The United States Postal Service that we all take for granted could be at risk of bankruptcy. With most written communication switching from letters to the Internet and more people going with UPS and Fedex the Postal Service is losing money. While the other shipping businesses are free to make any changes they deem necessary to keep their business going, the Postal Service is restricted in its options. Unlike many of the other government agencies the Postal Service doesn’t receive any tax money to keep its operations afloat. They also have to set aside health benefits for their employees well in advance of retirement and they are restricted in their ability to close down offices that are performing poorly. All of these restrictions make it even more difficult to make a profit in this horrible economy.
With all of the financial difficulties that the Postal Service is facing they have no choice but to hike up their prices yet again. On top of the standard stamp price increase, they are also raising the price of their priority mail shipping and their overnight. Priority mail prices will be going up by around 3 percent and overnight shipping will be switched to a flat rate model of 40 dollars a package. The overnight shipping is up from a sliding plan that starts at 13 dollars a package and increases depending on the weight of the package. Even with the price hike the Postal Service will only gain a little headway and could face an eventual collapse without help from the government.
The debt reduction committee that was established specifically to dissolve Washington’s congressional gridlock, is on the verge of failing altogether. The committees failure makes nearly $1.2 trillion in spending cuts a likely possibility.
According to a Democratic aide working with the committee it is highly unlikely that the committee will be able to reach an agreement on the deficit savings. The aide is not permitted to discuss the case and wished to remain anonymous. In the email from the aide, it is stated that the likelihood that the committee talks can be salvaged is very poor.
The Congressional Budget Office is set to receive information allowing them to score a proposal in advance of the November 23 due date that the supercommittee is supposed to be completing a deal. Mitch Mcconnell, Republic Senate Leader, declared that “failure is not an option” for the created supercommittee panel that was thrown together in August after a heavy session of conflicted voting by Congress. The panel was thrown together after debating about raising the nation’s debt limit and the issue received a dismal 9 to 14 percent approval by congress.
Both Republicans and Democrats got on the radio on November 21 to point the finger at each other for not reaching a deal in time. The Democrats claimed that Republicans would not budge on their anti-tax agreement and Republics claimed that Democrats would not go along with their revenue raising offer that will also cut spending.
Pointing the Finger
Jon Kyl, U.S. Senator of Arizona, said that the Democrats turned down a deal that would create $250 billion in revenue by getting rid of a few tax breaks. The deal would generate all of that money while lowering the income tax rates at the same time. Kyle said that the Democrats are a group of people unwilling to cut spending unless they are raising income taxes at the same time.
John Kerry a well known Massachusetts Democrat says that Kyl’s statement just isn’t true. He exclaimed that the Democrats were willing to agree to a deal that cut $917 billion in spending without any additional revenue. The agreement went along with the August plan to raise the debt limit. The most recent Republican plan results in the highest tax cuts since the Depression.
On November 21 European stocks took another drop for the third consecutive day. The U.S. futures backed off in fear of a Congressional impasse. Both the Stoxx Europe 600 Index and the MSCI Asia Pacific Index lost 2.1 percent and 1.3 percent respectively. As the U.S. futures backed off the Treasuries advanced.
The standard and Poor’s 500 futures fell by 1.4 percent and the benchmark gauge for the American equities declined by over 3.8 percent in the past week. The equities decline was the largest loss in the past two months and French, Italian and Spanish bond yields increased over the same period of time. Fitch ratings believes that the poor economic condition of Europe creates a risk for American banks as well.
A Fade of Optimism.
The supercommittee members barely retain any hope that their efforts will result in an actual deal, but nobody wants to give up hope states Jeb Hensarling on Fox Sunday News. The reality is slowly beginning to overtake the committee’s hope.
If the committee fails to come up with an agreement soon there is 1.2 trillion dollars in spending cuts set to take place on both defense and domestic programs. The lack of a deal will provide President Barack Obama with a method for offering insurance benefits and a payroll tax cut for unemployed Americans, both of which expire at the end of 2011.
This is something that is shocking. As the bankruptcies are going down, and not up, the District is still number 3 on the top of the list of all bankruptcies. Florida’s bankruptcy rate was down over 17% from the last year. This means that it is much slower than it has been, but their spot on the records is not moving. They are at a stand still.
Still, within this year alone, the Middle District of Florida had close to 57,000 bankruptcies. This is much lower than the Central California District that came in at closer to 140,000 filings. The entire U.S. Filings went down a little over 8% this year, but the total of bankruptcies were still up over 1 million. There are a few factors to why the percentage has dropped over the last year, and they include, but are not limited to: more jobs being widely available, stabilization in the economy, federal programs that are there to assist the homeowners having trouble, and banks taking more care in fixing problems before moving forward with the process.
This does not mean the recession is over, or that no one will file for bankruptcy, but it does mean that the bankruptcies filed because of recession might be behind us. Those that have debt to file for bankruptcy with have already done so, and those that are unemployed and not able to pay off the debt are waiting until they can afford to do so. A lot of the people that are filing for bankruptcy are small business owners with failed businesses. Of course, it is not getting worse, but it is also not getting any better.
The same debt issues have been circulating in Alabama, and they still have not been resolved with the creditors. There is a lot of negotiating, but they are not paying their balance down. Since a lot of the government’s money is put into roads, run the courts, perform public services, and other things that help the state function, there is nothing that can be liquidated or removed from the process in order to make the money to pay the creditors that are owed. They are continuing to pay everyone that is owed, and to continue business as usual while Chapter 9 sorts out a payment plan for the state. Going through municipal bankruptcy is painful and very expensive so they wish to stay away from it as much as they can and try to get the creditors their money.
California filed for bankruptcy in 2008, and emerged from the long process only earlier this very month. The total that was spent on lawyer fees, not counting the amount that was needed to pay creditors back summed up to around $10 million in the end. The interest of the bonds that the state owns is what is holding them down when it comes to paying off their debt, and being able to get out of the debt that they have. This is because the percentage of the interest keeps increasing over time, and this is a lot for the state to keep up with. They are hoping not to have a municipal market meltdown because of the underfunded pensions, falling tax revenue, and excessive debt.
A lot of the debt came from fraud within the system that has since been taken care of, but the debt remains. Several of the county commissioners ended up in prison because of this wrong doing, but there was not much that could be done to undo what they already did. They are trying to continue public services, but the levels that are received are drastically cut in half. They are forced to cut anywhere from $40 to $100 million in their budget for these types of things throughout the state that they once did not have a problem with. Just in the past year the state laid of several hundred employees, and cut the County Sheriff’s office and limited them on what they could do, on top of other cuts and stipulations.