Pearlstein: End of Saturday mail service is only the beginning

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Steven Pearlstein
Wednesday, March 31, 2010; 11:00 AM

Washington Post business columnist Steven Pearlstein was online Wednesday, March 31 at 11:00 a.m. ET to discuss how the loss of Saturday postal service is a mild inconvenience compared to the more painful adjustments to our standard of living that will be required to bring our economy back to balance.

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Choose the loser: You know, I could probably live with getting mail 2-3 times a week. If we need to tighten our belts, let's start with housing. Why is it so expensive in a big country like this (outside prime real estate like near beaches or in NYC)? We have nearly-vacant former industrial towns in the midwest and northeast; let's get employers to move their youngest workers there, or to needless-boom cities like Las Vegas. The losers if we make housing cheap would be the seniors who hope to sell theirs as part of their nest egg, but since those are already the ones who are best off, it would be an alternative to means-testing social security.

Steven Pearlstein: Actually, our country is about as good and efficient at doing what you suggest as almost any in the world. That is why we have, over time, had lower unemployment and higher economic growth, because we are much more flexible in redeploying unused and underused assets (land, people, technology, machinery) than others, and because we are much quicker to write down the value of some asset so that it can find its next highest and best use. As for a correction in inflated real estate prices, residential and commercial, it has already largely occurred, although there may be another leg down in both. And you are seeing the the speculators now moving in, creating a floor under the market, which is the first step to getting real buyers and real investors to return to the market.

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a good solution to the ongoing debt crisis : With the urgent need for jobs and increased spending and economic growth for poor, working, and middle class households, isn't there a practical necessity and a moral imperative to begin to redistribute equity through taxing corporations and high incomes? How else do we find funds for near bankrupt states like California, and for adequate health care and education nationwide? It would seem that New Deal type initiatives are an absolute necessity to create genuine economic recovery.

Steven Pearlstein: We do need to raise additional tax revenue, and surely the marginal tax rate on upper income people could go to 40 percent, with perhaps a increase in the long term capital gains rate to 20 from 15. Short term capital gains should be taxed as ordinary income. I think there is general consensus among serious, open-minded economists on all of those points. Whether it should be higher or not does begin to raise a question about tax avoidance and investment disincentives in the US. Which means that if we are to close the gap, there will need to be tax increases on the middle class. Its unfortunate that Democrats, including the president, have tried to take that off the table. I don't think the middle class would be so opposed if it knew that, first, the the truly rich were contributing their fair share and, second, if they could see quite visibly the benefits and services they were getting as a result, and a sense that the special deals and tax breaks and subsidies were being eliminated. That's a tall order, but it is doable. As for the corporate tax, that's a longer discussion but the general consensus is that the rate should come down from 35 percent to 25 percent, which you could easily accomplish simply by closing all the corporate loopholes and preferences which have eaten away at the corporate tax base. Given the global competitive situation, there is a limit as to how much more you can tax corporate profits as a whole. You can probably squeeze out a little more, but not anywhere near enough to close our gap.

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Our economic future: In your opinion, is America too big to fail?

Steven Pearlstein: Yes and no. Yes, too big to fail, but not too big to stumble badly.

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Location not mentioned to protect the local post office: Is it me, or hasn't Saturday mail pretty much been eliminated already? It seems I hardly ever get any mail on Saturday. I used to assume they did light duty on Satuday anyway, so I really won't miss it much.

Steven Pearlstein: I have the same impression.

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Mail service: 1. Look at this as part of technological efficiency--email & electronic bill paying produce overall monetary savings for consumers (fewer stamps needed), but then the PO does not the volume needed to maintain six-day delivery. It isn't conceptually any different than computerization resulting in fewer secretaries in your average work place.2. I'll bet you get comments about how inefficient the PO is. But it's pretty darn efficient, IMO. I can mail a letter from Maryland to Idaho for 44 cents. Good luck having a corporation do that and still make money, or even bother to do business in Idaho to start with. Plus, FedEx and UPS aren't even open on for pick-up on Saturday, and if they try to deliver with a signature requirement and fail, you have to go 15 miles to pick up a package.

Steven Pearlstein: I agree on both counts. The one caveat is that I'm not sure I'd eliminate Saturday delivery, a day when everyone is home. How about Wednesday delivery instead?

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Cut Home Mail Delivery on a Different Day?: First, eliminating Saturday delivery means going without mail delivery from Friday until Tuesday on holiday weekends. Second, roads are less crowded on Saturdays, with USPS vehicles burning less fuel sitting in traffic.

Steven Pearlstein: Well, I guess great minds.....

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VAT: Important column today! I've heard a number of economists, including Rogoff, prescribe a VAT as the elixir that will cure the federal deficit. Do you concur that a VAT is needed? And do you believe that proposing such a tax is politically feasible? If not, what other approaches would you consider to be practical?

Steven Pearlstein: Most public finance experts think we need to add a VAT to our mix of taxes, and I wish, frankly, we had gone to that as a way of paying for government-funded health care (Medicare, medicaid, subsidies for private insurance). The reason is that people could really see that a particular tax was going to a particular service that they value. And if the health system began to require even more money, then people could very clearly see the tradeoff (or lack of one) between the tax and the service, and decide which way they wanted to go. It would also have allowed us to lower the payroll tax, which is regressive and, at times like this, a bit of a discouragement to job creation. And since you would be raising one tax and lowering another, it would not be as subject to the anti-tax rhetoric, even though the overall amount of money raised would increase. I've talked about the changes to the income and corporate tax rates. I also think we need to put a small across-the-board tariff on all imports, along with all other trading partners, to help to pay for the employment safety net for people who lose their jobs and benefits because of the disruptions inevitably caused by increased trade. And, of course, there is lots of money to be raised, mostly from upper income households, by reforming and simplifying the tax code and eliminate all those tax breaks and preferences that we all cherish but which are really regressive and unfair. All in all, we need to get real. We know from years of experience trying to cut federal spending that the system demands a level of federal spending of at least 23 percent of GDP. We can afford to run a steady-state deficit of, say, 2 percent as long as we have modest productivity and population growth. That means we need to collect 21 percent of GDP in federal revenues of all sorts, which is several percentage points above where we were before the recession hit. That's the broad-brush reality. We can stomp our feet and complain that's too high, but so far not a single politician has stepped forward with a politically viable plan to cut the spending from the 23 percent level. Until they do, the clear implication is that we, as a democratic society, demand that level of service and should be prepared to pay for it. The "free" lunch turns out not to have been free, and in any case, it is about to end.

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Wrong cuts: The post office is supposed to be run "for profit" like any other business, but it really seems to operate for its own convenience. Cutting back PO hours to 9-5 just makes me use Fedex or UPS since they're open when I'm available. The clerks are horrendously slow, waits are long and the buildings are shabby inside. With this type of "customer service," of course they're not doing well!

Steven Pearlstein: The Post Office is imperfect, but a lot better than it used to be in terms of its efficiency. There's still too much of a civil service mentality, a sense that it is operated by and for the employees rather than the customers, but that has been changing slowly. They've gotten better in their use of technology. And we value the reliability and the social cohesion that it provides the country -- a purely private enterprise would not operate "inefficient" rural post offices or charge the same amount to send a letter anywhere in the country. The one thing I would institute is a method for people to quickly and easily give feedback to regional managers. Right now, there are still too many postal employees (albeit a small minority) who feel they have a job for life, with generous pension after that, irrespective of their performance. They need to be abused of that notion.

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Post Office employees Benefits: I understand that the post office employees enjoy some very generous/lavish benefits. Is this being looked up in terms of looking for wasy to save money as well?

Steven Pearlstein: The pension and retiree health benefits are more lavish than private workers enjoy, and over time they need to be negotiated downward, which is very hard in terms of labor negotiations. Unions will do almost anything to avoid downward revisions like that. The postal service has got to be willing to take a long strike to convince them otherwise.

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No Saturday Mail: I don't generally need my mail delivered 6 days a week - but why not cut off Monday delivery, and use Saturdays to get signatures?

Steven Pearlstein: Gee, I guess lots of us are thinking along the same lines today. I wonder if the Postmaster General is listening.

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Second sentence of your last paragraph today: You listed consequences such as "higher taxes, higher interest rates, reduced government benefits and services, delayed retirements, higher prices for imported goods and slower growth...." But I can't see any politicians having the backbone to impose higher taxes or surcharges/tariffs on imported goods, so aren't some of the other items on this list -- like the reduced government services and delayed retirements -- destined to become more drastic?

Steven Pearlstein: I agree that we should put the idea of across the board tariffs on the table, as part of the new round of global trade negotiations. Small, across the board tariffs as a way of raising revenues to deal with the economic consequences of trade, and get the winners from trade to compensate the losers, is a sound economic idea.

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Reducing spending: Amen, brother! I hope this is the first step in a long road of people beginning to make cuts. It has to happen. I actually really like getting mail on Saturday -- it's the only day I'm home so it's the one time I look for mail. But, in the grand scheme of all the cuts that are going to need to be made, it's a no brainer. I agree with the previous poster that we really only need mail delivery every 3 days or so. Cut the delivery workforce in half, and give them two routes. One delivered on Monday, Wednesday, Friday. One delivered on Tuesday, Thursday, Saturday.

Steven Pearlstein: Another good idea. I think you'd have to consult with the big bulk mailers on that one, the people who pay most of the cost of the postal service. But I think with some tweeks, they might be able to live with that if they can get some assurance about rate stability.

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For "Choose the Loser": Why would young workers want to move to ghost towns in the midwest?

Steven Pearlstein: They wouldn't unless companies saw the opportunity to move to a low-cost place and create jobs there.

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Fixing the deficit through higher taxes, fees: Assuming higher postal rates, the coming VAT, the end of Bush tax cuts, and the new EPA taxes on energy, aren't we accepting "true" unemployment of over 20% for at least the next decade?

Steven Pearlstein: No. There are many instances of companies having respectable growth rates and productivity within a society that has slightly higher tax rates than we do. Among the industrialized countries, we have been at the low end of the scale, and there is nothing in economic theory or practice to suggest that jobs would be destroyed wholesale, or job creation eliminated, with slightly higher tax burden. A lot depends, of course, on how you structure your taxes -- if you get it wrong, there can be more of a negative impact. But that's why God created ave public finance experts, to help us with those issues.

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Minor point: Mail delivery on Monday is already very late because they are delivering two days worth of mail (Mail moves 24/7). If they eliminate Sat delivery, this will get even worse. Why not some other day?

Steven Pearlstein: It seems like we almost have consensus on this issue. I have a friend who works for the Postmaster General. I'll let her know of our thinking.

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Long term cuts: I appreciated your straight-forward approach to the cuts necessary to promote long term growth. Much like the Fed's actions in the 80's, these cause short term pain, but can dramatically shift future prospects. However, we are notoriously short term thinkers - the next quarter, budget cycle, election. What do you suggest for helping people see the need to make small changes now instead of large ones later?

Steven Pearlstein: They need to have a sense of what the long term gains will be from their short-term pain. They need to imagine it, see it, smell it. That's where the leadership comes in.

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No wonder the post office is struggling...: I recently sent out a mass mailing (300 pieces) from my office. My intern and I took the envelopes downstairs to the mail pickup area. Because there were no mail service bins available at the time, we stacked them neatly in a box we had brought.A few hours later, I received a call on my personal cellphone (meaning the mail carrier had badgered building management for an emergency-only number). The mail carrier, who didn't even identify herself as a mail carrier at first, ranted and raved that mail can only be picked up from a bin, not from the floor (...uh, there was a box?), and that the box was trash (so...there WAS a box?). I offered to come downstairs and move the mail into a bin for her, since clearly that was outside of her job description, and she screeched some more about how she would move it herself and was letting me off with a "warning." So, basically, something mildly inconvenienced her and she felt it necessary to call and bless out a customer on a personal cellphone.Wow. No wonder the Post Office is bleeding like a hemophiliac caught in a tractor, if they can't even master a simple, "Thank you for your business."

Steven Pearlstein: As I say, the idea of a customer-centric organization has still not fully infused the post office culture.

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Cut our standards of living? Really?: Steven, normally I agree with you, but today's column where you start with a reasonable cut to mail service on Saturdays and make an unsupported leap to austerity and a declining standard of living. Most of the middle class derived no benefit from the excesses of the 2000's that caused the financial crackup; to ask them to pay for it through delayed retirement and reduced benefits is unjust. As you mention once in the column, raising taxes will also help the debt problem. A recent paper said that as income inequality increased, national savings rates declined. If we compress the inequality by targeted taxes on the high earners, we should see an increase in the national savings rate as well.

Steven Pearlstein: My preference would be to pay more, but demand that they have a great education system, including great state universities are have enough seats for their children and grandchildren, and great parks and playgrounds and recreation programs, and good public transportation systems. That way they don't have to spend their after-tax money on private schools and health clubs and having three cars in the garage to get everyone to school and work. There are public goods that can be provided more efficiently than private goods, and we have underinvested in those during the Republican anti-tax, anti-spend regime.

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Washington, D.C.: Steve - love your work & trust your judgment so I hope you answer my question. First, a point about a previous question re: corporate taxes...it seems many citizens do not understand where the "consequence" of a tax falls. This is a basic, rudimentary, Econ 101 matter. Raising taxes on corporations just raises prices for consumers bc they pass the entirety of the tax along. It in no way creates more tax equity.My major question:It seems this whole debate about the debt can be boiled down to a simple question...is our current debt level and entitlement structure untenable for the long term? Progressive economists like Jared Bernstein and Krugman have long argued our debts are easily sustainable bc our economy will keep growing over the long term. That is, we are borrowing more, but against a constantly appreciating economy. Conservatives have made the opposite argument, that the U.S. is effectively cash-flow insolvent even if we are balance sheet solvent, and that the current level of debt/entitlements will cripple us. I trust your judgment and I know a lot of your other readers do, which point of view is closer to the truth and more grounded in empirical economic data?

Steven Pearlstein: First off, thanks for your kind comments. Second, its not exactly clear who "pays" the corporate tax. It depends on the industry and the moment in time, but economists would say that it is spread variously among consumers, shareholders and employees. My rule of thumb is that its about one-third to each group, but I think the consensus among economists now is that half is paid by shareholders and half by the two other constituencies. As for whether debt matters, I'm more on the side of those who say that, given where we started this recession, we don't have as much room as Krugman and Bernstein would like to use Keynesian stimulus. As Rogoff and Renhart show, you get these tipping points at a certain level of indebtedness that, when reached, become very destructive. So we are between a rock and a hard place here, inasmuch as if we don't do enough short-term deficit spending, we wind up in a deflationary liquidity trap, and if we spend too much, we trigger a currency and credit crisis. We shouldn't be cavalier about either risk, and the best way to thread this needle is to put in place NOW some good long-term plans to reduce baseline spending and increase baseline revenues.

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Tax Rates: It's been found that you can raise income taxes up to 50% marginal tax rate before you get distortions in the market due to tax avoidance. Not that we need to go there (at least not permanently), but we have more flexibility in rates than we're currently using.

Steven Pearlstein: Yes, you're right about 50 percent, but you have to leave room for 10 percentage points of state income taxes on top of the federal. That's why I say 40 percent.

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The Big Short: I read your review of Michael Lewis's new book, The Big Short. I thought you disliked people taking insurance against assets they did not own? Yet you wrote a favorable review for a book lionizing those that shorted the housing market. I'm curious. Explain please?

Steven Pearlstein: These aren't moral judgments. I think it is not helpful to an economy to allow people to take insurance against assets they don't own. But as long as it is legal, you have to expect that people will do it. What I loved about the housing shorts in the Lewis book is how their success exposed the stubborn idiocy and herd behavior of Wall Street. I suppose its the "enemy of my enemy" sort of admiration.

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Another vote for Wednesday: Yeah, I'd rather not skip mail service for two days in a row (or more on holiday weekends). Think of Netflix, for example - it would be annoying to watch a movie Friday night and not be able to send it in until Monday. Better to break up mail service at two different times during the week.

Steven Pearlstein: Think of it this way: the mail deliverers could play golf with the dentists on Wednesday afternoons!

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POSTAL SAVINGS BANK: If the Government were to revive the system of postal savings banks, which were abolished in the '60's, a whole new line of enterprise would open up for all those postal employees who have time on their hands outside of rush hours. Also it would give the Government some leverage vis-a-vis the private banks and open up a lending revenue stream for small business. Ireland is now doing just that.

Steven Pearlstein: This idea of having the government issue bonds for specific purposes that people might rally around -- its worked in the past (war bonds) and I think it could work in the future. And by using post offices to cut out the Wall St. middlemen, you could strike a blow for democracy and efficiency all at the same time.

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taxation: Why should capital gains be taxed differently from ordinary income?

Steven Pearlstein: In theory, they shouldn't. But as long as you have a corporate tax, which is a tax on capital in large part, then you may want to have a lower capital gains tax to avoid a total double taxation of capital (as compared to labor).

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Traffic on Wednesday v. Saturday: "Second, roads are less crowded on Saturdays, with USPS vehicles burning less fuel sitting in traffic." I would have to disagree. Mid-day delivery on Wednesday means less traffic than mid-day on Saturday. Mid-day Wednesday is when most people are in the office. They aren't out driving around - like mid-day Saturday (running errands, etc.)

Steven Pearlstein: The environmental take on the Wednesday vs. Saturday debate. Thanks.

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Allow a contrarian note: While in theory, cutting back Saturday service and/or delivery may not affect a lot of people, others will be affected. In a way, this constitutes rationing of service due to the resources available, and how there is essentially not enough funding to go around. While this may seem like a clumsy example, I also think this is one of the underlying fears of HCR- for all the bluster about 'death panels' and other nonsense, there is the kernel of fear that by expanding control and thus affecting Medicare payments, there can be a decrease in service available to people. I'm sure this will raise the hackles of a lot of people, but I think it is a legitimate point to compare one thing (the USPS) to the other (HCR) rationally and without fear of recrimination.

Steven Pearlstein: Rationing is not a dirty word. I prefer to call it rationalizing the use of a fixed amount of resource. The reason its important is that it forces you to decide -- do I want to pay more for this service, or do I want to find that part of the service that is least useful and eliminate it in order to avoid paying more. That is a useful exercise. Sometimes we would decide that spending more is worth it. Sometimes we would make the opposite call. But if you have a system where you never consider that tradeoff, then what you have is the U.S. health system, where the costs every year rise much faster than the incomes of the people paying for it.

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Taxes: Are Americans undertaxed? Compared to the rest of the World, that is - compared to what we spend on government services, I guess we clearly are. A VAT - maybe temporary, "for the duration" - would seem to be an obvious measure, but would it lead to a social revolution?

Steven Pearlstein: Actually, I think that is overstating things.

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Are they also...: Thinking about cutting out Saturday hours at Post Offices? That would be really bad for people who truly can't get there during the week.

Steven Pearlstein: Okay, another vote for Wednesday.

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No mail on Saturday will show how little we need mail: There was an op-ed in the Post a week or so ago which said that if the USPS cuts mail on Saturday, it'll show the country how little we depend on mail. If that happens, we can then cut another day. Then another, etc.I agree. I rarely get anything good in the mail anymore. Paychecks etc get direct deposited and my pay statements are online. My bills are all emailed to me and I pay them electronically through the billing company.Problem is that the poor (who have no loud voice) are the people most in need of the mail. They tend to not have bank accounts and/or online services. They need to mail things.

Steven Pearlstein: We still need a public mail service. Maybe not forever, but for now.

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Netflix: The big reason why I'd rather get Saturday mail than Wednesday mail is the convenience of Netflix, and I'll bet a lot of people feel this way. I suspect that it would be harder for the Post Office to staff around non-contiguous off days, though.

Steven Pearlstein: I'm sure the postal service has thought that through, but I suspect the real reason they have focused on Saturday is because that is easiest and most preferred in terms of personnel.

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The Brits can do it: So why is it the British can have (at least last time I was there) TWO deliveries daily, except Sunday? Smaller country? Better efficiency? Four centuries of practice?

Steven Pearlstein: All sorts of reasons, including those that you have mentioned. Not sure it is not highly subsidized.

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Different Day for Mail: Your suggestion of keeping Saturday and skipping a different day is consistent with what I remember being suggested 15-20 years ago. In addition to keeping delivery on a day when people will be home, it also keeps the maximum period between deliveries down to 48 hours (Saturday-to-Monday, and whichever other day is skipped) rather than having a weekly 72-hour gap (Friday-to-Monday).In fact, I think the original suggestion was to eliminate delivery on both Tuesday (the lightest mail day) and Thursday... This would mean only four delivery days per week, but would avoid the long weekend gap.

Steven Pearlstein: My, this is getting complicated.

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I think you'd have to consult with the big bulk mailers on that one, the people who pay most of the cost of the postal service: The people who pay most of the cost of the postal service are the people whose mail I put directly in the trash. The system exists for almost no reason. I can do without all the direct mail ads, the catalogs, the fake mortgage notices, the credit card solicitations. And honestly I could do without the yearly card from Aunt Edna.

Steven Pearlstein: I just spoke to Edna. She says there will be no fruit cake for you this year.

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Excellent Article, What's Next for the US?: Excellent article. I'm scared that many are seeing the same inbalances that are now on the precipice of real interest rate hikes. Seems that one more bailout will prevent the Government from getting the bond sales to fully meet their requirements. Plus the "ratings agencies" have started to put some heat on our high grades. Ignoring the commercial loan crisis that should break this year (small banks are already going under at a faster rate this year), should we get a preview of our endgame from the way things turn out in Greece and Spain? How much time do you think we really have before the government will need to start balancing its books, which will immediately put people on notice that their standard of living will no longer be bankrolled by future generations?

Steven Pearlstein: Obviously you don't know when the tipping point is reached. It's usually some event that you never expect. Better to start worrying about it now, however.

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Deregulation: I know privatizing the post office is off the table as long as Obama and Pelosi are in charge. However, is there any chance they would repeal the government mandated monopoly and allow competition for all the postal services? Why not let Fed Ex and UPS expand?

Steven Pearlstein: As I said before, a purely private company would operate in says that we might not find socially acceptable. If we then started giving them parameters in which to act, then we would be right where we are now, with an "independent" postal service whose parameters are set by the government. There's nothing magic about what FedEx or UPS do, other than the fact that they didn't inherit a lot of government workers with government salaries and pensions and a government culture.

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re: California: A previous poster mentioned that taxing the rich is what is needed to save states like California. How about California changes its ridiculous property tax law to generate revenue instead of continually falling back on the tired "the rich will pay for it" trough?

Steven Pearlstein: This is a much more important issue you raise than taxing the rich more in California. My impression is, in fact, that the rich are already pretty well taxed -- and many of the richest now "live", for tax purposes, in Nevada.

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Steven Pearlstein: We're more than out of time. Good discussion. I'll let the Postmaster General know about our ideas.


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