The Political Class: When It Comes To The Post Office, A Day Late and $5.5 Billion Short

If you had not heard, the U.S. Postal Service is in very dire shape as laid out in the September 6, 2011 Associated Press article:

• Postmaster General Patrick Donahue recently warned Congress that the Postal Service is on the brink of financial default.
• If Congress does not act by September 30, the Postal Service will default on a Congressionally mandated $5.5 billion payment to the U.S. Treasury.
• If no Congressional action is taken, about a year from now the Post Office could run out of money to pay its operating expenses.
• The Postal Service lost more than $8 billion last year despite having cut 110,000 jobs and closed smaller Post Office locations.

Other reports have reported that email and other electronic communications options have steadily reduced the amount of first class mail over the past several years. This has placed financial burdens on the Postal Service which is faced with a declining revenue stream but high fixed costs of physical post office locations, vehicles that go out everyday regardless of how much mail needs to be delivered, and employee unions that severely limit layoffs.

Although there are long term structural and market head winds for the Postal Service, the current short term crisis is really a Congressionally instigated problem. In 2006, Congress mandated that the Postal Service create a fund to start prefunding the medical benefits of employees for the many decades out.

In other words, Congress wanted large upfront payments from the Postal Service's annual operations budgets to fund the future medical benefits of employees that have not even been hired yet, or possibly not even born yet. This fund would start funding employee medical benefits starting in 2017 and be the sole source of money for those benefits.

However, Congress severely missed the forecast of how much money could be put away by the Postal Service in light of its declining revenue and declining market size. Also, according to the article, this is the only Federal government agency that is required to prefund its medical costs decades into the future.

Two observations on this whole mess, one complimentary and one critical. From a complimentary perspective, it appears that some people in the Post Service actually understand the root causes of the agency's problems. Postmaster General Patrick Donahoe understands that he has a huge fixed cost problem with a permanently declining revenue stream.

He and others in the Postal Service want to shut down 3,700 more Post Office locations, further cut the workforce by 220,000 employees, eliminate Saturday mail delivery, withdraw from the Federal retirement system and set up and manage its own retirement systems, get back $6.9 billion from the Federal government that it claims it overpaid into the current government retirement systems, and adjust union contracts for future flexibility in staffing. All good, solid, and appropriate actions in light of the current situation. Best of luck to Mr. Donahoe.

Of course, the critical comments, as always, are reserved for our politicians. Consider some quotes and opinions from members of Congress that were quoted in the article:

• Senator Joe Lieberman - "We must act quickly. The U.S. Postal Service is not an 18th century relic, it is a 21st century national asset, but times are changing rapidly now and so, too, must the Post Office."
• Senator Susan Collins: She is quoted as stating that "the Postal Service supports a $1.1 trillion mailing industry employing more than 8 million people in direct mail, periodicals, catalogs, financial services, and other businesses."
• Senator Tom Carper: he stated that Congress needs to work on areas where agreement can be found.

Carper and Collins have introduced Postal Service reform legislation in the Senate and several other reform plans have been introduced in the House of Representatives. However, how fast can a Senate reform bill be approved, how fast can a House bill be approved, how fast can these two bill be reconciled, how fast can the President sign the reform bill, and how fast can the changes in a final bill be implemented? Given the speed, or lack of speed, track record of the political class, it does not appear like any reform legislation will be forthcoming any time in the next few weeks, not in time to avoid default on the required payment.

Let's review. According to our politicians, the Postal Service is a national asset, it supports a major part of the nation's advertising industry, and Congress needs to do something but is only at the start of the reform legislative process. So, why are we only a few weeks away from a Postal service default?

The political class should have known about this looming crisis long ago. It should not have been a surprise to them that Postal Service mail volumes were in a permanent state of decline. It should not have been a surprise to them that Postal Service revenues were in a permanent state of decline. It should not have been a surprise to them that legislation they passed in 2006 was going to overwhelm Postal Service operating revenues. They should have known but we are still only weeks away from a default.

Given that the Postal Service is a "national asset," it never should have come to this point of crisis and panic. But it did, as does just about any problem that confronts the political class. Failing public schools, lost war on drugs, subprime financial crisis, escalating health care costs, terrorist attacks, etc., problems are never anticipated in time, problems' root causes are never understood, and problems are never solved, or are solved in a panicky last moment in a suboptimal way, usually wasting taxpayer money in the process.

Step 34 from "Love My Country, Loath My Government" would address this type of institutional incompetence. Given the mess of an impending Postal Service default, Congressional members in both the House and Senate would be removed from any committee or subcommittee post they sit on that had Postal Service oversight and responsibility, according to Step 34. That is the only way to get their attention and force them to actually be accountable for their Congressional behavior.

One final thought. If our politicians are so concerned about saving this national asset, why did they spend five summer weeks and the entire month of August on vacation? I guess it is not such a national asset to our politicians if their vacation time is more important than this national asset.

Lesson learned: if you have anything to mail, do it soon before this national asset is a day late and $5.5 billion short.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available, at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.



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