Postal Service on the brink
Last time I wrote about the USPS, several angry emailers took me to task for accusing the gigantic quaisi-government dinosaur of being inefficient.
Well, perhaps those correspondents have a different dictionary than I do but the USPS has literally thousands of employees who sit around and do nothing - and are paid for it. Sure, it's a paltry sum - $4.3 million (it was $31 million in 2009). But if you want to talk about inefficiency, that would be Exhibit A.
This is just one of the union work rules that is driving the USPS over the edge into insolvency, forcing the taxpayer to bail them out. Of course, its not all the union's fault. American's habits of communicating have radically changed over the last two decades with email, texting, cell phones, and IM's.
But in the case of the USPS, you fix what you can control; and that means big changes are on the way for how the post office services us.
The United States Postal Service has long lived on the financial edge, but it has never been as close to the precipice as it is today: the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances.
"Our situation is extremely serious," the postmaster general, Patrick R. Donahoe, said in an interview. "If Congress doesn't act, we will default."
In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency's deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers - nearly one-fifth of the agency's work force - despite a no-layoffs clause in the unions' contracts.
The post office's problems stem from one hard reality: it is being squeezed on both revenue and costs.
Labor costs represent 80% of expenses, a gobsmackingly high percentage in this day and age. The unions were in the drivers seat when the USPS had a monopoly. But package delivery became big business in the 70's and then the internet age hit in the 90's to seal its fate. Now the USPS is stuck with labor costs reflective of the 1980's rather than the real market in the new century.
Could a consortium of package delivery companies like UPS, Fed Ex, etc. do a better job of delivering wedding invitations, grammas letter to her grandkid, or even bulk deliveries for direct mail clients?
Would they even want the job?
The Feds wouldn't sign off on an arrangement like that unless the union contract went with it. That means that a company or group of companies that was tempted to take over for the USPS would have the exact same problems with labor costs as the post office does now.
Look for a gigantic tax payer bailout with little change to the union contract. Senate Dems would filibuster any tampering with the contract so it will almost certainly survive with a few cosmetic changes.
And 5 years down the road - maybe sooner - we'll be asked to bail them out again.