Free Markets, Free People

unfunded obligations

USPS — a case study in government incompetence

The US Post Office is in deep trouble.  Obviously some of the problems can be laid at the feet of the internet which has all but killed routine personal mail in favor of the faster and cheap email.  Competition in the area of express delivery and package delivery have taken a ton of business away as well.  Private companies like FedEx and UPS can delivery those items more cheaply and reliably than the USPS ever could.

But the biggest problem the USPS faces is its lavish entitlements driven by union demands.   And once again, we the tax payers are being warned that unless we toss another 5.5 billion dollars the USPS’s way, its going to go broke.  Here’s why:

At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.

So you have a government agency with declining revenue number …

Mail volume has plummeted with the rise of e-mail, electronic bill-paying and a Web that makes everything from fashion catalogs to news instantly available. The system will handle an estimated 167 billion pieces of mail this fiscal year, down 22 percent from five years ago.

It’s difficult to imagine that trend reversing, and pessimistic projections suggest that volume could plunge to 118 billion pieces by 2020. The law also prevents the post office from raising postage fees faster than inflation.

And overgenerous and rising pension obligations.  Sound familiar?  The $5.5 billion payment due at the end of September is a payment required to help restructure that pension program.  But, as expected, there’s resistance from the union as to the means taken to do so – like cutting the work force:

Cutting the work force is more difficult. The agency’s labor contracts have long guaranteed no layoffs to the vast majority of its workers, and management agreed to a new no layoff-clause in a major union contract last May.

But now, faced with what postal officials call “the equivalent of Chapter 11 bankruptcy,” the agency is asking Congress to enact legislation that would overturn the job protections and let it lay off 120,000 workers in addition to trimming 100,000 jobs through attrition.

Got that folks … the brainacs at the USPS, fully aware of the dire financial straits in which the agency found itself, agreed to a “no lay-off clause” in their new union contract last May.  Incredible.

And now that it makes perfect sense to consider layoffs, as well as other measures (no Saturday delivery, closing little used post offices, etc.), that option is one that would literally take an act of Congress:

The post office’s powerful unions are angry and alarmed about the planned layoffs. “We’re going to fight this and we’re going to fight it hard,” said Cliff Guffey, president of the American Postal Workers Union, which represents 207,000 mail sorters and post office clerks. “It’s illegal for them to abrogate our contract.”

So reach deep fellow taxpayer.  Time to bail out yet another failing agency which apparently never saw this revolution in communication coming, was never able to compete in the market without monopoly powers granted by government and has overspent and overpromised even as it watched it’s market share continually shrink.

Maybe it is time to, horror of horrors, consider privatizing this service?  Actually, that’s something that should have been done years ago.  But watch … we’ll still have this government run anachronism around our fiscal necks when your grandchildren are adults.


Twitter: @McQandO