Privatizing the Post Office

According to Postmaster General Patrick Donahoe, the U.S. Postal Service is on the brink of insolvency and will default—probably in 2012—on a mandated $5.5 billion payment to the Treasury unless Congress intervenes this month. Calls to save the post office are already coming from the likes of Susan Collins and Joe Lieberman.

Interestingly, Donahoe is not directly asking for federal funds, but he is requesting permission to make certain changes, including:

  1. the elimination of Saturday delivery,
  2. the closure of 3700 offices,
  3. workforce cuts by up to 220,000, and
  4. setting up a retirement system just for USPS employees.

But one of Donahoe’s ideas represents a huge red flag. He is requesting that the USPS not be required to make advance payments to cover its future retiree medical benefits. Sound accounting requires that retirement (including medical) expenses for an employee be incurred while he or she is working. Not doing so kicks the proverbial can down the road, eventually forcing an organization to pay benefits to previous workers out of current revenues. Our social security system went down Ponzi’s road and we all know how that worked out.

Ultimately, Congress must decide if the USPS should be saved as a federal agency and if so, what strings it should attach to the billions of taxpayer dollars that will be allocated to the task. We will inevitably be told that partial or complete privatization is extreme, but many other nations—Germany, Japan, Sweden, Denmark, Finland, and the UK, among others—have already moved in this direction. There is no rational reason for Congress to play micromanager in an attempt to revive the USPS. The only irrational reason is to placate the union. The USPS has about 574,000 employees.

In my view, this is not very complicated. Advances in technology—namely the Internet and cheap telephone service—have taken a big bite out of demand for traditional mail delivery. The lack of competition in this segment has led to the long lines, mediocre service, and endless bureaucracy that the USPS has become famous for. Privatizing and allowing competition is the only logical solution. Taxpayers should not be asked to subsidize a service that is already being performed more efficiently by UPS, FedEx and your Internet service provider. How Boehner and Republicans respond will tell us a lot about their potential for real reform.

2 thoughts on “Privatizing the Post Office

  1. This is long overdue. If we bail them out today they will just ask for more next year. Why not auction off the entire post office?

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