Post Office Just A Symptom Of Bigger Problems

November 16, 2012 11:00 am

by Charlie · 17 comments

Today’s Courier Herald Column:

Expect a lot of people knocking the US Post Office over the next few days.  They’ve just released their latest financial report, and for the federal year ending September 30th, they managed to lose $15.9 Billion dollars this year.  Even in a city like Washington D.C., that’s starting to sound like real money.

To put that into perspective, the service handled 159 billion pieces of mail last year according to Bloomberg News.  Doing the quick math of sliding one decimal, that means the post office loses a dime on every item they delivered.  Those dimes are stacking up.

These financials are not released at a good time for the post office, as the national political picture is shifting from the elections to the upcoming budget battles in Washington.  The Post Office will likely be used as yet another example of how government doesn’t work.  Expect many in Congress to grandstand over the numbers.  When watching someone do so, please also remember this:

The Post Office had a plan to cut 3,600 locations from its operations last year, but the plan was scuttled by Congress.  The offices that were scheduled to close were mostly in rural locations, where the average of the smaller offices take in $15,000 in revenue but cost $114,000 to operate according to the New York Times.  Congress was not willing to cut rural federal jobs in their districts, nor allow many of their constituents to be inconvenienced by the relocation of rural post offices into the operations of those in nearby towns.

Like many of the problems in government, the blame will fall to the agency, with Congress pointing many of the fingers.  Yet Congress then refuses to allow the problem to be solved, fearing backlash from constituents.

It is this example that we need to understand on several levels as we begin discussions on how to fix the economy while we also dig out of current budget deficits.

First, Congress and the American People have grown quite comfortable with the notion that we can get something for nothing.  The ability to print our own money is funny that way.  We demand tax cuts and we get them.  We demand government spending and we are granted that.  Thus far, the US has been able to put both of these relatively unlimited wishes on the country’s credit card.  The fact that many other industrialized nations have worse problems has allowed our debt to continue to work in world markets, delaying the inevitable financial results of such reckless fiscal policy.

When the problems surface, however, Congress generally applies a political solution rather than an economic one.  Problems at the Post Office have been known for quite some time.  Costs are increasing while the volume of mail delivered is decreasing.  Changes must be made.

The American public has no tolerance for pain, however.  Congress continues to beat up on the post office for not making a profit or breaking even, but then refuses to allow simple business realignments to address current market realities.  Congress must decide if the Post Office is to be a utility with easy access for all – a position which will require ongoing subsidies – or if the real underlying structural problems are to be addressed.  Addressing those problems will mean accepting less service for some, higher costs for others.

Such it is with the bigger budget picture.  If the structural problems are to be addressed, then some will pay more, most of us in some way will receive less.  That’s what the market would demand.

But in the market of politics, the customers on the demand side of the equation are not shopping with their own money, but instead shop with votes.  And voters want things.  Voters do not have a good recent track record of correlating the items they want with the costs associated with their delivery.

Congress, ceding to the wishes of the voters, seems to have an equal problem balancing the wants of voters with the needs imposed on the treasury.  The problem goes well beyond the inability to allow rural post office locations to be closed.  The pain threshold of mail delivery doesn’t begin to compare to a reduction in social security benefits, the loss of deductions for home mortgage interest, or a smaller paycheck because tax rates have increased.

When Congress points at the Post Office and laughs this week, be sure to point back at Congress and ask them why they have let this happen.  Just don’t be too surprised if they let on that the reason they have let these problems go on for so long is because it’s exactly what we demanded.

 

John Konop November 16, 2012 at 11:08 am

Good post, you hit on the nail!

……..The American public has no tolerance for pain, however. Congress continues to beat up on the post office for not making a profit or breaking even, but then refuses to allow simple business realignments to address current market realities. Congress must decide if the Post Office is to be a utility with easy access for all – a position which will require ongoing subsidies – or if the real underlying structural problems are to be addressed. Addressing those problems will mean accepting less service for some, higher costs for others.

Such it is with the bigger budget picture. If the structural problems are to be addressed, then some will pay more, most of us in some way will receive less. That’s what the market would demand.

But in the market of politics, the customers on the demand side of the equation are not shopping with their own money, but instead shop with votes. And voters want things. Voters do not have a good recent track record of correlating the items they want with the costs associated with their delivery…..

jiminga November 17, 2012 at 10:42 am

And let’s not forget the union contract has a “no layoff” clause that was “negotiated” by a non-elected bureaucrat, which congress continues to fund. The USPS has a labor cost around 80% of revenue, far higher than either UPS (which is also unionized) and FedEx. All hidden behind “necessary services”.

Jackster November 16, 2012 at 12:23 pm

Could the same sort of framework be applied to military spending (i.e. bases, R&D, and training)? Where we all know we need to cut the size and scope of military (not to be confused with intelligence) missions, but congress would apply a political, not an economic problem?

drjay November 16, 2012 at 12:30 pm

maybe there is a good reason, and i’m just simple, but why not cut out saturday delivery, or better yet, charge a premium if you HAVE to have mail on saturday…seems like an easy way to cut 17% of expenses without much effort or hard decision making…

Mike Dudgeon November 16, 2012 at 12:48 pm

Great post Charlie. I have been saying similar things for many years. Both elected officials and the public are going to have to realize that there must be some pain to straighten out our fiscal house. We cant have it for very much longer.

Mike Dudgeon November 16, 2012 at 12:48 pm

meant to say “have it both ways”

Lea Thrace November 16, 2012 at 1:16 pm

Great post Charlie!

As Jackster said above, the Congressional shenanigans that you point out above can be applied to so many other things. Military (fighter jets and ships being built that the military does not actually need), Medicare (soo much waste to point out individually), SS, redundancy between Homeland Security, NSA, CIA, FBI, DOJ.

It’s ridiculously frustrating to see posturing over the need to cut waste and tighten belts but then balk when your district will have to take some of that hit.

Harry November 16, 2012 at 1:21 pm

That’s true.

ryanhawk November 16, 2012 at 1:44 pm

This should be a simple problem to solve — the real subsidy is for junk mail, and that should end immediately. Which politicians want to defend subsidies for junk mail?

Jackster November 16, 2012 at 2:04 pm

Don’t politicians send the most junk mail?

Dave Bearse November 17, 2012 at 9:22 am

Where’s the mention that the rural POs are largely located in rural Republican territory? The mention would highlight the fact, notwithstanding conservative rhetoric, that it’s red states for the most part that are net takers of the federal government revenue.

Deficit spending is a problem for Dems and the GOP, but the record seems to be that it’s only a GOP concern when it’s Dems, and not the GOP, that control it.

Harry November 17, 2012 at 9:24 am

“it’s red states for the most part that are net takers of the federal government revenue.”

Source?

Dave Bearse November 17, 2012 at 10:14 am

Reality.

Harry November 17, 2012 at 12:40 pm

Just because a soldier draws a paycheck from a installation in a red state, doesn’t mean 100% of his income goes to the red state. Anyway, I understand that the biggest takers are blue states like CA, NY, MA, MD, VA.

xdog November 17, 2012 at 1:29 pm

“I understand that the biggest takers are blue states”

You’d be wrong. Here’s an article and nice chart by The Economist.

http://www.economist.com/blogs/dailychart/2011/08/americas-fiscal-union

Harry November 17, 2012 at 1:54 pm

Look at total federal dollars spent in each state rather than net dollars. Lucrative states suck up revenue and income from non-lucrative states (think about tech companies in CA, financial companies in NY, government workers in VA and MD) – so obviously they pay more federal taxes.

saltycracker November 17, 2012 at 4:35 pm

The USPS could function if congress and the USPS would agree on a new business model to address current needs. Nothing wrong with subsidizing rural delivery that did not involve door to door delivery unless surcharged. P,O. Boxes at some central pick up like a store desiring to attract the traffic is one approach.

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