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Rural post offices are critical to the 3rd District

Friday, October 7, 2011

The U.S. Postal Service is an integral part of American life, especially in rural communities. In rural areas like the Third District, residents rely on the USPS for the delivery of prescription drugs, retail purchases, business mail, and cards from loved ones. In fact, you are likely reading this column in a newspaper delivered through the mail.

Despite being a vital part of American history and culture, the USPS is struggling to stay financially solvent and risks facing bankruptcy. Citing a $3.1 billion shortfall in the second quarter of the year, the USPS recently released a list of 3,600 post offices to study for potential closure, which included many rural facilities. It is clear the USPS must take drastic steps to fix its budget deficit, but it is unreasonable to put the brunt of this responsibility on rural customers. Understanding the importance of rural post offices to communities in the Third District, I have continued to work to prevent the USPS from balancing its budget at the expense of rural customers.

In April of this year, I, along with my colleagues from Nebraska, sent a letter to the Postmaster General of the USPS urging the agency to account for the impact on local communities when considering the closing or consolidation of a rural mail facility. My office also has contacted more than 1,300 individuals in the communities with post offices under review, and co-hosted a Congressional Rural Caucus briefing to draw attention to the benefits of rural post offices and the need for USPS to look elsewhere for cost-savings.

H.R. 1351, a piece of legislation supported by postal labor unions, recently has gained a great deal of attention. I have expressed a number of concerns with this legislation. In reality, this measure does nothing to address rural post office closures. Instead, the bill changes existing law to allow the USPS to receive up to $75 billion in bailout funding from a civil service retirement account. This account is used not only for postal service retirees, but also for military retirees.

Even USPS officials admit H.R. 1351 does not resolve issues the organization faces in the coming years. As we in Nebraska know, short-term fixes often create long-term problems. For instance, this year alone members of two postal labor unions will receive raises totaling more than $270 million. Closing all 3,600 post offices on the recently released study list will save only $200 million -- not even enough to cover union pay increases this year. The Postal Service expects a $238 billion shortfall by 2020, so even cutting a $75 billion bailout check directly from the Treasury will not make it solvent.

Long-term, structural reforms are the best solution to put the USPS on a path to fiscal sustainability. These reforms include asking postal employees to pay the same for health benefits as the rest of the federal workforce, allowing for advertisement sales on postal vehicles, or shifting to mailbox on the curb delivery, which could save as much as $100 per house annually.

When the Postal Service originally was created it was charged with a mission to serve all communities -- both urban and rural -- with prompt, reliable, and efficient services. It is important the USPS upholds this original mission while at the same time fixing its bottom line. As this issue continues to be debated and considered, I will keep working to ensure rural communities have a seat at the table.

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Rep Smith is certainly right about post offices in rural areas. Much of our rural population is made up of retirees, and often the post office is their only real life line to the outside world. A lot of the remaining population is made up of ranchers and farmers and small businesses whose businesses and names are tied to the town in which they are located. Closing a branch post office in a large city causes an inconvenience for those customers; closing a rural post office causes a major inconvenience AND takes away the identity of our small towns, which most likely will be absorbed into the next closest larger town. Our local post office is targeted for closure and I wish our representative were as willing to help as is Rep Smith!

-- Posted by Star Mate on Sat, Oct 8, 2011, at 2:32 PM

I've never really identified a town with the post office. If a post office doesn't have business why keep it open? The post office is losing several billion dollars a year. cuts have to be made and its going to hurt.

Towns are made up of people. Its those people that give the town an identity not a post office. The mail will still come and will still be sent out. the outside world will not be cut off for lack of a physical post office in town.

-- Posted by npwinder on Sun, Oct 9, 2011, at 12:06 AM

Representative Smith;

It seems odd that you should mention deferring Union Worker Pay increases as a proposed method of overcoming shortfalls in the Postal System Budget - this at the same time that the Nebraska Business Forecast Council predicts a 35% increase in Farm Income for 2011 and remain strong through 2012 and 2013.

Maybe a more realistic approach would be to review the current Farm Subsidy Program to determine if subsidies are even considered necessary under the forecasted increase in income levels. We haven't seen increases in income opportunity at this level since just before the housing bubble burst. This kind of income potential tends to attract short term speculators, instead of long term Conventional Farmers.

Perhaps we should allocate part of the Subsidy Funds and help the Postal Service maintain a service we have all grown accustomed to -- the remaining Funds could go into an account to help the next generation of Small Farmers offset the ever increasing cost of farm ground spurred by speculation.

You often proclaim that over regulation is a barrier to increasing growth of income in the Agriculture Industry. Isn't that rationale in direct conflict with the reality of a 35% increase in income in one year?

-- Posted by Geezer on Sun, Oct 9, 2011, at 7:14 PM

Good post Geezer.

-- Posted by bberry on Mon, Oct 10, 2011, at 9:14 AM

Adrian, Too bad you couldn't have been just as concerned when the legislation was pushed through, just before recess, that required the USPS to front load 75 years of retirement funding. Go visit your friend and fraternity brother Tom in jail and ask him about it.

-- Posted by hulapopper on Mon, Oct 10, 2011, at 6:40 PM

The more farm income the less need for federal farm subsidies.

-- Posted by bberry on Mon, Oct 10, 2011, at 9:05 PM

The answer is simple steffanie, they don't. Today's increases in farm incomes is due to higher commodity prices, and an increase in net worth due to rising land prices/rents. Most of the subsidies are spent on conservation. A federal union employee can lay no claims to that.

Next year it is likely to change as input prices are increasing at an even faster rate. Hopefully, our politicians will resist the temptation to add another subsidy to offset these cost in an attempt to buy votes.

-- Posted by Chunky Peanut Butter on Mon, Oct 10, 2011, at 9:41 PM

I was under the impression most farm subsidies were based on compensation of income and yield not CRP, but I've been wrong before.

-- Posted by bberry on Tue, Oct 11, 2011, at 12:14 AM

Chunky Peanut Butter

I am going to give you an opportunity to educate yourself and to revise your comments before replying to your post -- I owe you that much respect.




-- Posted by Geezer on Tue, Oct 11, 2011, at 7:32 AM

Yes Geezer, I am very familiar with the EWG. However, if you actually observe the data, these dollar figures are from a period from 1995 to 2010. As you can see, much of the payments from 1995 to 2005 were from LDP and Counter-cyclical payments. These payment are triggered when commodity prices are low.

The direct payment, based on yield, is set on either county averages or actual production averages. This payment is set every year.

Today, a larger percentage is spent on conservation, not just CRP, but on all conservation practices that reduce erosion, water consumption, and now "green" practices which some believe is sustainable agriculture.

-- Posted by Chunky Peanut Butter on Tue, Oct 11, 2011, at 8:29 PM

Chunky Peanut Butter

Thanks for the response, it is appreciated.

I agree that a larger percentage is now being spent on Conservation Programs than in the past. I thought you meant that most of the Total Subsidy Funds were being spent on Conservation Programs.

For the period 1995-2010 about 9.5% of all USDA Subsidies in Nebraska were utilized on the various Conservation Programs.

The Direct Payment has become somewhat of a contoversial program. Originally it was set up by the 1996 Freedom to Farm Act as a way of transitioning from Subsidized Farming into a Free Market System. The program has been continued beyond it's anticipated lifespan and has more or less become an Entitilement Program that costs the Federal Government about $5 billion a year.

To complicate matters, land value estimates usually include these payments which in turn drive up land values and rentals making it hard for the small farmer to expand and new farmers to get established. Not to mention the lure it offers for speculators wishing to tap into a pool of government funds.

What I am concerned about is that the value of farm land is being pushed through the roof by speculators the same way the housing market was. They are hijacking a program that was originally intended to help the small farmer get back on their feet after the great depression. I just hope it doesn't have the same outcome as the housing market did.

-- Posted by Geezer on Wed, Oct 12, 2011, at 12:16 AM

The difference between the housing market implosion and today's agricultural real estate market is cash. Much of the ag land purchases is made through cash, not financing, as was the case with housing. Large farm operations are buying land with cash from higher commodity prices.

On a balance sheet, cash on the assets side is buying land. This land is then placed in the real estate equity column, also on the assets side. The result is a zero loss on the assets side of the balance sheet. And no increase on the liability side.

With the housing real estate market, we saw very little cash used to make the purchase. However, on the liability side of the balance sheet, a huge liability appeared with the addition of the home payment. With no owners equity appearing on the assets side, this results in a negative equity. Something good bankers stay away from.

With accounting rules bent on favoring home ownership at all costs, regulator's having their hands tied, some bank took on risky loans. As new home owners unable to make payment and cover living expenses, they went delinquent or filed bankruptcy. With a sudden flood of homes on the already inflated real estate market, the market went bust. No sane person was willing to buy homes at those inflated prices. We are very close to sane housing prices again.

Yes, grain production is now best left to large farms. Small farms can still find a niche, if they are willing to work smart about it. Most are not.

-- Posted by Chunky Peanut Butter on Wed, Oct 12, 2011, at 9:59 PM

Chunky Peanut Butter

I am sure that increased commodity prices have allowed additional purchases of farm land. On your balance sheet, don't the subsidy funds play a part in the amount of that cash on hand? If those funds were not available to offset expenses then the cash on hand would be less, anyway you look at it. If this wasn't the case what would be the incentive to receive the subsidy payments?

Your analysis of the housing market collapse does not reflect the facts. Laws were already in place to limit at risk loans, in particular was U.S. Code: Title 12, Chapter 3, Subchapter VII, 301

301. Powers and duties of board of directors; suspension of member bank for undue use of bank credit.

Every Federal reserve bank shall be conducted under the supervision and control of a board of directors. The board of directors shall perform the duties usually appertaining to the office of directors of banking associations and all such duties as are prescribed by law.

Said board of directors shall administer the affairs of said bank fairly and impartially and without discrimination in favor of or against any member bank or banks and may, subject to the provisions of law and the orders of the Board of Governors of the Federal Reserve System, extend to each member bank such discounts, advancements, and accommodations as may be safely and reasonably made with due regard for the claims and demands of other members banks, the maintenance of sound credit conditions, and the accommodation of commerce, industry, and agriculture.

The Board of Governors of the Federal Reserve System may prescribe regulations further defining within the limitations of this chapter the conditions under which discounts, advancements, and the accommodations may be extended to member banks.

Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts, or other credit accommodations, the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Board of Governors of the Federal Reserve System, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time.

Where the problems really began is when some in the banking industry implemented the deferred interest concept (this was not a government idea) which lowered the initial monthly payments up front. This concept was used to manipulate prospective borrowers into believing that as housing prices continued to grow they could then turn around and sell the house for a modest profit. This was the bait used to catch the fish and allowed speculators the opportunity to flood the market with over priced houses.

I have worked in the land development field for my entire professional career and was working in the Phoenix area during the housing boom. I seen it all unfold, every aspect of it. The home buyer became just a tool to allow speculators to game the market

-- Posted by Geezer on Fri, Oct 14, 2011, at 8:48 AM


I see your point above with the nearly direct quoting of the law. Still, why were these laws circumvented? If banking laws were broken, why are not bankers in jail? The answer is simple, the laws were allowed to be disregarded. If the disregarded laws were brought about by governmental pressure, could this be the reason for the mad scramble for bailout money? The answer is, yes.

A lot of butts had to be covered. Bankers for having made bad loans and to keep them from squealing about the governmental pressure to bend or ignore the laws. Members of congress who voted to allow the banking laws to be bended. Members of the Federal Reserve who put pressure on congress to bend the banking laws so that fed members would profit wildly. Former President who did not stop all this.

All in all, the laws of supply/demand still reign supremely.

-- Posted by Chunky Peanut Butter on Sun, Oct 16, 2011, at 10:44 PM

Chunky Peanut Butter

I agree with one aspect of your analysis - why aren't those that were involved being brought to justice?

Supply and demand are only principals used to justify a free market system. If either side of the equation manipulates the pricipals upon which it was founded, it collapses upon itself.

That is the primary reason we have regulations, to create a level playing field for all participants.

-- Posted by Geezer on Mon, Oct 17, 2011, at 6:48 AM

No, supply and demand is what drives a free market system. It is (should be) supply/demand that sets selling and buying prices. Governments role, justice, is to make sure that neither are manipulated. It is justice, that holds those who do manipulate supply and demand accountable.

So I ask you Geezer, look at any consumer product. Do you see any supply/demand manipulations? If so, why?

-- Posted by Chunky Peanut Butter on Mon, Oct 17, 2011, at 11:04 PM

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U.S. Rep. Adrian Smith
Washington Report