 2002 and cut the state sales taxes on electricity, natural gas, food and water for residential use. Before 2003, the State of Louisiana had gone through annual budget crisis. With the passage of the 2002, the Stelly Plan raised income tax rates to 6% on individual $25,000 to $50,000 incomes of; established 4% on joint income from $25,000 to $50,000, and 6% >$50,000 on joint income; the state had a balanced tax system mostly reliant upon the income tax, severance taxes, and sales taxes. In 2007, when Governor Jindal was elected, the state experienced a surplus in revenue not experienced in previous years.

Jindal inherited a $1.1 billion surplus from former Gov. Kathleen Blanco. He blew the surplus in his first year as governor embracing the rollback of the Stelly Plan voters approved in 2002, the elimination of excess itemized deductions, and the higher rates which resulted in a total hit to the state of $1.4 billion in 2008. The rollback of Stelly has cost the state more than $300 million a year since then.” It is after the tax rollbacks, where more of the blame other than mismanagement is foisted upon Jindal. Jindal has increased tax exemptions and credits on businesses regardless of the benefit to the state in jobs or business growth. Rather than maintain the UAL (retirement funds) at a fundable level, its liability has grown from $12 billion to $20 billion setting up a day of reckoning in the future.

According to The Advocate; Louisiana gives away more taxpayer money than any other state on a per capita basis.

– “Duck Dynasty,” Louisiana is on the hook for nearly $330,000 at last count for each episode;
– $700,000 to Wal-Mart to build new stores in two affluent suburbs;
– Valero announced an expansion, creating 43 new jobs;
– Louisiana promised to cover $10 million of the cost, or nearly a quarter of a million dollars per job;
– Film incentive program cost state taxpayers $251 million last year,
– Refunds of a property tax that businesses pay on their inventory have more than doubled in the past seven years, reaching $427 million last year;
– The solar power tax credit was billed as having negligible cost to taxpayers when it was created six years ago andballooned to $61 million in 2013. That is because it is hard to pass up: It covers 50 percent of the cost of solar installations, which, when combined with a similar federal program, gives homeowners a robust return on their investment;
– Tax exemption for fracking wells — experimental technology at the time the tax break was passed 20 years ago — is now widely used and last year cost the state $240 million;
– Enterprise Zone program has done little to spur investment and job creation in poor areas, its original intent. Instead, the bulk of the taxpayer money the program doles out — an average of about $70 million annually in recent years.
etc.

To meet the annual Louisiana budget shortfall for a total of $1.6 billion, Governor Jindal has asked state universities to expect $300 to $400 million less. For its flagship university, LSU would be on the hook for 40% of its operating budget and 51% of its funding from the state or $60 million. LSU President Alexander puts it into perspective:

– “In addition to the freeze on 125 (new) faculty positions, we’re talking about potentially losing up to 250 to 300 positions at the main campus,”
– The Workforce and Innovation for a Stronger Economy Fund or WISE, a fund that was set up to send $40 million to higher education institutions around the state in an effort to help higher education programming match the state’s job market, is likely to be scrapped as a part to balance the state’s budget.
– “We will go from the second highest graduating class in history to being eventually 2,000 less in graduates.”
– “The potential that could hit us would be tuition fee increases, 3,000 less course offerings, etc.

Less notable universities in Louisiana without the political influence would fair worst under Jimdal’s budget cut program. The state no longer has the money to fund K through 12 education, higher education such as LSU, state healthcare and mental programs as the funding has disappeared in tax breaks to business boondoggles and unfairly skewed to those making up 1% of the income (~$25,000 advantage annually). Governor Jindal is a hopeful presidential candidate. To point out how silly some of the business tax breaks are given at the expense of Louisiana citizens and the state, the state legislature and Jindal sponsored Sales tax holiday for the Purchase of Weapons.

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Whats the Matter with Education in Kansas?

Washington Post’s Catherine Rampell opined an example of what could happen in 2016 if the Republicans win by featuring what is happening with education in Kansas after another $51 million in cuts. A recent letter by 17-year-old junior at Smoky Valley High School Haeli Maas to Governor Brownback cuts to the chase of it.

To Governor Sam Brownback,

I am writing you today as a concerned citizen of Kansas. I am currently sixteen years old and a junior at Smoky Valley High School, while also maintaining two jobs. In my free time I do homework, and the chances of any other free time are incredibly rare.

While in school, I maintain a 3.8 GPA, something I am very proud of. I am enrolled in honors courses and try my best to make everything I do count. I love school. I have loved school since the day I started school. I hope that in the future I will be allowed to continue my education in college, and love school just as much in my time there.

I read a few years ago some very wise words from a judge restated by principal John Tapene at Northland College. He said:

“The world does not owe you a living, you owe the world something. You owe it your time, energy and talent so that no one will be at war, in sickness and lonely again. In other words grow up, stop being a crybaby, get out of your dream world and develop a backbone, not a wishbone. Start behaving like a responsible person. You are important and you are needed. It’s too late to sit around and wait for somebody to do something someday. Someday is now and that somebody is you!”

Someday is now, sir. It is up to you to pave our way. You are the determining factor in the future of my generation’s lives. Education is important and it should never be put on the back burner to the rest of the issues. Do not write off my generation and refuse us the opportunity to educate ourselves, because we will surprise you. We are capable and ready to take on the world, and if we are put into the world without the education to make a difference, then it is you who will pay. It is you who will count on us in your age. If you wish to see this great state continue to be great, educate the future.

I will have completed my public education within the next year and a half. I will move on into the future and I will succeed because that is who I am. I have younger siblings still in school, and I fear for them. I fear that my little sister will forget her love for school, and lose the spark that makes her such a unique and beautiful person. It is up to you to keep that spark. It is up to you to fight for our future and our education, so that we may fight for you when the time comes.

This is a beautiful state. Kansas has so much to offer to so many people. We are truly capable of anything. Within our borders, we harbor the potential to be something truly great. Do not forget to put faith in your youth, and do not bypass our education in order to save face. Invest in our future, and you will inevitably be investing in your future. After all, if you forget to educate the youth, who will take care of you?

From your fellow Kansan,

Haeli Allison Maas

So far Governor Brownback has not responded to the high school student’s well written letter asking for his support of education in Kansas.

In a manner which forces cuts to be made by utilizing “block grants,” the Kansas Republican Legislature and Republican (redundant alert) Governor Brownback have placed the onus of decision making upon the local school boards and constituents abdicating their responsibility to provide for education. This comes under the guise of flexibility and local decision-making and the $51 million is in addition to cuts already enacted by the Republican administration. This is little more than a copout by the administration.

The Kansas SC has ruled the present funding is unconstitutional and has sent the case back to the district court to rule on what is adequate funding. July 1 (2014 – 2015 school year) was the deadline set by the Kansas SC to restore some of the cut funding for capital improvements and general operations of $129 million additional. This could evolve into much higher restoration of funding once through the lower courts.

Brownback insists he is leading a low tax, small government American Renaissance and GOP leaders say they may resist court orders. Meanwhile, students like Haeli Maas plead with Kansas Governor Brownback not to write off their generation.

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Scott Walker Dumped?

Over at Addicting Info, Nathaniel Downes is reporting Scott Walker has been dumped by the Koch Bros as their sponsored candidate for President. I wonder if he had to return the ring?

It appears Scott has taken an anti-immigration stance which is something the Koch Brothers oppose. Scott made it apparent, illegal and also legal immigrants are not welcome which is rich in itself as much of Wisconsin is made up of Germans and Norwegians who immigrated to the US and settled in Wisconsin. Scott made his views known during an interview with The Washington Post.

In terms of legal immigration, how we need to approach that going forward is saying . . . the next president and the next Congress need to make decisions about a legal immigration system that’s based on, first and foremost, protecting American workers and American wages.’ He went on to cite favorably Sen. Jeff Sessions (R-Ala.) on the subject. ‘The notion that legal immigration hurts the economy and native workers has been rebutted repeatedly and is widely disparaged by a host of pro-growth conservatives and scholars. Mair, whose work on immigration reform is well known, took to Twitter to denounce ‘the full, Olympics-quality flip-flop.’”

This a populist viewpoint and one would expect it to come from Senator Warren’s lips (sans the nativist part) and not Scott Walker’s. Of course, Scott may be attempting to curry the favors of Labor after going after the public unions in Wisconson . . . think anyone will believe him? This stance is in direct conflict with the Koch Bros. who want more immigration which would dilute the labor pool even more thereby shrinking wages. Daily Intelligencer Jonathan Chait is reporting Jeb Bush will be allowed an interview for the candidate position also. Koch early-on support for Scott Walker was disputed by David Koch.

“Let me be clear, I am not endorsing or supporting any candidate for president at this point in time,” Mr. Koch declared for the record.

A Corpocracy at work.

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The Continued Demise of Detroit Under Governor Snyder and Michigan

Naked Capitalism has an article The Continuing Depopulation of Detroit on Detroit which I attempted to answer. No one cause can be assigned to answer what happened to Detroit since 1950 and well before the first black Mayor was elected. I attempted to put this into perspective. This is not an easy and nor will it be a brief story to tell about Detroit and there are many factors to point to which led to its decreased population. In 1950, Detroit had a population of 1.8 million and was a white-dominated city. Detroit was rolling in jobs then from the OEMs and Tiers.

The past

Between 1950 and the 1967 ~300,000 residents had already left Detroit before the riots. which was equivalent to 3 earlier decades of population growth from 1930. After the war and flush with cash manufacturing war munitions, the OEMs began to abandon the multi-story factories in Detroit for single story and sprawling plants in the suburbs and like what you might see in Wixom, down river, Lordstown, Beloit, etc. With the plants went the jobs and Detroit lost ~130,000 jobs by 1967. 25 new plants had been built and none were located in Detroit during the same time period. Not only was this a way to improve on manufacturing efficiency, it was a calculated attack on unions and UAW power. By 1960 and while still called Motor City, Detroit could no longer claim such a distinction as only Chrysler was building cars in the city.

Just in time to help the transition to the suburbs were the FHA and VA new housing products requiring only 3% down payment and favored new developments over older city areas. White workers moved from the racially mixed Detroit areas to the suburbs such as Wixom, Livonia, Royal Oak, etc. located around the city and in places such as Indiana, Ohio, and Illinois. What stopped blacks from taking advantage of FHA and VA loans was the lack of equal access housing laws. Developers, realtors, banks, etc. were able to block blacks from moving into these new developments in Wayne, Oakland and other counties. As I mentioned, FHA guidelines favored new suburban developments over older and riskier city developments.

As a point of reference, Detroit suffered its first deficit in 1961 well before Coleman Young took office in 1974. Much of this came from the transitioning of plants and labor outside of the city. What also hurt the city and if you are familiar with it are the successive rings and diagonals of highways in and around the city which create barriers to travel as Detroit has little in the way of mass transit. Bring mass transit up in the richest county in Michigan (Livingston) and you will see a myriad of reasons not to have it and maintain the status quo of too big, too often and too fast. Hey gas is cheap and we do not need any mass transit which is still a philosophy of much of Michigan. Brighton as well as other suburbs have <1% black residents and there is a fear of easy access. Michiganders also have the distinction of driving their TBTOTF vehicles the farthest of any other US workers to get to work. Not having mass transit places a burden on the inner city as auto travel is not cheap and inefficient in comparison. Before one can point to black leadership (Kilpatrick) as causing Detroit issues today; one might look at Cavanaugh, Miriani, Gov. Romney, Federal housing policy, open discrimination, the OEMs, and big oil as laying the groundwork for the slow decline of the city. Much of which led up to the racial tensions in large cities such as Detroit and Chicago. Unemployment was at 14% for blacks and 7% for whites in Detroit and it did not take much for some black Vietnam vets who fought on some of the same dirt as I did later in 68 and 69 to get into a scuffle with the Detroit police igniting the 1967 riots occurring well after white flight. White flight was already in full bloom by 1967 and what followed were small businesses leaving the city.

And what did the courts do?

Justice Thurgood Marshall’s dissenting opinion:

“School district lines, however innocently drawn, will surely be perceived as fences to separate the races when, under a Detroit-only decree, white parents withdraw their children from the Detroit city schools and move to the suburbs in order to continue them in all-white schools.”

Justice Douglas’ dissenting opinion:

“Today’s decision … means that there is no violation of the Equal Protection Clause though the schools are segregated by race and though the black schools are not only separate but inferior. Michigan by one device or another has over the years created black school districts and white school districts, the task of equity is to provide a unitary system for the affected area where, as here, the State washes its hands of its own creations.”

The 1974 SCOTUS decision in Milliken v. Bradley:

“In a 5-to-4 decision, SOTUS held school districts were not obligated to desegregate unless it could be proven that the lines were drawn with racist intent. Thus, officially arbitrary lines which produced segregated districts could not be challenged.” Again and the same as United States v. Cruikshank, SCOTUS supported state rights and local control over schools above Federal interference to correct the result of local and state direction resulting in segregation.

If there was any hope the wall of the economic and racial wall of segregation surrounding Detroit would be broken, it failed in SCOTUS. Attempting to break the separate but equal doctrine of schools failed leaving Detroit schools two thirds occupied by black students and supported by a deteriorating tax base. The NAACP had brought suit in Federal Court. The lower courts agreed with the NAACP only to be overturned by SCOTUS. The NAACP sued based on there being a direct relation between unfair housing practices as found in FHA policy, redlining (earlier in my hash above), and educational segregation. The 6th District COA had specified it was the state’s responsibility to desegregate (sound familar?). Here is the Catch 22; since the violations were found in the city and also in the newer developments, the very same policies and redlining which kept blacks out of the new suburbs could not be blamed on the suburbs. Detroit was effectively walled in by economic class and race.

Metropolitan Detroit provides >50% of the Michigan GDP as Canada’s largest port of entry to the state of Michigan. Without it, Michigan would be just another large vegetable farm and salt mine. While people outside of Detroit blame blacks and snub the city, their salaries would be dramatically lower without the city and many of them would leave.

So what is happening today?

We moved here from MadCity Wisconsin due to work. I do throughput analysis, brown field layouts, purchasing, distribution, logistics and materials. There are not many of us Druckers around anymore. If you really believe Labor is the issue as many economists would have you believe, you join the ranks of the seriously misguided. Labor has not been an issue since the sixties. That manual direct labor has been eliminated or moved overseas and other forms of labor are not as prevalent is not an issue of race or education, it is the result of a movement to avoid other infrastructural costs prevalent within the US.

Michigan has a habit of voting for Dems in national elections at 54% or greater of the electorate. Yet Michigan sent 8 Repubs to The House and 5 Dens in 2012. How can that be? Michigan packs its districts thereby diluting the impact of its Dem constituents. If you talk to the pols, they will claim it is the result of where people live rather than how districts are drawn. I would direct you to Huffington and Sam Wang for a better explanation as the space here is too small to get into it (I did write on Michigan gerrymandering pre-2014 on AB if you Google it). At worst, Michigan should be split evenly in Repub and Dem House representaton. Much of the radical change in The Congressional House was reinforced in Michigan and five other swing states to give the Repubs much of the majority they enjoy today there. Michigan has also begun to lay the groundwork to change how the Electoral College is selected in Michigan doing a split plus two for the majority winner of the state. For those of you who believe this is a far better approach, Google Justice Posner (7th District) and the Electoral College which I believe was printed on my old haunts Slate Mag. Given the present districting, the result in Michigan will be a disenfranchising of the Dem majority vote it has enjoyed in National Elections. Thank you Koch Bros!

With Detroit’s bankruptcy? Funny thing happened there also, CDS were paid off at 80-90% to investors (Geithner where are you???). Read the DEMOS argument against the imposed Detroit bankruptcy (The Detroit Bankruptcy) which the appointed Emergency Manager’s (Kevin Orr) staff took time to answer in rebuttal. The state of Michigan slashed Detroit revenue sharing ($67 million) making a bad situation even worst for cash flow. The rest of the state rode on Detroit’s already weakened economic being to balance its budget. The issue was cash flow to stave off the bankruptcy and the state only made it worst given the Repub political stance of the state ( since 1990, Repubs have controlled the state Senate [solely] and state House [a majority of the time] during census years and other years). It is far easier to blame former black mayors rather than assume blame for laying the groundwork economically and racially causing much of Detroit’s demise. There is much pent up anger in outlying areas from Detroit. Today, the Govenor Snyder state has refused to help Detroit schools leaving them with > than a $100 million deficit after 4 state designated emergency managers.

Sorry for the length of this chemo/steroid rough-cut dialogue. I get a lot of energy after being pumped-up and had written this into the night from a lack of need for sleep. I believe this paints a truer picture of what took place in Detroit before Coleman came to power, what took place from 1967 onward to Kilpatrick, and how the city continues to be plundered.

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Fracking

I live in Michigan, a state which felt in its infinite Republican legislator wisdom it was important to remove all input from the cities, counties, and townships and leave the industry unfettered with any controlling influence. For those who are worried about capitalism and free enterprise if you own the land, there is such a thing called the 5th Amendment and a “Takings” which covers denial of an owner the legitimate use of their land. Michigan Zoning and Planning Commissions do take note of “Takings”.

Some might call this NIMBY on the part of locals; but, it is important to get their input as they end up with what is left over after the Fracking Companies leave their backyards with the residue, water contamination from spills and leakage, and how the contaminants are handled. Michigan has always moves slowly to correct the issues of big business and does not live up to its motto “Pure Michigan.”

Spoko at Hullabaloo took note of one particular Commission meeting:

As noted in the article, what I have seen at commission meetings as a Planner, and with the actions of the state to deny local input and decision making:

instead of attacking the oil and gas corporations for rigging the game or pressuring the governor to pack the Nebraska Oil & Gas Conservation Commission with oil men, he blames government. Yes, the procedural tricks to keep the hearings off the record, and not subject to popular control are ‘government,’ but it takes some smart lobbyists to get those laws passed in the first place.

Pay attention to how this good old boy Fracker makes his point with one of the Commissioners. “Would you drink the water? Oh, you can’t answer questions?” I wish we had some people like this at our meetings.

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Madison Protesters the same as ISIS

I lived in Mad City for 12 years, a place I had wished I could of lived as a child. Instead, I was able to raise my children there. Flying back to Madison after a consulting gig and seeing lakes Mendota, Monona, Wingra, the Capital on the Isthmus between Mendota and Monona nestled in the woodlands was akin to returning to sanctuary. It was safe haven for those of us who lived there and returned there after working elsewhere.

Madison always had a different way about it.  While running for election, Gov. Dreyfuss called it “30 square miles (1978) surrounded by reality.” We were different and we made it different as we paid higher taxes to ensure better schools and services for those who lived there. We bought Dreyfuss daughter’s home on the west side. Given my knowledge of Mad City and knowing it is illegal by state law for public workers to strike in Wisconsin, it is interesting to read Scott Walker’s comments about protesters there:

“‘We will have somebody who leads and ultimately will send a message that not only will we protect American soil, but do not take this upon freedom-loving people anywhere else in the world.’

Here comes the zinger.

‘We need a leader with that kind of confidence. If I could take on 100,000 protesters (in Madison, Wisconsin), I can do the same across the world.’

So that we’re clear here, Scott Walker just compared American citizens exercising their right to free speech to violent, homicidal extremists in the Middle East.

What did Walker do to ‘take on’ the Madison protesters? Well, he locked them out of the Capitol, threatened to call out the National Guard, had them arrested, and exposed himself as the corrupt Kochhead that he is.'”

I knew we were tough; but, we were not extremists by any stretch of Walker’s imagination. Let us be sure, Walker is no leader and has pretty much ruined the state of Wisconsin with his governance of it which will carry on for years to come. Walker did catch flak for his comments comparing Wisconsin protesters to extremists as Senator Warren took Scottie-boy Walker to the wood shed:

“If Scott Walker sees 100,000 teachers & firemen as his enemies; maybe it is time we take a closer look at his friends,” Senator Elizabeth Warren . . . One could only hope she would run for president.

Scott Walker’s friends are the ultra conservatives such as the Koch Brothers, Sheldon Adelson, etc. It is no secret the Koch Brothers spent far more on the 2012 election than the top ten unions (which they are trying to bust) spent. Furthermore by Federal law, those unions have to report what they have spent on elections.

2016 will be an interesting election.

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Racism or a Nation’s Reality ? ? ?

invisible hand Crooks and Liars has a post up on it’s site here: Wingnut Cartoonist At Indy Star Gets His (Gary Varvel) Cartoon Yanked Claiming the cartoon was overtly racist, the Indianapolis Star eventually yanked it after initially removing the mustache off of the man coming through the window claiming the mustache created an image too ethic. For all I know and being of Italian descent, the man could have been Italian.

One emotion portrayed by this cartoon (and missed by many) is the overall tenor of America’s attitude towards legal and illegal immigrants coming from south of the US border. Without knowing Gary’s thoughts and approach towards immigration and about the people he depicts in his cartoon, one could take the opposite view of the cartoon in how it portrays White America. We have changed again from a nation asking for other countries to:

“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed, to me:
I lift my lamp beside the golden door.” Emma Lazarus

to a nation of:

Send us your technically qualified and those who can get an H-1B and are willing work for less wages. Doctors are most welcome! We will take advantage of you; but if you qualify, you can sup at our nation’s table of economic reward and pay taxes. All others need not apply even if you live under the threat of violence and poverty.

I do not know Gary and his ideas or political beliefs. Maybe Gary’s cartoon was drawn upon a foundation of racism; but, it does demonstrate one clear fact. The politics of this nation and the character of its people has changed over the last decade or so and we have become a nation of fear. We are afraid of different hues, cultures, and religions so much so we ban them altogether from our borders, our neighborhoods, and our homes. Our nation’s politicians of recent are doing nothing to foster any change in these attitudes and are actively fanning the flames of fear of immigrants and a president who took action.

Thinking of the upcoming Thanksgiving Holiday, when was the last time you have celebrated it with strangers from outside of your family?

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By Default or Design: The Demise of the Postal Service

Guest Post by Mark Jamison, retired Postmaster Webster, N.C.

This post originally appeared on Save The Post Office Blog. This is Part 2 of three posts and following Invisible Hands: The Businessman’s Campaign to Dismantle the Post Office.

Default.  It’s an ugly and dangerous word.  It gives the impression that the individual or enterprise attached to it has utterly failed.  It implies defeat and irresponsibility.  

The news media use the word with relish.  Like a car crash, a hurricane, or a murder, it sells newspapers.  Combined with the word “bailout,” it’s also a surefire way to advance a particular political agenda.

On August 1, 2012, the United States Postal Service did not make a payment of $5.5 billion to the United States Treasury.  On September 1st the United States Postal Service will fail to make a second payment to the Treasury of $5.6 billion.  The Postal Service, blare the headlines, is thus guilty of an “historic default.”  But it’s all hot air.  The Postal Service is simply not making payments it should never have been required to make in the first place.

Whose fault is the default?

The two payments behind all the headlines were prescribed by the 2006 Postal Accountability and Enhancement Act (PAEA).  The payments were ostensibly designed to pre-fund the health benefits of future retirees from the Postal Service; but, they were actually nothing more than an accounting place holder used by Congress to mask federal budget deficits and to satisfy an arcane accounting system that exists primarily to deceive and dissemble. 

invisible hand

In 2002, an examination of the postal pension liabilities revealed that the Postal Service was actually overpaying into one of its pension fund by tens of billions of dollars.  But lowering the payments would have added to the federal deficit, so Congress had the Postal Service put the money it was saving from reduced pension payments into an escrow account.

A few years later, when PAEA was being crafted, Congress created a retiree health care fund, and shifted the money from the escrow account to the new fund.  It also mandated that the Postal Service pay off the balance of its retiree health care liability in ten years.  A forty-year payment schedule would have been totally adequate, since the fund was intended to cover retirees for the next seventy-five years, but the payments would have been too small to balance out what the federal government was losing with the reduced pension payments.

The retiree health care fund now has in excess of $44 billion.  As it grows with interest, the fund will have more than enough to cover the costs of retiree health care for decades to come.  The fund, it’s important to note, is not being used for current retirees.  As with most businesses, that expense is paid for out of current revenues, on a pay-as-you-go basis.   The $5 billion payments to the fund were excessive to begin with.  They are now totally unnecessary.

Yet in spite of all this, the word DEFAULT issues from the lips of Congressmen as a foul epithet.  It reverberates through the media as an example of the failure and profligacy of government.  It is worn as a talisman of triumph by those who insist that government cannot, will not, and must not succeed in a utopian world of free unfettered markets.

invisible hand

The Postal Service has over $320 billion dollars in its pension and health care plans.  These plans are widely recognized to be significantly overfunded.  Claiming that the Postal Service has failed to meet an obligation and has therefore defaulted is a little like saying that a man who fails to add a monthly payment to his multi-million dollar 401K ought to file for bankruptcy. 

Claiming that the Postal Service has defaulted is merely an excuse to further the notion that the Postal Service is an anachronistic dinosaur that ought to be broken up or privatized.  It’s also a means for Congress to avoid and evade its responsibilities to govern effectively.

The reality of the situation is that several groups and forces have combined, through ignorance and cupidity, to dismantle a significant piece of our national infrastructure and to eliminate 500,000 good, solid middle-class jobs. The truth, at this point, is that the fate of the Postal Service is the result of a bad dream, a dream that has us on a runaway train heading for a cliff.  Solving the problem is less a matter of saving the train than simply waking up.

It was a very bad year

I’ve written many times over the past year, on “Save the Post Office”, other websites, and filings with the Postal Regulatory Commission, about the value of the postal infrastructure, the mismanagement of the Postal Service, and steps that could be taken to put things on the right track.

Last August, in post entitled “The Perfect Storm: How everything is coming together to take the Postal Service apart,” I suggested that Patrick Donahoe may go down in history as the last Postmaster General of the United States Postal Service and that he would almost certainly be considered the worst PMG of all time because of his substantial efforts to dismantle and decapitate a cherished national institution.

invisible hand

In “How to Save the Postal Service Before It’s Too Late,” I offered a series of modest, reasonable, and realistic proposals designed to both calm the growing mentality of crisis surrounding the Postal Service and to begin updating the business model of the Postal Service so it could build on its significant assets and retain its relevance into the 21st Century.

Over the past twelve months, the situation has only gotten worse.  It’s been an endless stream of overwrought claims of impending disaster.  The fire has been stoked by the media, which look for conflict and controversy rather than reason and fact.  The crisis mentality has been furthered by a Congress that seems of incapable of discerning the public interest, let along legislating and governing in a responsible manner.  The situation has been exploited by ideologues, who have used it to advance their agenda of privatization, and by many stakeholders in the mailing industry, who have licked their lips over the prospect of a postal system operated for their benefit alone.

There is a great deal of blame to go around — virtually everyone involved in this theater of the absurd has failed in some manner — yet the simple fact of the matter is that we stand today in a situation that can be easily and reasonably resolved to the benefit of the American people.  A great and useful institution has been damaged and demeaned.  Tens of thousands of jobs have been lost, while ill-considered and even idiotic plans have been advanced.  But the damage is all self-inflicted.  Despite the weighted words of “default” and “bailout,” the postal crisis — at least the one grabbing all the headlines — is essentially fictitious and fraudulent.

An infrastructure that builds infrastructure

The Postal Service has been and continues to be an essential infrastructure.  It furthers our democratic ideals and our commercial opportunities.  The postal network — the thousands of facilities and plants, the millions of miles of routes, the machinery and data processing capacity that supports everything, and the human capital that drive the network — the mailhandlers, clerks, carriers, and postmasters — is a useful and important piece of our national infrastructure.

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Yes, electronic communication, the Internet, cell phones, and all the other modern means of moving information have challenged the postal system.  But the postal network has adapted to technological change before and remained not only relevant but an important driver in the utility and productivity of new technologies.

Those who think that the postal network is no longer valuable should read the recent report from the USPS OIG, Postal Service Contributions to National Infrastructure.  As the report makes clear, the postal infrastructure has enabled the country to grow, businesses to prosper, and new technologies to evolve.  Even in today’s advanced electronic environment, there is still considerable value and benefit in being able to deliver to every house and business, six days a week. There is still considerable value in having a positive and useful government presence in small towns and communities in every corner of the nation.  There is still considerable value in having a means to distribute the printed word across a neutral and trusted network, as well as a system for handling voting by mail.

In addition to the value of the infrastructure and the ongoing opportunity it offers for business and commercial development, one cannot easily discount the social value of the network.  The Postal Service has offered meaningful and worthwhile employment to millions of Americans, and it has lifted many families into the middle class.  We hear all about how postal workers are paid too much and receive benefits that are too generous, and how this is an unfair burden to taxpayers.  But postal workers do not receive a dime of taxpayer money.  Their salaries and benefits have been fully paid for by reasonable and sustainable postal rates that are among the cheapest in the world.

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The postal network has bound the nation together by making the commerce and goods produced in one part of the country available throughout the country.  Thanks to the postal system, a person in a remote region of rural America can shop for the same products as a person in a busy metropolitan area.  Certainly television and the Internet now offer windows into other worlds, bringing the world to our living rooms and now even our phones, but as broadening as those connections are, they lack the unique capacities offered by the physical connections embodied in the postal network.

We have built a tremendous asset in the postal network, yet most of our leaders — our elected representatives in Congress and the executive officers of the Postal Service — seem willing to simply disassemble that asset and consign it to irrelevance or worse.  This cavalier treatment of an asset owned by the American people borders on the criminal.  What is worse, the reasons they offer for what they’re doing are as thin as the paper we claim to no longer need.

The postal network offers unlimited potential.  It could be used to assist local and state governments in their missions.  It could be used to assist federal agencies, the way it helps with the census and elections. The use of the postal network could save millions if not billions of dollars in taxpayer money if we allowed it to be used effectively and efficiently by other governmental bodies.  The network also offers huge potential in data and resource collections through mobile sensors on postal vehicles.  Its vehicle fleet could be used as a proving ground for new technologies.  Its facilities could be early locations for charging stations.

The only thing that stands in the way of a more productive use of this national asset is our lack of imagination, our parochialism, and our ideological inflexibility.  The promise of binding the nation together is an open and ongoing one, providing we are prepared to acknowledge the potential of the postal network.

Instead, that potential is being lost.  Instead of dedicating ourselves to finding value in our national infrastructure, we have donned blinders of self-absorption that limit our vision to only those things that offer immediate return.  The financial crisis was driven by this narrowed vision of immediate gain, and our failure to find a robust recovery is rooted in the same blindness.

Taking the service out of the Postal Service

Once the Kappel Commission of 1968 laid the foundation for the new Postal Service, the agency’s leadership has been fixated on the idea that it must become something other than what the Founding Fathers created it to be.  Rather than performing the essential and necessary work of binding the nation together, the leadership of the Postal Service has been seduced by the idea of privatization. They may not always call it that, but the fact is that when your goal is to jettison every characteristic that makes the postal system a service infrastructure in favor being “more businesslike,” then ultimately the goal is privatization.

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Patrick Donahoe and the current Board of Governors represent the culmination of forty years of dishonest thinking.  Their plans spell the destruction of a public postal network.  They would turn the country’s postal system into a private logistics company. The healthcare prepayments mandated under PAEA and much else that Congress has done are part of what’s behind the current crisis, but Mr. Donahoe and the BOG are also part of the problem.  Their actions have served to undermine the stability of a national institution, and thanks to them, there are 400,000 fewer good paying jobs than there were five years ago.  They say the cuts have been made necessary by declining mail volumes, but Mr. Donahoe and the BOG seem congenitally unable to tell the truth about the state of postal affairs.

One need only look at the Postal Service’s offerings in the Nature of Service Cases before the Postal Regulatory Commission.  In the five-day case, the Postal Service sought to cut 17% of service for about a 3% savings.  In the network rationalization case, they withheld research that showed huge revenue losses as a result of the proposed changes in service standards.  In PostPlan, they propose to reduce service to 13,000 communities for virtually no cost savings. Worse, the plan is little more than a political sop to disguise office closings.

The sum total of their plans has been nothing short of massive reductions in service with the goal of abdicating their responsibilities to provide universal service.  The plans are poorly conceived and poorly presented.  More often than not, they have been revised on the fly, as expedience and publicity requires.  That’s because the plans lack any fundamental basis in preserving our postal system.

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The BOG and Mr. Donahoe have not acted as managers entrusted with a national asset. They have acted more like vulture capitalists stripping the organization of its assets so that what’s left can be sold to the highest bidder.

If the Postal Service stands in dire straits today, it’s because those charged with running the service have done everything in their power to gin up a crisis.  Each month, Mr. Donahoe and his senior managers offer up another prediction of doom.  We’re told there’s a cash flow crisis, but somehow there are billions of dollars available to spend on unproven and still unproductive systems like the FSS machines.  We’re told that volumes are falling precipitously due to the Internet, but instead of showing all the ways it’s adapting to the new environment, the leaders of the Postal Service make ever more hyperbolic predictions of doom.  What prudent business that uses the Postal Service wouldn’t be making alternative plans right now?

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The management culture of the Postal Service is rotten and bankrupt.  For years we have heard reports of managerial bullying.  Just the other day, an arbitrator took the unprecedented step of requiring a District Manager to apologize for the ongoing atmosphere of bullying in offices in the Los Angeles area.  Many have heard the story of Jerry Lane, the former Cap-Metro Area Vice-President who left the Postal Service after assaulting an employee.  How does someone like that reach such a senior position anyway? The behavior that resulted in his “separation” was neither unique to him or others in the organization.

Whether it’s fudging numbers to make a plan more palatable or looking the other way at abusive managers, the senior management of the Postal Service has lost the capacity to be self-critical.  The problems of the Postal Service can be attributed, at least in part, to a management culture and a senior management that have become hopelessly dysfunctional.  No solution to the postal crisis that does not include a restructuring of the senior management and a thorough housecleaning at L’Enfant Plaza will be effective.

Where’s a Congress when you need one?

While senior postal management bears the lion’s share of the blame for our current circumstances, Congress owns the problem.  As the day of the faux default approached, we saw senators screaming that their colleagues in the House were letting the American public down by not acting on a bill to resolve the situation.  But in doing so, they unnecessarily amped up the already overheated rhetoric with misleading talk of “$25 million a day” losses and the impending default.

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The leadership in the House has run from its responsibilities.  Darryl Issa, chairman of the committee with oversight responsibility for the Postal Service, has offered prescriptions that would immediately destroy the Postal Service.  At least Mr. Issa is ideologically consistent.  He stands for a view of America and the American economy that leaves most of our citizens behind and actively denigrates government.  His offerings on postal matters reflect that.  It’s no wonder that his colleagues do not support his bill. It’s easy to argue that Mr. Issa may be the biggest beneficiary of the current situation. When words like “default” and “bailout” start getting thrown around, his radical solutions don’t seem so radical.

The problem is that if the House were to act tomorrow on the bill already passed by the Senate, we would simply be taking bad legislation and making it worse.  Tom Carper, the Democrat from Delaware, plays the point man in postal legislation.  His prescriptions are, for the most part, endorsements of the course Mr. Donahoe and the BOG have set.  They dismantle the institution and the postal network and harm hundreds of thousands of postal employees and thousands of American communities.  Mr. Carper’s proposals seem designed to satisfy the direct mailers, which is no surprise since they are major contributors to Mr. Carper’s campaigns.

Whatever his motivations or reasons, Mr. Carper has increasingly portrayed himself as the savior of the Postal Service.  It is a role similar to the one Mrs. Collins of Maine played during the debate on PAEA, and the results are likely to be the same.

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Many news outlets have opined that Congress ought to get out of the way and let postal management and the BOG run the Postal Service, the more businesslike the better.  Others have simply said the Postal Service is irrelevant and should be privatized.  My response to both of those views is that no government is not good government and it certainly isn’t better government.

While Congress has clearly failed to function as a thoughtful body in governing the Postal Service, that’s not reason for removing the postal system from Congressional control.  We, as citizens, ought to demand that Congress fulfill its role in overseeing the Postal Service in a professional and effective manner.  Those who think no government is a good idea or that the Founders had no faith in government are delusional.  Without a strong government based on democratic principles, the end result will be either anarchy or plutocracy.

The default of leadership

The issue is not large or small government.  The fact is that many of those who argue for small government actually support the expansion of government, so long as that government favors their interests.  The largest expansion of government in our history has occurred under two Republican presidents.  

The issue ought to be effective government.  Clearly those who designed our political system understood the need for infrastructure.  They understood the need for and value of postal services.

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One of the greatest challenges our country faces today is rebuilding our infrastructure. We have done best economically when we focused on investing in foundational infrastructure.  Good infrastructure expands economic opportunity and allows more people to participate more fully in the economy.  Growth built on broad economic participation is growth that is both sustainable and growth that is broadly beneficial.  The postal network has played a major role in providing that kind of growth, and it can continue to do that.

The Postal Service does not have a fiscal crisis.  There are billions of excess contributions in retirement accounts.  Those accounts, including the ones designed to fund retiree benefits, are well funded. The crisis facing the Postal Service is one of management and governance.

The management of the Postal Service has no credibility. It has offered plans that do not protect or utilize a great American asset.  Instead, their plans transfer the assets and revenues of the Postal Service into the hands of a small segment of the mailing industry and serve to dismantle the postal network, a useful and essential infrastructure.

The Congress of the United States has abdicated its responsibility with respect to postal matters. It is not simply about the failure of the House of Representatives to act on a bill.  It goes much deeper than that.  When the legislature of the United States is no longer able to see the value in an infrastructure that sustains not only our commerce but our democratic values, when they are willing to sacrifice services that thousands of American communities rely on, when they are willing to undermine the useful, effective, and economically efficient employment of nearly half a million Americans, when our legislators are willing to do these things casually and cavalierly, then they have failed the country, miserably.

There is no Postal Service default. The Postmaster General and the Congress of the United States have defaulted on their responsibilities to the American public.  Shame.

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Wisconsin’s Utilities War on Energy Efficient Customers

Having raised a family in Mad City, Wisconsin (a place former governor Dreyfuss called “77 square miles surrounded by reality” and others calling it the Left Coast of Wisconsin, I found the state to be open to new ideas and more so than what is found in other states. Of course things have changed with Governor Walker coming to power which reflects a state and nation regressing back to ideals and practices less tolerant.

We Energies is attempting to piggyback its fossil fuel driven energy generation costs on the back of more efficient and environmentally friendly renewable energy sources. While MG&E (the same as We Energies) has withdrawn its request to increase rates from the Public Service Commission (PSC), WPS remains with WE Energies in the quest to increase rates on energy efficient users and wind/solar power generators to subsidize a flawed 10 year old plan of the utilities and heavy users of fossil fuels. This comes at a time when solar power is finally becoming an affordable technology for many homeowners and businesses and making up 1% of We Energies 2.2 million customers in Wisconsin.

“If granted by the PSC, residential customers would see a 5% increase in their electricity rates next year,” the Journal Sentinel reported. Wisconsin would have the highest electrical utility costs in the Midwest as reported by Midwest Energy News. The impact of this decision could influence other utilities to raise rates on energy efficient users and solar/wind generators in other states.

In a billing message sent to many of its customers across the state, We Energies explained the rationale for the increases; “claiming it is making use of the power grid ‘fair’ for all of its customers even though those customers with renewable energy use less of the grid than those without solar or wind power.” We Energies claims more efficient customers not using the grid is leaving more cost to be borne by those who are not as efficient. Hmmmm? Saving energy by being more efficient or generating renewable energy should cost more? Why? The plan:

• We Energies wants to impose an additional monthly charge on distributed energy installations going from $9/month to $16/month for an average homeowner and with customers having renewable energy sources paying more.

• We Energies wishes to change the net metering terms making it less beneficial to the homeowner solar power provider to We Energies during peak power times.

• While third party ownership is illegal in Wisconsin, We Energies also seeks to prohibit third party leasing of solar installations to homeowners.

The reasoning: “The cost due to being more efficient and using the grid less should not be shifted to others for the use of the grid,” We Energies Brian Manthey said.

Huh? As pointed out in the Express Milwaukee article We Energies’ War on Its Solar Customers the result is a substantial increase for those users who use the grid rarely or less than major users due to energy efficiencies or their own renewable energy sources. In the end, the more efficient users are subsidizing the heavy users of fossil fuels due to We Energies poor strategy developed 10 years previous. It is a bill increase for smaller and more efficient users. So, we have made the big circle and are back at the beginning. If you are efficient, can sustain yourself with renewable energy most of the time, and can kick-in to WE Energies needs during Peak Energy Need Times; it does not matter and in fact you are going to pay more than if you are 100% dependent on WE Energies for power.

Sounds a little bit like Peabody Coal . . .

Notes and References:

We Energies’ War on Its Solar Customers

Advocates: Wisconsin solar fight could spill into other states

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