Neither Snow Nor Rain Nor Heat… But Maybe Competition

The USPS is in tough times and consumer behaviors are part of the mix.  Since 2006, its fortunes have turned very dark.  Even First Class Mail, while profitable, is down 25% in volume.  Internet, UPS and FedEx are taking the lead in what USPS had hoped would be new business lines.  USPS faces dwindling savings from its cost cutting programs despite a headcount reduction of 168,000 people. Since 2006, it has lost a total of $40 billion; it is $11 billion behind on its mandatory pensions and health payments; and is near insolvency.

In Washington, supporters and opponents line up predictably, but none pretend a resolution is obvious or readily afforded.  The Postal Accountability and Enhancement Act required the USPS to stay current in retiree pensions and health care funding.  That is especially prudent for any declining business.  Otherwise retirees and taxpayers will be stuck with the tab.   But this obligation led to wild claims such as a pension fund with a $75 billion surplus when in reality, a GAO audit found $6.9 billion in excess payments. Deck-chair adjustments such as skipping Saturday delivery won’t fix the problems.

Policy prescriptions for the USPS train wreck depend on whether we want it to remain a government chattel or become a private enterprise.  The USPS could become a private sector firm associated with one or more of its current competitors, provided there was some level of public lifeline extended to any of the remaining 528,000 postal workers who might not fit into the new enterprise.

If the USPS remains a government enterprise, it will be competing against two or more private enterprises that cannot rely on subsidies from union-friendly politicians.  To keep the field level, USPS will need to achieve breakeven by taking on continual workflow reengineering, management-layer flattening, and headcount “right sizing.”   Don’t expect more of the same from a rigid union and insular management to save USPS.

Alan Daley is a retired businessman who lives in Florida and who follows public policy from a consumer’s perspective.

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