Don't bail out the Post Office

Disappointingly, but not surprisingly, some members of Congress have attached another taxpayer bailout, this time $25 billion, to a politically influential entity, whose employees happened to be "represented" by influential unions, to the House-passed HEROES Act.  The entity in question has, according to a General Accounting Office (GAO) study, accumulated almost $70 billion in losses over the past 13 years.  The GAO has also calculated that this institution's unfunded liabilities add up to an additional $143 billion in debt.  This business also missed $48 billion in required payments for retiree health and pension benefits.  It also already received $10 billion in the CARES Act.

The institution in question is none other than the United States Postal Service (USPS).  USPS has a horrible track record of fiscal mismanagement despite (or maybe because of) having a government-granted monopoly on first-class mail delivery.  USPS's problems pre-existed the coronavirus and will continue after the coronavirus shutdown ends, so there is no reason a postal bailout should be attached to a coronavirus spending bill.

I am a libertarian who is against bailing out any company or government program with taxpayer dollars.  But even for those OK with bailouts and the economy improving, there is absolutely no good argument to bail out the U.S. Postal Service — again.

Instead of showering money on USPS, Congress should repeal the monopoly on first-class mail delivery.  I support privatizing the USPS, but short of that, reforms are needed.  The management needs to be free to make decisions based on the most efficient way to serve customers instead of how to please politicians, bureaucrats, and powerful employee unions.

While privatization is not likely to be enacted this year, Congress can start to reform the post office by adopting some the proposals of the Trump administration's White House Task Force.

One of the task force's ideas was to change the pricing structure of services because of the "rise of digital alternatives and the corresponding decline in mail volumes."  The current price structure does not resemble a valid business model, because prices have no relation to profitability.  Also, the task force recommended changes in cost allocation, because the structure does not "capture the cost implications that the rapid decline in mail volume and the rapid rise of package volume have had on the USPS's cost structure."  The USPS has hidden the cost of packages to claim that it makes money when in truth it loses massive amounts of cash on both packages and a dwindling mail delivery demand.

Another big cash loser is the high cost of labor.  In 2018, "labor costs accounted for 76 percent of the USPS's overall operating costs."  That is because as a government-protected entity, postal management has no incentive to resist union bosses' demands — even if caving in to these demands will hurt its employees long-term by driving the Post Office into bankruptcy and/or forcing management to underfund employee pensions.

Crony capitalists are looking to profit from a USPS bailout.  Cronies are trying to protect their special deals with their local post office at taxpayer expense.  The New York Times reported on May 6, 2020 that a "coalition, which includes Amazon, plans to pour $2 million into ads opposing President Trump's call for higher package delivery rates and pressing for Congress to help the service."  Amazon and other online retailers love the USPS because taxpayers end up subsidizing underpriced delivery pricing that allows Amazon and other online sellers to get packages delivered at a low cost.  They are pouring money into a lobbying campaign to bail out the USPS because that money will be used to keep the rates low for them to continue to take advantage of the taxpayer-funded USPS. 

Unfortunately, too many members of Congress are also incapable of reforming the Post Office.  Instead, their "solution" is to simply throw taxpayer money at the USPS.  Hopefully, fiscal conservatives and free-market advocates will defeat the attempt to bail out the Post Office and instead get Congress to enact real reforms to put the Post Office on the path to competing in a free market.  This is better for taxpayers, consumers, and even the long-term interests of postal employees.

Norm Singleton is president of Campaign for Liberty.

Disappointingly, but not surprisingly, some members of Congress have attached another taxpayer bailout, this time $25 billion, to a politically influential entity, whose employees happened to be "represented" by influential unions, to the House-passed HEROES Act.  The entity in question has, according to a General Accounting Office (GAO) study, accumulated almost $70 billion in losses over the past 13 years.  The GAO has also calculated that this institution's unfunded liabilities add up to an additional $143 billion in debt.  This business also missed $48 billion in required payments for retiree health and pension benefits.  It also already received $10 billion in the CARES Act.

The institution in question is none other than the United States Postal Service (USPS).  USPS has a horrible track record of fiscal mismanagement despite (or maybe because of) having a government-granted monopoly on first-class mail delivery.  USPS's problems pre-existed the coronavirus and will continue after the coronavirus shutdown ends, so there is no reason a postal bailout should be attached to a coronavirus spending bill.

I am a libertarian who is against bailing out any company or government program with taxpayer dollars.  But even for those OK with bailouts and the economy improving, there is absolutely no good argument to bail out the U.S. Postal Service — again.

Instead of showering money on USPS, Congress should repeal the monopoly on first-class mail delivery.  I support privatizing the USPS, but short of that, reforms are needed.  The management needs to be free to make decisions based on the most efficient way to serve customers instead of how to please politicians, bureaucrats, and powerful employee unions.

While privatization is not likely to be enacted this year, Congress can start to reform the post office by adopting some the proposals of the Trump administration's White House Task Force.

One of the task force's ideas was to change the pricing structure of services because of the "rise of digital alternatives and the corresponding decline in mail volumes."  The current price structure does not resemble a valid business model, because prices have no relation to profitability.  Also, the task force recommended changes in cost allocation, because the structure does not "capture the cost implications that the rapid decline in mail volume and the rapid rise of package volume have had on the USPS's cost structure."  The USPS has hidden the cost of packages to claim that it makes money when in truth it loses massive amounts of cash on both packages and a dwindling mail delivery demand.

Another big cash loser is the high cost of labor.  In 2018, "labor costs accounted for 76 percent of the USPS's overall operating costs."  That is because as a government-protected entity, postal management has no incentive to resist union bosses' demands — even if caving in to these demands will hurt its employees long-term by driving the Post Office into bankruptcy and/or forcing management to underfund employee pensions.

Crony capitalists are looking to profit from a USPS bailout.  Cronies are trying to protect their special deals with their local post office at taxpayer expense.  The New York Times reported on May 6, 2020 that a "coalition, which includes Amazon, plans to pour $2 million into ads opposing President Trump's call for higher package delivery rates and pressing for Congress to help the service."  Amazon and other online retailers love the USPS because taxpayers end up subsidizing underpriced delivery pricing that allows Amazon and other online sellers to get packages delivered at a low cost.  They are pouring money into a lobbying campaign to bail out the USPS because that money will be used to keep the rates low for them to continue to take advantage of the taxpayer-funded USPS. 

Unfortunately, too many members of Congress are also incapable of reforming the Post Office.  Instead, their "solution" is to simply throw taxpayer money at the USPS.  Hopefully, fiscal conservatives and free-market advocates will defeat the attempt to bail out the Post Office and instead get Congress to enact real reforms to put the Post Office on the path to competing in a free market.  This is better for taxpayers, consumers, and even the long-term interests of postal employees.

Norm Singleton is president of Campaign for Liberty.