Tuesday, January 29, 2013

Private Sector MAKERS and Public Sector TAKERS ... Barnes & Noble vs. the Post Office

Private sector players are the makers. The government knows best gang are the takers.

That's my simple minded view of the matter. The government takes from the makers purportedly acting on behalf of We the People, but I wonder how much We the People think about why the government is taking what the they're taking, even if what it takes doesn't always come directly from those in the "middle class." In other words, shouldn't we focus on whether it's fair to take it in the first place, regardless of which maker it's to be taken from? I think so.

{NOTE: The story of how much is taken from the minority of high earners by the majority of "middle class" members through their elected government officals is a story for another day. It is the story of the dangerous power of the majority in a democracy versus the rights of the individual in that society. Repeatedly during our nation's history, commentators such as Tocqueville have warned us to beware of the tyranny of the majority. And since the majority of We the People elect those in government who then decide what, how much and from which makers to take the money that they spend and redistribute in the name of fairness and the people, that "middle class" constitutes the majority and in effect decides how much to take from the makers. Sometime soon we'll discuss why progressive tax systems and majority rule are a dangerous mix in a self governing society emphasizing individual rights. That is, we'll discuss fariness in a democracy where the individual in the minority is denied the same rights as the majority in the name of fairness. But not now.}

The government aristocrats try to obscure the simple fact that they are the takers, but the truth is the truth. The government takes from the makers and then spends, 'invests,' or otherwise redistributes what it takes from the makers. But only after first subtracting the government's management, handling fee, or commission for doing so. Aren't we lucky to have to such an efficient and effective  government that doesn't waste our money?

But now let's look at two examples of making and taking at work and how the two different participants play their respective roles of acting responsibly with MOM in mind or as OPMers, as the case may be. The story of Barnes & Noble in contrast to the post office is instructive. Can you guess which is the MOM example and which is the OPMer? I thought so.

We'll start with the makers, because if nothing's made, there's nothing for the takers to take.


Barnes & Noble has been negatively impacted by the growth of digitization and especially the sale and delivery of e-books. That's hardly surprising.The company is responding by pinpointing its problem stores and making serious plans to improve productivity and reduce its cost structure during the next several years. Barnes & Noble remains profitable and plans to stay that way. For them, the future is now.

B&N Aims To Whittle Its Stores For Years tells the story:

"Barnes & Noble expects to close as many as a third of its retail stores over the next decade, the bookseller's top store executive said, offering the most detailed picture yet of the company's plans for the outlets.

"In 10 years we'll have 450 to 500 stores," said Mitchell Klipper, chief executive of Barnes & Noble's retail group, in an interview last week. The company operated 689 retail stores as of Jan. 23, along with a separate chain of 674 college stores.

Mr. Klipper said his forecast assumes that the company will close about 20 stores a year over the period.

The chain shut an average of about 15 stores a year in the past decade, but until 2009 it also was opening 30 or more a year. Its store openings have largely dried up as consumers' shift toward digital books has upended the market and developers have stopped opening new malls; this fiscal year it has opened only two stores.

The company's consumer bookstores peaked at 726 in 2008, excluding the B. Dalton chain, which is now defunct.


Even with 450 to 500 stores, "it's a good business model," says Mr. Klipper. "You have to adjust your overhead, and get smart with smart systems. Is it what it used to be when you were opening 80 stores a year and dropping stores everywhere? Probably not. It's different. But every business evolves."

Mr. Klipper's comments come amid growing questions about Barnes & Noble's future. This month the company reported an unexpectedly weak holiday selling season, with store revenue declining nearly 11% from a year earlier. Book sales at stores open at least a year, a key barometer in the industry, fell 3.1%.

After years of losing market share for print books to discounting by, Barnes & Noble is grappling with the print market's shrinkage, thanks to the growing popularity of cheap e-books, also championed by Amazon. Unit sales of print books dropped 9% in the U.S. last year, according to market researcher Nielsen BookScan, and they are off 22% from 2007, when digital books started gaining traction. . . .

To be sure, the stores remain comfortably profitable, generating $317 million in earnings before interest taxes depreciation and amortization in fiscal 2012. That's more than enough to offset continuing losses at the Nook unit. . . .

The next two years will go a long way in defining the bookseller's future, by clarifying how fast the print market is shrinking. Bertelsmann SE & Co.'s Random House, the world's largest publisher of consumer books, says e-books now make up about 22% of its global sales, up from almost nothing five years ago. The head of a major publishing rival says he expects e-books will be as much as 50% of his total book sales in the U.S. by the end of 2014. . . .

Declines in print sales could affect the pace of store closures. Barnes & Noble has 442 leases up for renewal by April 30, 2016, representing substantially more than half of its stores. Mr. Klipper said he expects many will be renewed: "Why close them if they are making money?""



On the other hand, there's the perennial loser of billions of dollars in taxpayer money annually, the U.S. postal service. Its monopolistic customer unfriendly response to losing all that money is to raise prices. It in effect has decided that the law of supply and demand doesn't apply to taxpayer funded government agencies. But by so doing, it's extremely likely to lose even more money for its taxpayer sponsors.

That in turn will require the makers in the private sector to provide more money to the government takers so they can continue their wasteful union friendly and taxpayer unfriendly ways.

And the makers will pay even more to support the loss producing takers. All in the name of good government and fairness, of course. When will the costly silliness stop? That's a good question that We the People will have to answer someday soon. Either that or raise taxes even more on the takers.

First-Class Postage Rate Marches Higher tells the story of the taxpayer supported post office:

"Another rise in stamp prices comes as first-class mail volume is plummeting, underscoring the dilemma the near-bankrupt U.S. Postal Service faces.

The price of sending a first-class letter in the U.S. rose a penny Sunday to 46 cents as the Postal Service continues to struggle with eroding mail volume due to expanding reliance on email and the Internet to communicate and pay bills.

The increase comes just a year after the cash-strapped Postal Service pushed the stamp price to 45 cents, and follows the November announcement that the agency reported a record $15.9 billion annual loss for the fiscal year that ended Sept. 30. At that time, the Postal Service said it would run out of cash by October 2013 without congressional intervention.

There are several proposals before Congress to help keep the Postal Service financially viable, but no action has yet been taken. . . .

Prices will increase by an average of 2.57% across each class of mail, according to the Postal Service. For a first-class postcard mailed in the U.S., the price is rising a penny to 33 cents. Fees on other services, such as post-office box rentals, also went up.

In the past decade, the volume of first-class mail has plummeted to about 73.5 billion pieces of mail in 2011 from some 102 billion in 2002. The drop-off in the volume of first-class stamped mail has been even sharper, to about 25.8 billion pieces in 2011 from roughly 51.9 billion in 2002. . . .

The Postal Service has defaulted twice on retiree-health benefit obligations and notched multi-billion-dollar losses in five consecutive years. Options that Congress is considering to find a path to financial stability for the Postal Service include allowing it to sell ads, ship beer and wine and, possibly, end Saturday mail delivery."

Summing Up

So there we have it. Then makers in the private sector stay viable or cease to exist. If they stay viable, they pay taxes and keep the government entities operating.

Meanwhile the post office raises postage fees and drives even more customers away. Apparently the postal authorities have found a way to repeal the law of supply and demand, because an inrease in prices in the face of lower customer demand doesn't make sense. Unless you're a taxpayer supported government monopoly that can lose billions of dollars each year and stay in business by driving away even more customers, that is.Then the makers will just have to suck it up in the name of fairness and pay more so the aristocrats in government can vote to keep you afloat.

Lots of the taxes we makers pay are used by the takers in government for purposes of redistributing the money taken as they see fit. And if we happen to be among the makers who earn the most, we also get the privilege of being called greedy and not paying our fair share by the government takers. Then they raise our taxes further.

And golfer Phil Mickelson thinks he shouldn't be speaking up about the increased taxes he's being forced to pay?

I guess the rest of us will have to speak up on his behalf. And on behalf of all of We the People as well.

Thanks. Bob.

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