More Red Ink at the Post Office

The U.S. Postal Service just reported a net quarterly loss of $740 million, as loss that some are actually calling a success. The New York Times notes in its headline that the USPS didn’t lose as much as in the previous quarter ($1.9 billion). In the opening line, it referred to “better-than-expected performance for the agency, which has been shackled by falling revenues and a Congressional mandate that requires it to annually pay billions of dollars into a health fund for future retirees.”

The NYT spin in as expected, and the Congressional mandate to which it refers is sound accounting. Retirement (including medical) expenses for an employee should 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 this road and is approaching bankruptcy.

In 2011, U.S. Postmaster General Patrick Donahoe told us that Postal Service was on the brink of insolvency. He requested permission to make certain changes, including the elimination of Saturday delivery, the closure of 3700 offices, cuts in excess of 220,000 workers, and the establishment of a retirement system just for USPS employees. Donahoe got much of what he asked for, but he was not able to avoid the required $5.5 billion annual health care payment.

Donahoe is pinning hopes of solvency on more governmental assistance. “We are encouraged that comprehensive postal reform legislation has started making its way through the legislative process in both the House and Senate.” In his defense, Donahoe has made some cuts. The problem is that he is asking for continued direct and indirect subsidies to keep the postal monopoly afloat. It’s no surprise that the American Postal Workers Union ( is also calling for more handouts from Washington. The USPS employs about 500,000 workers.

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 are always told that partial or complete privatization is extreme, but many other nations—including Germany, Japan, Sweden, Denmark, Finland, and the United Kingdom—have already moved in this direction.

This is a no-brainer. Advances in technology—including the Internet and cheap telephone service—have cut demand for traditional mail delivery. The lack of competition in this segment has led to longer lines, mediocre service, and heightened bureaucracy. 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. The only worthwhile “comprehensive reform” that is needed is privatization.

2 thoughts on “More Red Ink at the Post Office

  1. There’s no reason the post office should be a protected monopoly. It’s not necessary for national security. Congress should cut it loose and require them to compete with UPS.

  2. The APWU is running ads against the $5 billion healthcare payment. I didn’t understand what this was about until I read it here. Why is the union campaigning against the post office setting aside funds for retirement benefits? It seems like they would want this to be done to protect their members.

Leave a Reply

Your email address will not be published. Required fields are marked *