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 (firstname.lastname@example.org) is a retired physician and former state senator.