USPS

Almost everything has changed in our digital world. Email has replaced snail mail—digital information of all kinds can be delivered instantly. As a consequence, many new companies have grown from nothing to become multi-billion dollar concerns. And one public-private partnership is threatened with extinction.

As it does almost every year, the management of the USPS appeared before Congress today and lamented the sorry state of their “company.” The USPS, they claimed, would be unable to meet its $5.5 billion pension obligation later this year and could cease operations within the next year. What to do?

That seemingly complex question can be answered in a single word: Nothing. The Congress should offer the USPS no bailout. They should pass no legislation that leads to indirect funding of their pension or their operations. They should let market forces take their course.

It is incumbent upon USPS management and unions to craft a plan that will save their company. To begin, the exceedingly generous pensions that postal workers receive will have to be re-evaluated. Both management and postal union leaders promised far more to USPS workers and retirees than they could deliver. Of course, they did so with the knowledge that the feds would bail them out when push came to shove. Unfortunately, the profligate spending by those same feds have lead to a deficit so deep that a bailout should be out of the question.

Management caved to a no-layoff contract for postal workers. Unfortunately, labor accounts for 82 percent of USPS expenses—as opposed to about 50% of expenses for UPS and Fedex. If your expense column has an 82 percent item, that’s where cuts must be made. But management negotiated with union leaders and promised far more to USPS workers than was realistic, again, with the knowledge that the feds would bail them out when push came to shove. That won’t happen.

If management and labor can craft a plan that enables the post office to survive, that would be great. But if they can’t, then the taxpayers and the Congress should do nothing. The USPS will declare bankruptcy, but in its place, a set of private sector companies will step in to take over many of its services.

The word changes. And just because the USPS has been around for over 230 years, does not give it the right to ask the taxpayers to perpetuate a business model that is unsustainable and anachronistic.

Update (7 Sep 2011):

Megan Mcardle comments in The Atlantic:

Congress has given the Post Office two incompatible mandates. It is to make money like a business . . . but it is not to have any of the freedom that businesses have to, say, close branch offices, cut its delivery area, or change delivery schedules.

This is, to put it mildly, lunatic.