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Government As Business

February 27th, 2007

The U.S. Postal Service is hiking rates again, but is making a big deal out of its “Forever Stamps.” The stamps, to be sold at 41 cents, will suffice for first-class postage for as long as the USPS exists.

The problem: the price of stamps rises at about the same rate as inflation in general–meaning that you get no benefit from the purchase. In fact, since you could invest the money and make interest off of it instead of holding on to stamps, the stamps will turn out to be a bad idea–and that’s assuming that the stamps don’t get damaged or lost over time. True, it would end the annoyance of buying 2- or 3-cent stamps to add to your old first-class stamps whenever there’s a price increase, but you may end up paying a lot more for avoiding that annoyance than is worth it. (Really, a single trip to the post office every several years and having to put more than one stamp on a letter? Heavens to Betsy, however have we survived up until now?)

The thing is, keeping them long enough to get any “value” out of them means keeping them for at least 2-3 years minimum, the shortest probable span between price hikes for stamps. You’d probably have to buy 5 years’ worth or more to have any “effect,” and the longer they are kept, the greater the chance that a lot of those stamps will be lost in one way or another. Seniors may go for this idea in a serious way, meaning that when they die, the stamps may not even be redeemed. Meanwhile, the Postal Service makes interest off that money instead of you.

This seems to be part of a new trend in government to take on business-like tactics. Take the U.S. Mint, for example, and their series of State Quarters and now President Dollar Coins. The idea seems less and less about providing a simple, basic public service, and more and more to market the service in the best possible way to get people to spend their money to put more cash in the government’s hands.

I suppose the trend started (or at least accelerated) in the Lottery Boom a few decades ago, instituting a kind of Idiot Tax (or, alternatively, a Fantasize-About-A-Rich-Life Tax). Remember how the states rationalized it by saying that all or most of the proceeds would go to public schools? Naturally, that was yet another fraud: if school districts actually wound up getting any money, it was snatched right back away again by de-funding the districts’ original budget–taking money out of one pocket while your putting money into another.

And like the Stamp and Coin campaigns, the lotteries similarly are financially smart business propositions for the state governments, who of course pay out the money over 20 years (giving you the option to take a much-reduced lump sum). Th odds of winning are so small, you get cases like this where the guy who actually beats the astronomical odds doesn’t realize he’s won for a month and a half. Apparently, he rationally believed that he had a snowball’s chance in hell of winning, so irony stepped in and gave him the winning number.

In short, we seem to be seeing more and more get-revenues-quick marketing ploys executed by the government–ploys that probably get most of their money by getting people in the lower income brackets to buy into stupid ideas or otherwise throw their money away, into the hands of the government–which is steadily decreasing the tax burden of wealthy people. Add the fact that government is cutting services to lower-income citizens more and more, and you have an interesting combined effect.

So, what’s next? Government-sponsored Pyramid schemes? Casinos operated by the IRS? Privatized Social Security Accounts?

I’m not joking on that last one–it’s a pure gamble. The stock market gets depressed when you retire, and you’re SOL. But then, the attitude reflected by this new trend of Government-as-Sham-Business seems to be, “if you’re stupid enough to buy into it, then you deserve what you get out of it.”

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  1. February 28th, 2007 at 04:51 | #1

    I was ranting about this at work yesterday. It’s a scheme to give them the money now, let them collect the interest, and you save $.02 down the road that really costs them nothing.

    I’m disgusted by the whole thing.

  2. February 28th, 2007 at 15:02 | #2

    The USPS has no choice but to come up with business-based ideas in order to remain in operation. It has to make enough money to operate through collectible stamps and even novel ideas such as “forever stamps”. Yes, people may or may not redeem them but, with private mail and parcel carriers such as Fed Ex and UPS competing with the USPS, it’s very hard for the USPS to stay in the black, let alone make a profit.

    In the past, the cash cow for the USPS was first class mail. With faxes, e-mail, and electronic methods delivering information far more rapidly than the USPS can manage, they have seen one of their largest sources of revenue diminish. With increasing fuel costs, they have seen expenses rise. The postal service actually has lost money on a great many services in the past (and may continue to do so). For instance, the USPS loses money on parcel delivery and non-first class mail in many cases.

    This isn’t because they are inefficient or wasteful. It’s because the USPS doesn’t have the luxury of offering service only in profitable areas. They are obliged to service the sticks as well as urban areas. The cost of servicing rural areas is tremendous compared to the revenue stream received from the small communities involved. Where does the USPS get money to offset the losses incurred in such service areas? They get it from premium or specialized services.

    The only other option is to subsidize the USPS with federal tax money. They haven’t been tax-subsidized since 1970 except to provide free service to the blind, the cost of providing information on children to local authorities and to cover the cost of carrying ballots from overseas voters.

    At the moment, the postal service is not allowed to make a profit by law (it is mandated as “revenue neutral” so any notion that these “forever stamps” are a means of bilking the poor (who incidentally are less likely to buy stamps offered in such a scheme) and ignorant out of money is misplaced.

    I’m frankly baffled at why this is an offensive or annoying scheme. It hurts no one and caters mainly to collectors and people who want to buy a book of stamps, toss it in a drawer and not have to think about any alterations in postal costs when they use them. It’s a convenience. It’s not an investment scheme. It’s little different from the way stamps have always worked – you pay first and use them later.

    Even if it’s being sold as a hedge against future increases in postal rates, it’s not offered in the hopes of getting millions of elderly to buy stamps and never use them. It’s being offered to draw people back into using postal services over the long haul and to reduce the need to print and sell stamps of marginal value when rates are increased (thereby saving the need to print and distribute stamps sold at a loss…I’m guessing a 2 cent stamp may cost more to make then its value).

  3. Luis
    February 28th, 2007 at 17:06 | #3

    I am somewhat put off by it because it strays from simple service-for-payment and strays into the shady side of businesses trying to trick people into handing over more money than they want to or need to. If the USPS needs more money, it should simply charge more up front, not engage in schemes to trick people into paying for what they’re getting. If tax-dollar subsidization is necessary to keep prices reasonably low for a basic vital service, so be it; otherwise, simply charge what it costs, and let the market settle itself out. My point in the whole post is that government seems to be slowly turning into a for-profit enterprise, using less-than-above-board finagling to wring more money out of the lower- and middle-class (and cutting their services), whilst simultaneously working to enrich the wealthy and corporations (while reducing their tax burden).

  4. February 28th, 2007 at 17:32 | #4

    How is selling stamps in this way shady? This “scheme” is little different from the way the post office has worked all along. You pay for stamps which you don’t use until you’re ready. They get the money upfront. If anything, the only difference between this and the way things have always worked is that buyers now don’t have to think they shouldn’t buy a book of stamps because rates may go up and they’ll have to buy a bunch of other stamps to adjust them.

    As for tax dollar subsidization, you’re suggesting that the USPS engage in knowing inefficiency or poor operation at the taxpayers expense just so they can stodgily follow a simplistic model of operation. My best guess is that this entire move was motivated by someone figuring out that, with every rate hike, they lose x amount of money to the changeover in stamps and the loss incurred by selling stamps at a lower value than what they are going to be sold for in the future is going to be less than the the cost of printing and dealing with selling low value stamps to bring old stamps up to the increased rate. I can’t believe you are advocating the USPS operate in a simplistic rather than a smart fashion at the taxpayer’s expense, particularly when it’s all above board and transparently set-up.

    The odd thing about your suggestions is that the people who are going to be most harmed by raising rates and “letting the market settle itself” are the people you most believe are in danger of being duped (the poor and the old – you may be shocked to know they won’t be hording stamps as they don’t tend to buy tons of things they don’t need considering they’re poor) as raising rates hurts them most. You also ignore the fact that the USPS services areas no business would bother with because they absolutely cannot operate at a profit (such as rural areas). Are you suggesting commercial businesses will take over these loss-laden services if the USPS cannot compete? The market cannot settle itself out when the USPS operates by different rules than its competitors. They have to service everywhere.

    If your point is that the government is turning “for profit” then you shouldn’t use a non-profit organization (the USPS) as an example. Even if all your suppositions about them greedly socking away money from customers for interest is right (and I’m not sure it is as it may actually be against the law for the USPS to invest), their status as profit-neutral means any money made from investments is going to be poured back into increased service or decreaed postal rates.

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