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.
Dale Whiting posted at 7:30 am on Sat, Oct 15, 2011.
No Doctor Patterson,
It's time to unburden the USPS from the lavish pension fund contributions it must pay to the Feds. Or aren't you in favor of smaller government?
Leon Ceniceros posted at 7:38 am on Sat, Oct 15, 2011.
Just the way the Mesa Teacher's Pension Fund, the Mesa City Worker's Pension Fund, the Mesa Police Department Pension Fund and the Mesa Fire Department Pension Fund that are........BILLIONS...underfunded will one day...bankrupt Mesa.
Would some one tell me how a School Superintendent can retire at age 60 and receive $200,000.00 a year for the rest of their lives plus the best Retiree Medical/Vision/Dental and Hospitalization Insurance plans ???
Arizona Willie posted at 7:57 am on Sat, Oct 15, 2011.
No, the postal service needs to start charging realistic fees.
How much would FedEx or UPS charge you for delivering a letter from Phoenix to Anchorage, Alaska in 3 days?
A heck of a lot more than 44 cents.
The postal service has been hamstrung by not being able to charge realistic amounts for the service it provides.
Bulk mail should NOT get special low rates. Why is business more deserving of a low rate than individuals?
The minimum postage for a letter should probably be $1.
I believe European postage rates are much higher than ours.
Politicians have used the postal service as a freebie to voters to stay in office. They have artificially kept the price way low and even then people complain. Wonder why a letter gets lost when the service is understaffed and overworked.
There is also a market the postal service could create and serve.
Many people get their drugs from mail order pharmacies now because their insurance demands it.
But, if you read the information that comes with the drugs, it says to keep between certain temperatures.
Yeah right. I get prescriptions delilvered by Fed Ex and UPS that are too hot to touch. After riding around in a brown truck in the Arizona sun for hours stuff assumes ambient temperature which is often 110 degrees.
How badly did that harm the medication you just received with warnings to keep it between 50 - 78 degrees?
There is a BIG need for drug delivery that keeps drugs at the proper temperature. Since the postal service is already equipped to deliver to the home every day they could easily create such a service and get peoples drugs delivered at the right temperature.
No telling how many people are taking drugs that are near worthless because they have been exposed to heat or cold for ours while being delivered, even by FedEx.
Ring of Gyges posted at 11:14 am on Sat, Oct 15, 2011.
@Arizona Willis- Your post brings up a different approach to dealing with the USPS than Mr Patterson's ideologue driven, business and shareholders first model.
Instead of trying to get rid of the post office, there should be ways of keeping it alive. Charging higher rates, cutting back to 5 days of delivery, and charging for bulk mail are all good ideas.
As far as the election freebies are concerned, I would not change this. I think political knowledge about candidates is vital to the republic, and the post office is doing a community a service by allowing candidates to send out free mailers .
Maybe if we looked at the USPS as providing a public service, similar to roads, bridges, libraries etc, and see the real value that it provides, then answers to the USPS's problems will manifest. There is a market for the service they provide, no question.
In regards to pensions, most of the cost of any person's pension, regardless if it's private (if your lucky to get one) or public, goes to healthcare. In fact, healthcare cost is the number one reason why the national debt is so high (no, not Government waste, Tea-baggers).
Lastly, I believe the Post Office is under the control of Congress. While their budget is funded by their revenues, those in charge cannot make decisions like closing branches, layoff employees, add fuel surcharges to cover losses, etc..without the permission of Congress. Their leadership is severely handcuffed to alter anything integral. They are prohibited from making exactly the kinds of changes necessary.No legislator wants to be responsible for someone's neighborhood P.O. closing down, massive layoffs, and reduced delivery.
chatmandu002 posted at 1:10 pm on Sat, Oct 15, 2011.
As a Tea Party member the USPS is authorized by the Constitution, Art 2, sect 8. I believe the USPS should be retained and restructured as contracted operation with the postal workers working for the contractor. The retirement system of USPS workers should be converted to the FERS (federal employees retirement system) and carried by the federal government until such time as all employees are converted to the private retirement system of the postal contractor. Postal service should be required as deemed necessary by the congress with the contractor required to comply with all federal work and safety rules.
Arizona Willie posted at 3:42 pm on Sat, Oct 15, 2011.
Aren't tea partiers and righties amazing? They preach free enterprise and get the government out of everything but defense.
They claim private enterprise is better than gov't .
So here chatmandu wants the postal service to be run by contractors ( private enterprise ) BUT he wants the Federal Government to pick up the pension obligations of the postal service.
So again the righties want the profits but they also want the government to pick up the losses so the business can't possibly lose.
Profits to business --- losses to the government --- WHAT A DEAL. :(
Kinda like the proposal here in Arizona where businessmen want the state to guarantee their small business loans.
They want the Fed Gov't to give them loans and the state pays the loans off if their business loses money. The business owner takes NO risk at all.
That's the way Republicans think.
Websters Dictionary has revised their definition of an IDIOT: someone who makes less than a million dollars a year and votes Republican.
Rich posted at 5:06 pm on Sat, Oct 15, 2011.
About all the government should do is guard the shore and deliver the mail. You want to let them out of half of that? Why? So they've got more money to harass us? Why not mandate they get these two handled BEFORE they try other things? Currently they are major incompetents on both, as you so neatly pointed out with number two.
CSalafia posted at 10:44 pm on Sat, Oct 15, 2011.
Tom,
It was republicans like you that, back in 2006, forced the USPS to pay for 75 years of pensions in 10 years. Had you incompetents not forced them to do so, they'd be running in the black.
So the USPS failure is all on your head.
Arizona Willie posted at 8:02 am on Sun, Oct 16, 2011.
The postal service is NOT taxpayer supported. But it DOES answer to Congress.
It can't raise rates without permission. It can't adjust services without permission.
And it is politically unpopular to grant permission because the people think they are entitled to have a letter delivered across the country in 3 days for 44 cents and we want something for nothing.
What business would flourish if it couldn't raise prices when costs went up? If it had to keep a certain number of employees on duty even during times when there was no business?
The righties are always calling for government services to be run like a business but they won't let the post office run like a business --- neither will the lefties.
No business can succeed if it can't charge enough to even cover costs.
Righties want everything to be run by private enterprise and have the owners make a profit from everything.
Can you image the cost of postage if Bank of America bought the postal service?
Basic stamp would be $2.75 and go up every year in order to increase profits.
And you would have to go to the post office to pick up your mail. Delivery would be considered " inefficient ".
wdgnas posted at 5:07 am on Mon, Oct 17, 2011.
will the private company that takes over the postal system have to fund their pension liabilities for 75 years like the usps? most likely the there will be no pension. even if there was a pension it would be underfunded and the taxpayer would pick up the slack (see pension guaranty benefit corporation). tom, think before you write.
chatmandu002 posted at 10:33 am on Mon, Oct 17, 2011.
AZ Willie you got it right. Us righties and Tea Party members have it right. We always will have it right, right on, right way, right time, you name it we got it right.
samkat posted at 4:06 pm on Mon, Oct 17, 2011.
Tom: I challenge you to work as a postal letter carrier in June, July or August or try a Midwestern winter for a minimum of 30 days and report back on their net worth. Now, the biggest problem in reorganizing the USPS just happens to be the restrictions imposed by Congress. Its somewhat akin to fighting the school yard bully with one hand tied behind your back. If I was" King for a Day", I would start by dismantling the top heavy Postal Directors Board and instilling some humanity in the postal management ranks. The rank and file live under a constant fear of reprisal and intimidation from management and supervision. Postal workers are people just like you and me. The majority of them have families to support and want a decent living like everyone else. For the posters who are most critical, go to any post office and they will direct you to the post office employment center where you too can apply for one of those high paying jobs. PS: They accept applications from retired emergency room doctors also. :-)
PS: I would not care for a UPS or FedEX style mail delivery service as I don't want my mail thrown on my front door step as they run for their next delivery.
samkat posted at 4:08 pm on Mon, Oct 17, 2011.
By the way, how many of you actually talk to your letter carrier? I take the time to get acquainted with mine and they appreciate the little bit of attention and kind words.
VofReason posted at 12:59 pm on Tue, Oct 18, 2011.
Yes raise prices on mail, that will solve all of the problems. But wait, there is that nettlesome supply and demand thing that works in the real world. If you raise prices on mail, it would drive revenue even further down- kind of like raising taxes for the Government. Another little nugget from the real world, almost no private companies have pensions - they are called 401Ks. It is like self responsibility where you fund your own retirement. This is why it is an abject failure like most Government agencies.
PatrioticPerson posted at 10:21 am on Tue, Oct 25, 2011.
Samkat.....you must have a short memory or be too young to remember that the mail was once delivered to your front door. Now you have to walk or drive to a bank of mail boxes to get your mail. I also do not have the time to wait there just to chat with my letter carrier. And if you get a package you most likely will find it at your front door just like the packages from FDX and UPS.
PatrioticPerson posted at 10:34 am on Tue, Oct 25, 2011.
Compare private sector pensions to public sector pensions. Compare private sector labor agreements with public sector labor agreements. Compare private sector wages with public sector wages.
The reason for the difference is where they get their revenue from and who they have to report results to.
No wonder everyone wants to work for the public sector.
samkat posted at 7:48 pm on Sat, Nov 19, 2011.
Person: I am older than dirt and I do remember the days when the mail was delivered to your door. In fact, I did a short stint working for the postal service delivering mail door to door. Unfortunately, Congress hobbled the post office and in order to try to maintain a level of service, they went to the postal clusters along with many other cost cutting measures.
You must have one heck of a long drive as I only have about a hundred yards to walk and I do see my postal carrier there on a regular basis. I also get to talk to the subs as well.
Sorry but postal regulations restrict carriers from leaving packages unattended at your doorstep like FEDEX and UPS. Unless they are too large to fit the cluster mail boxes designated for packages, you might have to go to the post office if you were not home when the carrier knocked on your door. I had three packages delivered withing the past week and two of them were left in the cluster mailbox. The carrier simply left the key in my box so I could retrieve the packages.