Bypassing the Political Class, Fixing The United States Postal System

As I was standing in line at the Post Office the other day to mail some gifts, I was struck by the relatively short length of the line. We are within in a two week window of Christmas and the line was quite short. It started me wondering about how much the proliferation of email, online bill payment, text messaging, social networking, cell phones, etc. might be impacting the operations and the profitability of the Post Office.

When I got home I saw that my latest edition of Business week had been delivered, on time I must say, and within that issue (December, 13, 2010) was an article about the status of the Post Office. Judging by the facts laid out, it is in much worse shape then I imagined while looking at the short lines:

• The United States Postal Service (USPS) is supposed to be run as a profitable entity but has lost money in 14 of the previous 16 quarters.
• The USPS recently had to borrow $3 billion from the U.S. Treasury to cover its financial shortfall, the most that it is allowed to borrow in any one year.
• It is rapidly approaching a debt of $15 billion owed to the Treasury, the upper limit that it is allowed to owe.
• It operates over 32,000 locations, which is way to many for the declining demand that it faces.
• Besides its current fiscal problems, the USPS has a long term debt obligation of about $50 billion for retiree benefits and pensions.
• The last time quarterly mail volume increased was almost four years ago, first quarter, of 2007.
• The USPS spends 78% of its budget on salaries and benefits compared to 43% at FedEx and 61% at UPS.

What a mess. A declining market, high fixed costs, an outdated business model, leveraged to the hilt with debt, tough competitors, etc. Looks like drastic action needs to be taken to make the USPS profitable again, as the law requires:

• Close down light volume locations and replace them with agents such as hardware stores, supermarkets, etc.
• Trim the workforce as needed in line with declining mailing volumes.
• Terminate some services to save expenses such as Saturday delivery and possibly closing down a day or two a week, allowing agent to pick up the slack.
• Allow the Post Office to offer other services like other national postal systems do to cover their costs (British Royal Mail and Japan Post also provide banking and insurance services) to offset the decline in their core business.

Seems reasonable, unless you are a politician, especially a Democrat. According to the article, politicians have frequently opposed and stopped the closing down of low volume or poorly performing post offices in their district. They have aligned themselves with the postal unions to block the termination of Saturday delivery and other cutbacks in services that make good financial sense but would offend a politician's campaign supporters, the unions. Thus, we continue to spiral down into the vortex of another government bailout, a bailout that will be much more costly if sane, rationale steps are not taken to account for a declining market.

"Sane" and "rationale," there are two works you will not see in the same sentence often with "politician." However, a Utah Congressman, Jason Chaffetz, who is possibly going to head the subcommittee that oversees the USPS in the new Congress, has a solution, a solution that is similar to processes laid out in "Love My Country, Loathe My Government" to solve other national problems. Chaffetz would put together a a Federal Commission, similar to successful the military base closing commission, to identify which post offices to shut. Similar to the base closing plan, Congress would vote to approve the entire plan or reject the entire plan, they could not cherry pick parts of the plan. This way, Congressional politicians would have air cover by saying their hands were tied. Given the general lack of courage of most politicians in Congress, this may be the only way to get past the localized resistance to sanity.

This is the same process laid out in "Love My Country, Loathe My Government" for fixing our illegal immigration problem, our escalating health care cost problem, our failing public schools problem, our drug addiction problem, and our lack of a national energy strategy and policy problem. Congress and the political class has had decades to fix all of these problems and have made absolutely no head way. As a result, we are faced with ever escalating national issues and ever less courageous politicians that will not take the necessary steps to address the root causes of our problems and step out in front of the pack to actually provide some leadership. When we see that politicians do not have enough courage to even close an unnecessary Post Office location, we have absolutely no chance of seeing any act of courage in the bigger issues of our time, lest they offend a voter bloc or two.

I wish Congressman Chaffetz well in his bold act of actually cutting politicians mostly out of the decision loop when it comes to fixing the USPS market and financial situation. I hope it works, lord knows nothing else that involves a politician is likely to work.




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