published Saturday, May 4th, 2013

Postal problem: Privatization best option for USPS

Veronique de Rugby
The Shallowford Road Postal Service facility
The Shallowford Road Postal Service facility

Making a profit by delivering goods and services that consumers want to buy at a given price is the first goal of any business. If consumers aren't interested, the business goes under. But that's not the model the U.S. Postal Service follows.

The agency has been running annual deficits since 2006, resulting in a net loss of $40 billion. Between 2006 and 2012, mail volume declined almost 25 percent due to the increasing use of email and e-commerce.

Also, according to the House Committee on Oversight and Government Reform, if the Postal Service were allowed to immediately cease making catch-up payments to its health care and pension plans, it would have an unfunded liability of nearly $100 billion by 2017.

The GAO further highlights that "while USPS achieved about $15 billion in savings and reduced its workforce by about 168,000 over this period, its debt and unfunded benefit liabilities grew to $96 billion by the end of fiscal year 2012."

And guess who will be footing that bill? Though the Postal Service was created to be a self-sustaining entity, taxpayers are forced to stand behind this large and growing liability.

The USPS must be privatized. Unfortunately, that's not going to happen as long as Congress continues to cater to special interests (postal employee unions, in particular) rather than taxpayers' interests.

Even a small reform -- curtailing Saturday delivery, which is projected to save an estimated $2 billion per year and is supported by both the Obama administration and majority of Americans -- is stalling.

Opposing the reform were all the groups that live off the mail -- advertisers, postal unions and paper companies, among others -- and Congress.

Others have proposed plans for fixing the Postal Service. In his new budget, Obama calls for a $30 billion bailout from the federal government, a five-day delivery schedule and an increase in the price of stamps. This is not only a bad solution from the perspective of customers and taxpayers, but it won't be enough anyway.

The main problem is that the USPS' labor costs are huge. It is the second-largest civilian employer in the country after Wal-Mart. Employee wages and benefits comprise nearly 80 percent of total USPS expenses, which is about $56 billion spread over 570,000 workers.

As the Cato Institute's Tad DeHaven notes, "Studies that have made 'apples to apples' comparisons of postal workers to private sector workers have repeatedly found that postal workers receive a significant compensation premium."

This isn't surprising given that 85 percent of the USPS workforce is protected by collective bargaining agreements and receive more generous benefits as postal employees than regular federal civilian workers.

As the Washington Post recently noted, "employees continue to enjoy a no-layoff clause and contribute less to their health-care benefits than do other federal employees." The USPS did not make required prefunding payments of $11.1 billion for fiscal year 2011 and 2012 retiree health benefits. At the end of fiscal year 2012, USPS had $48 billion in unfunded retiree health benefit liabilities.

Under these conditions, it isn't surprising that the USPS runs deficits year after year that no business would be able to afford. What's the solution?

Partial privatization, perhaps in the form of public-private partnerships, won't solve the problem. Converting a government monopoly into a pseudo-private entity may seem to be an improvement, but it falls short of any real sustainable results. It's time to put an end to this gift to special interests and fully privatize the United States Postal Service.

Veronique de Rugy is a senior research fellow of the Mercatus Center at George Mason University and a contributor to the Washington Examiner, where this piece originally appeared.

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librul said...

Sure, slap a two dollar stamp on it and give it ten days or two weeks and if it doesn't get there, just chalk it up to the carelessness of an underpaid, overworked corporate worker bee.

What?, your blood pressure medicine is two days overdue? Give it a couple more days then call our multi-tiered overseas customer care contractor ("all our representatives are helping other customers") to put a trace on it - the surcharge is quite reasonable. If it's found, you will receive it the week following your next scheduled weekly delivery day.

Oh yeah, the dreamy world of postal privatization.....

May 4, 2013 at 5:40 p.m.
MasterChefLen said...

If the post office was a private entity, it would be bankrupt. The only thing keeping this thing alive is the monetary backing of the federal government to bailout the budget shortfalls. The postal union obligations are crippling this entity. Privatization is probably not the solution, but an entire reorganization (union and management)is. Start from scratch from the both to the top based on a private enterprise organization. The liberals seem to point the finger at everything else but the bloated, and crazy rules and financial obligations the postal union require.

May 4, 2013 at 7:51 p.m.
librul said...

What is needed is a succinct explanation of the issue - not blather from right wing privatizationists.....to wit:

"The USPS carries an extraordinary financial burden that no other government agency or company bears.

"A 2006 law, the Postal Accountability and Enhancement Act, requires the Postal Service to pre-fund the health care benefits of future retirees. It forces the agency to pre-fund a 75-year liability in just 10 years, which costs the USPS more than $5.5 billion annually.

"This mandate is the reason the Postal Service is threatening to end Saturday mail delivery service, lay off 120,000 workers, close thousands of post offices and eliminate hundreds of mail processing facilities.

"In addition, the Postal Service is required to overpay billions more into its pension accounts in the Civil Service Retirement System and the Federal Employees Retirement System.

"Congress created this problem, and Congress can fix it

"Without the mandate, the USPS would have been profitable over the past four years, and rather than having to use up its $15 billion line of credit from the U.S. Treasury to cover the pre-funding obligation, the Postal Service would have had significant borrowing authority to ride out the bad economy it now faces.

"From medical prescriptions to important financial documents, packages, catalogs and newspapers, the U.S. Postal Service is a critical part of our economy and an integral part of daily life across America. It is the center of a $1.2 trillion industry that employs 8 million people, including printers, mailers, publishers and other businesses that depend on the Postal Service..

"The Postal Service and its employees don't want a taxpayer bailout. They have not received any taxpayer funds in nearly 30 years.

"What they do want is the freedom to use their own surplus pension funds to pay down the pre-funding obligation."

http://www.progressohio.org/blog/2011/09/congress-caused-the-postal-services-financial-problems-only-congress-can-fix-them.html

May 5, 2013 at 1:33 a.m.
fairmon said...

Unfunded future liabilities mean at some point someone will either not receive what is promised or someone will have to pay for it. That is the problem many states and cities are beginning to have as more and more people retire. delivery three days per week would not cause anyone unmanageable difficulty. Adjusting compensation to no more than the upper quadrant of the private sector would be a major improvement plus addressing some of the work rules that cause significant cost issues would be a bold but good step. It is not likely congress will face the issue or make the hard decisions until there is a bankruptcy crisis that shifts the burden to the tax payers.

May 5, 2013 at 3:03 a.m.
Hunter_Bluff said...

Posting from the Washington Examiner is a lazy approach to fill what is otherwise a decent newspaper - the Times Free Press.

May 5, 2013 at 9:02 a.m.
grannybunny said...

I hate that this stupid article keeps getting reprinted. If government's providing a service is a "gift to special interests" (sic), what would privatization be: a gift to FedEx, UPS, Pitney Bowes and all the other for-profit entities that are seeking to take over the profit-making deliveries currently being done by the Postal Service (USPS), while leaving the vast majority of Americans -- at the 122+ million addresses not served by private delivery companies -- totally without mail service, much less at an affordable price. Privatization is a non-starter. There is no private entity willing -- or able -- to replace USPS. The Postal Service delivers 160+ billion items per year to 152+ million -- and the number keeps growing -- addresses. FedEx and UPS -- combined -- delivery 7 billion items/year to 30 million addresses. Give us a break, Veronique de Rugby, and quit spouting this ignorant nonsense!

May 7, 2013 at 9:33 a.m.
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