Today the U.S. Postal Service (USPS) will default on a $5.5 billion payment to the federal government to cover retiree health benefits. In September they will default on another payment of $5.65 billion. The federal government would like you to believe that the cause of the postal service’s decline is due to the internet. I wish that were the case.
The USPS, once a department of the federal government and now a quasi-governmental agency, can only blame its “benefactors” in Washington for its demise. Sure, the internet and cultural changes have impacted demand for the the USPS’s bread and butter first class mail service. Myriad other “businesses” have faced similar challenges over the last 25 years. Some have risen to the challenge and thrived. Others have gone the way of the buggy whip.
To survive in the digital age businesses must be lean, productive, and quick to react to changes in the economic environment. Because of the postal service’s unique relationship with the federal government, they have been unwilling, then unable, to adopt a business model which will allow them to survive the 21st century without massive subsidy. You don’t even need to travel off of the Delmarva Peninsula to see the truth of this statement.
The USPS wanted to close several processing facilities on Delmarva. US Senators from both Delaware and Maryland fought the idea. Who can blame them? They don’t want to see high paying jobs cut in their states. Until the USPS capitulated to the demands of these elected officials, legislation affecting the federal subsidy was held up. The facilities stay open and, VOILA!, the subsidy passes.
Mail a letter from New Church, VA to Pocomoke (you can almost throw a rock) and the letter must travel from New Church to Norfolk to Easton to Pocomoke. Your letter would travel almost 400 miles to reach its destination – 8 miles from where you mailed it. Of course, I understand that there are logistical concerns and that this MAY be an extreme example. However, this is typical of mail processing on Delmarva.
Antiquated rules require that mail from Delaware be processed in a Delaware facility. Ditto for Maryland and Virginia. When the USPS wanted to close the Easton facility, they were going to route all mail from the Maryland shore through Baltimore. Wouldn’t it be easier, and cheaper, to route it through Delaware? By doing so, a core argument against shuttering Easton – routing mail through Baltimore would be disastrous to the Shore’s economy if the Bay Bridge were shut down for any length of time – would have gone by the wayside.
In addition to a multitude of politically motivated inefficiencies, the USPS also suffers from other ills affecting the federal government. Their problem is that they can neither tax nor borrow their way out of their problems. The postal service is saddled with union contracts that force them to pay wages far in excess of the market. Add in benefits, like above market health care and retirement costs, and its little wonder that they can’t make ends meet. Throw in union mandated work rules and you have the trifecta of inefficiency. Ever wonder why we import most of our steel today or why GM was bailed out?
What about raising the cost of postage? Of course they could do that. They could also see a further decline in revenue. While Barack Obama and his Democrat cabal may be forcing you buy their brand of health insurance, they haven’t figured out how to force you to buy stamps.
No one really wants to see someone lose their job to downsizing. No one really wants to see someone’s wages cut. Yet, how can the USPS be expected to survive in a market economy when they are run like the government? They can’t. So … expect to pony up more subsidies.