The Post Office Sinks

The U.S. Post Office has been putting out the alarm bells, with the Postmaster holding out the prospect of the Service becoming insolvent and closing. The Post Office has seen sales drop by 22% over the past five years, with a corresponding inability to cut costs, reduce employee benefit expenses, or raise prices sufficiently to stop the hemorrhaging of cash. Postal contracts with labor prohibit layoffs, political pressure is applied when post offices are scheduled for closure, and the health and pension benefits for labor are quite generous. Despite the obvious need to slash costs, and maybe raise some prices beyond what the law currently allows Washington has made this into another prime example of their dysfunction and inability to make tough decisions. Solve the trillions in federal deficits? This group in Congress can’t even figure out how to solve a relatively simple business problem that faces the U.S. Postal Service. They give dysfunction a bad name.

So what do you need to do? Reduce costs, first by allowing additional job reductions that reflect the decrease in business. Don’t want to do that because you do not want to break the union contracts? Then pay!!!!!! Subsidize the costs of the additional unneeded workforce with federal tax dollars until you can reduce the force by attrition. But they don’t want to cut, and they don’t want to pay.

Allow the Post Office to change the health plans offered to employees to reflect the market. Don’t want to do that because you do not wish to offend the Postal Workers??? Then pay!!! Subsidize the portion of health care benefits above what the Post Office should be paying with federal tax dollars. But again, they don’t want to cut, and they don’t want to pay.

Reduce service. The Post Office wants to reduce delivery from six days a week to five days a week. But Congress does not want that either. The rural Senators have an objection: From the New York Times.

Senator Susan Collins of Maine, like many lawmakers from rural states, vigorously opposes ending Saturday delivery, which would trim only 2 percent from the agency’s budget. Ms. Collins, the ranking Republican on the committee overseeing the postal service, said the cutback would be tough on people in small towns who receive prescriptions and newspapers by mail.

“The postmaster general has focused on several approaches that I believe will be counterproductive,” she said. “They risk producing a death spiral where the postal service reduces service and drives away more customers.”

No service cuts Senator Collins? Then subsidize that two percent of budget with (yup) federal tax dollars? But again Congress does not want to cut, and they do not want to pay. Geez Senator Collins are we subsidizing the rural parts of the country with Post Office dollars? We do not wish to offer subsidies any longer, so either cut that service or pay.

The Post Office needs to be freed from the dysfunction of Congressional oversight. They have a business that could be making money, not losing it. The massive pre-payments for retiree health care are a huge burden for the Service, but are reflective of the costs that will eventually have to be borne. Better to recognize them now. Raiding the pension fund, which the Post Office believes is over-funded makes no sense either. The problem could be solved by a first year MBA class at any major university. Maybe Congress ought to give this issue to the MBA students at Wharton. They would produce a workable result long before Congress will. Read the New York Times story here. Read the Post Office White Paper on cost reduction here.

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