The United States Postal Service has been an American institution since the beginning of our nation. But time and change recently have not been kind. Today the USPS has made itself into an expensive anachronism. It’s time to let it go.

The Postal Service has been in a steep financial decline for so long that it’s no longer news. From 2007 to 2010, mail volume fell 20 percent and USPS racked up $20 billion in operating losses. In fiscal year 2011, the losses kept rolling in. Revenues were down 2.4 percent in the first three quarters compared to last year, with a $3.1 billion loss in the third quarter alone.

Now USPS has nearly exhausted a $15 billion line of credit from the feds with no turnaround in sight. Worse, this month they have a $5.5 billion pension payment due that they are unable to fund.

Admittedly, some of the Post Office’s problems aren’t of their own making. The advent of email was obviously damaging to USPS revenues. The anthrax scare and bombs-by-mail haven’t helped. Muscular competitors in package delivery have taken over some lucrative lines of business, forcing USPS to subsidize their packages with even higher rates on first-class mail, where they hold a legal monopoly.

But USPS has wounded itself, too, especially with its truly awful record of negotiating labor contracts. As a quasi-governmental agency, it has no profit motive, no shareholders and no incentive to hold the line. The law provides for arbitration of contract disputes between USPS and its four unions, yet USPS has signed fat contracts for the past 10 years without ever trying arbitration.

As a result, this company in decline has union contracts that all have “no layoffs or reduction in force” clauses that prevent payrolls from falling with revenues. Early this year, a nearly bankrupt USPS reached agreement with the American Postal Workers Union on a contract that would “safeguard jobs, protect retirement and health care benefits” and provide a 3.5 percent raise, according to a jubilant union president.

Postal workers are paid an average of $79,000 in wages and benefits, compared with $59,000 overall in the private sector. (What, you didn’t know that postal workers have such unique skills that they command a 33 percent premium over other workers?) Labor costs represent 80 percent of total USPS expenditures, compared with 53 percent at United Parcel Service and 32 percent at FedEx. Its crippling labor costs render it non-competitive except for those services where it holds a monopoly.

What to do? The service has a bright idea: more junk — er, “standard” — mail. It turns out that those fliers and catalogues clogging up your mailbox and then your trash are quite profitable to deliver. USPS also recommends service reductions, like closing smaller post offices and reducing mail delivery days.

But none of these changes would be sufficient to overcome the mistakes made by USPS in compensating their employees so far above their ability to generate revenue. Taxpayers could intervene, but the best bet is just to allow the consequences of poor management to play out. We should have learned from multiple bank bailouts, from failed green energy subsidies like Solyndra and all the other government efforts to pay for the bad decisions of others. It makes no sense to socialize financial losses and privatize gains.

Unions too have to understand that the world has changed. Private-sector unions long ago realized it’s a bad idea to kill your company. But public-sector unions believed they had no such concerns. Government and its agencies were bottomless pits of money and there was no limit to what could be extracted from them.

But now the money has run out. Governments everywhere and agencies like USPS have reached their limit and clearly don’t have the ability to pay for all the lavish benefits they promised. Bankruptcy, previously unthinkable, now looms as the possible only way to correct the foolish contracting excesses of the past.

That’s not a pleasant prospect, of course. But there is no reason for taxpayers to subsidize services customers are unwilling to pay for and that private firms could provide less expensively.

• East Valley resident Tom Patterson (pattersontomc@cox.net) is a retired physician and former state senator.

(3) comments

faceindawind

Never tried arbitration in the last 10 years? What a lie. The last rural contract in 2006 was settled with arbitration. We are headed there again this December, along with the City Carriers. Get your facts straight Mr. Patterson.

While UPS and FED EX have lower labor costs as companies, they also have a smaller work force delivering their products. On a pay scale based on individual earnings they make as much as we do per hour. They also have profit sharing for their employees. The extra monies these companies make go into shareholders pockets and their executives. While any profits the USPS generates goes back to Congress and the American people as a whole not a select few share holders.

faceindawind

Also we are NOT tax payer supported. We do not need this proposal of a 10 billion government bail out. What we need is a restructure of our mandated pre payment of retirees benifits 75 years into the future program. A program mandated by Congress in 2006. Lets get this done first and see where the organization goes.

We as rural carriers have been taking paycuts for several years due to loss of volume and automation.A lot of us now work 6 days a week to make what we used to in 5 days. Funny how our ego manical Postmaster General stated to a group of NYC Postal employess that he would never take a pay cut. Why isn't Congress looking into the overstaffing of upper and middle management?

RandyF

Holy cow Mr Patterson, where to start with this. At least someone else has corrected you on some things. I will clear up something that your Anti-Union mindset thinks is true. I should say, what you said is true, but very misleading. Yes, APWU represented workers will receive a 3 1/2% raise out of this contract. However, you don't explain that this contract is back-loaded.

The APWU has taken a freeze on wages until November 2013. APWU has also completely waived any payment of a COLA for 2011, and deferred the payment of any accrued COLA for 2012 until 2013. To allow for more flexibility of the workforce, a new category of worker was established as well as allowing for the creation of Non Traditional positions. These would be jobs that may not have 40 hours of work each work or a full 8 hours each day.

Yes, the No-Layoff clause is still in place but that only covers workers that were on the roles in November 2010. Those hired after that, are subject to layoff.

Labor costs for the USPS has always been around 80%. The USPS has the Monopoly on First Class Mail because it delivers to every address across the country every day. It takes people to do that. One Carrier would have 400-500 delivery points on their route. One UPS or FedEx driver may have only100-150 stops to make in a day and might be over an area that is covered by 10 Letter Carriers.

USPS Package Services Class of mail does not subsidize any other class of mail. Package Services is part of the Shipping Services side of things and is not covered by the Monopoly.

The $5.5 Billion payment that was deferred for 6 weeks is not to fund Pensions. I have no idea where you would have gotten that idea. It is a payment that Congress mandated in 2006 to establish a trust fund for FUTURE Retiree HEALTH Benefits. The fund would cover expenses for the next 75 years. This trust had to be fully funded in only 10 years. This fund is to cover people who don't even work for USPS and some that aren't even born yet. How reasonable is that?

If not for this payment, the USPS would actually shown a profit of around $600 Million. So. tell me again how it is UPS and FedEx competition and Union Contracts that are driving the USPS to insolvency?

You really should really into anything that you will present as a fact instead of piecing together bits and pieces of other stories.

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