September 6, 2010
The Perpetual Post Office
The Postal Service must be immortal; it's a government program, though one in ill-fitting sheep's clothing like Fannie Mae's before its camouflage was washed off by the bailout. The Service is also, like Fannie Mae, dreadfully managed; any private-sector CEO with that loss history would be unemployable anywhere but Congress. But the Service lurches on, relying on its monopoly to raise postage whenever the union isn't happy with its wages.
Like General Motors, there are reasons for its climbing costs. Here's a little list:
- Labor is the largest cost item; the heavily unionized force is a Democrat benefactor.
- Huge, monopolistic bureaucracies by nature don't thrive on efficiency.
- Electronic communications are displacing "snail mail" postage income.
- Advertising is migrating from print to electronic distribution.
Added together, these factors result in a resistant, cumbersome bureaucracy serving a declining market. That brings up another problem: one of proportions. First class postage revenues have subsidized advertising, publishing, freight, and other postal patrons, but the first class business is shrinking faster than most of the rest; carrying the other classes is becoming too burdensome. The other classes now have to earn more of their real costs, and that's affecting their volume, too.
Overall, from 2001 through 2009, mail piece volume declined about 15%. The Service reduced its workforce (about 80% of its costs) almost 20%.while somehow managing to hike its operating expenses about 9%. Compensation and benefits per employee rose from $66,000 to $85,000, which probably explains both the cost increase and why the union swallowed the decrease in the workforce. In traditional government fashion, the Service has managed to do less work at greater expense by exploiting its monopoly to raise its income. That means postal service without competition costs more than it should -- but it's actually worse than that, since Congress appropriates from the taxpayers, who already overpay for postage, whatever is needed to make up for losses. This makes the Service's privatized characterization a bit humorous.
One outstanding feature of postal expenses was reported in a September, 2009 Washington Post story: "Paid to Do Nothing." The story reported the Service paying employees to sit idle in order to meet union contract obligations for an average 45,000 hours weekly, adding to about $50 million in annual payroll. Pre-bankruptcy General Motors engaged in similar practices, one of the things which led it to bankruptcy.
With the present economic stress, the Postal Service boondoggle is an inexcusable waste of resources stripped from taxpayers who need them, an act both immoral and economically counterproductive. The worst of it is that the taxpayer impoverishment is perpetual; there seems no budget capable of confining Postal Service spending and no Congress willing to shut it off.
So what do you do with an unsightly weed crowding out your roses and using up their fertilizer? Congress in this case appropriates more fertilizer at the expense of the roses. But should it? The government supplied mail service when no one else could; it helped open the wilderness and develop the country. Now, communication, delivery, and the Service's sidelines such as money orders are available from private enterprises that do a better job and, having competition, do it at a lower cost. The Postal Service is both a boondoggle and an anachronism; it lived its useful life but now staggers on with increasingly costly life support, a government zombie. The 2009 operating cost per delivered mail piece was up 22% from 2001 even with 20% fewer people.
The Service transports and delivers two things: information and goods. The internet does much better with information, and Fed Ex, UPS, and others compete to move goods. The cash cow that has supported the service, first class mail, is disappearing into the internet. The only remaining service at some point will be subsidized-price delivery of certain things to a few inconvenient places but the revenue from high-volume first class mail will not be available to pay for it.
It's time for government to leave the business -- it's very much a business -- of private enterprise. To avoid unnecessary disruption, that shift will require time and planning. Politicians will try to impose government control onto the result via licenses, new regulation, or sweetheart dealing; that will guarantee an outcome worse than before (California's phony 1990s deregulation of electric power comes to mind). Then the politicians will keep the taxes they've been spending on the Service instead of letting them revert to the taxpayers. But as the Republicans discovered and the Democrats are rediscovering, politicians are replaceable.
Though the Postal Service has essentially died, the aged, obsolete, limping thing lurches on, bleeding money. It's time for a decent funeral, a six-foot hole, and a nice monument. Perhaps a museum -- with a little display explaining standby time.