Wednesday, February 6, 2013

Is the US Train Falling off the Fiscal or Literal Cliff?

OK. I think it’s official that we are now a social media and on-line communication world. As I listen to the U.S. Postmaster General Patrick Donahoe on Wednesday morning stating that the US Postal Service is going to stop delivering letters and other mail on Saturdays, but continue to handle packages, I see another basic staple that, like most other things, Americans take for granted until they begin to go away. The gradual nature of the demise makes sense, but because people generally don’t notice items until they are slammed directly in front of them, they can ignore them.

There are many aspects of our daily lives that are funded by our taxes and that we don’t notice, so we don’t see the need to pay for them. The mail is definitely one of those. If delivery has been privatized to the point of making the US Postal Service irrelevant forever, then that’s fine. We will all go to UPS® or FedEx® and other Commercial Carriers to mail everything then so be it. It will be more expensive, and if they are not regulated at all to be competitive then a regular post card will go up by 2 to 3 times the cost. As I am writing this, I am sure that the market researchers at UPS® or FedEx® and numerous potential competitors that may be pondering what the competitive price is for a postcard/letter in the current market before people go on-line and dump the paper altogether. Many who determinedly continue to live in the analog world will be irritated by this, understandable, but then again, if the service becomes prohibitively expensive, then we head to the alternative, on line. American Greetings®, Hallmark® and Shoe Box® have already gone this direction and are lowering their overhead by selling virtual reality. In 1995, the national Greeting Card Assn. stated that they would sell 2.7 billion Christmas holiday cards. By 2011, that number plummeted to 1.5 billion cards as those of us who used to send out paper cards to everyone, now do an electronic message to up to 100 people stating “Happy Holidays”. At first it used to make me sad, when I thought I’d stop putting the cards around the living room over the holiday season and remembering my friends and family, but shortly after I realized that they could be printed and tacked around with the same overall effect.

This reminds me of the tragic demise (they are technically in a coma now, but waiting to be declared dead after waiting way too long to try to go digital and eliminate their distribution sites, Blockbuster Video® looked up just in time to get whacked in the head before it was forced to give up on trying to beat Netflix® who took out the middle man and sent the videos directly to the home. They too had to re-modernize though and upgrade their distribution to be removed from a CD and sent electronically instead to compete with Time Warner® and Comcast® and be competitive with their instant gratification quotient. The cable company costs are already invested by many and the 1.00 for an oldie to a 4.50 newly on DVD movie, make it quite competitive compared to going to a theatre, particularly if a whole family or even a couple are watching, (and the perk of pausing to not miss the best scene while I 'go to the loo' is a nice bonus at a lower price.

Other industries are going to go the same route depending on the advantages taken by the marketers and the vulnerability of the customers. The yo-yoing of the paranoia over transportation and commuting is a perfect example. If it is prohibitive to stay in a remote area, due to the cost of transportation, then the people will go where they can make enough money to live. If they figure out how to keep fuel costs below $5.00 a gallon then people will suck it up and keep driving. But meanwhile, as the public is figuring that out, the demand is swinging back and forth on if Amtrak should disappear and be privatized or if we all simply go back to driving everywhere. Up and down the east coast and the west, we have some options still. This could change, the government and the private sector both play with it in the abstract from time to time, but that does not mean that they are going to ever act on it.

Bloomberg.com reported recently about the New York fare increases being necessary Hurricane Sandy in October delivered the worst damage to the New York subway in its 108-year history requiring the borrowing of nearly $4.8 billion for repairs and infrastructure upgrades. The MTA Board voted to increase the cost of a single ride (transfer included) from $2.25 to $2.50 which may seem large compared to a single ride on the Los Angeles Metro which is $1.50 (transfer not included) while in Washington DC, a 20 mile ride from Northern Virginia to Suburban Maryland is $ 5.75 at rush hour on the MTA.  If my employer and I can come to an understanding, do I begin to virtually commute as half of my friends do from as far away as Mattawan NJ or Front Royal, VA, or to keep track of our productivity, do we commute? Do cities like Detroit and Memphis stay in an urban plight, or do they continue to flip demographically from the fleeing that took place in the 1970s? Nobody wants to pay more than they have to, but the reality is that the costs are going to go up for services if they go private and taxes are going to go up if they go public; it is pretty basic math.  

When the mass white flight took place in the 1970s and 1980s, and the commuters watched urban decay while avoiding criminals during commutes out of town, it was worth the time and the energy and money to commute in. Now that the cities are cleaned up, the white return flight is now beginning and the price of an efficiency apartment in Manhattan, NY, Logan’s Circle, DC, and even Fells Point in Baltimore, MD are now reflecting the demand on urban living. Many noticed these trends, but few noticed the trends of the poor moving outward to Newburgh, NY or to Northeast Baltimore or Prince Georges County, MD, where they are more isolated, have fewer services, longer commutes and are more vulnerable to gangs and narcotics while the cities clean themselves up to enable the middle class to move back in and look for a good charter school for their kids.

This fight is not going to end anytime soon. The conservative privatization goals of removing the government from every aspect of life from education to transportation to postage, is one way to go. Taxpayer funded transportation, public education and services like the US Postal Service are another. The more dangerous tangent that the country may continue on however, is the road toward trying to do both. Funding and holding onto the public services just enough to destroy them before the private sector gets rolling, while not funding them enough for them to do what they are tasked to do; or expecting the private sector to take up the slack while they have no incentive or obligation to do so. This will definitely result to a much deeper spiral while both sides look at one another saying, “We have no idea what happened, we just know it’s not our fault.”

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