“I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing. Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or if they try, they will shortly be out of office.”
― Milton Friedman

“Human beings are born with different capacities. If they are free, they are not equal. And if they are equal, they are not free.”
― Aleksandr Solzhenitsyn

Wednesday, January 03, 2018

USBS

While I appreciate President Trump's judgeship appointments, regulatory reductions, foreign policy initiatives, rejection of the global warming hysteria, and many of the new tax policies; this Presidential tweet is an example of why I can't get on the Trump train:
"Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!"
Here's what he should have tweeted:
"Why is Amazon, having a choice of parcel delivery services, paying the bloated United States Post Office the price established by federal regulators, making goods cheaper to Amazon customers? ... Duh! Rhetorical!

USPS should be PRIVATIZED!"
The Postal Service cannot charge "MUCH MORE," or the business would go to UPS and FedEx. Amazon, as a huge customer, should expect to get a volume discount.

The USPS is a part of the swamp, so that formulation should have occurred to someone with business experience and an understanding of free market economics. The President does not possess that understanding, further evidenced by his similar approach to international trade.

It is a major failing. Without economic freedom there is no freedom.

The USPS benefits from protectionism via a monopoly on first class mail. Trump would have them price themselves out of the only market where they make money.

The decline of first class mail is, however, only partially responsible for the decline of the USPS. Other reasons are: Regulatory denial of first class mail increases, the health care and pension liabilities the Post Office has assumed (169% of the fiscal year 2016 revenues), excess real estate, and bureaucratic inefficiencies; all results of a federally mandated monopoly. This is exactly what happens to protected industries; misallocation of capital, mispricing, insensitivity to customer needs, complacency about markets - resulting in inability to innovate or compete.

The President cannot see that the protection of US Steel will have the same result as protection of the USPS, perhaps because his business experience has involved a great deal of government subsidy layered on to inattention during his basic economics classes.

No comments: