Friday, May 4, 2012

The U.S. Postal Financial Fiasco in a Larger Context ... Pogo's Teachings

Why do we have such huge fiscal deficits and an enormous national debt? More importantly, why aren't we doing anything about it?

For answers to these simple but profoundly troubling questions, let's consider the ongoing U.S. post office financial debacle and what Pogo taught us long ago, "We have met the enemy and he is us."

The Senate's Pony Express is subtitled "Blocking the reforms that even the Post Office wants to make." Here's what it says:

"Ronald Reagan liked to quip that only in government is failure rewarded with more money. Witness the U.S. Postal Service, which the Senate has voted to give another $34 billion while delaying reforms that would save money. If today's Senate had been around a century ago, the Pony Express would still be delivering the mail.

The Postal Service is losing $25 million a day as more communication goes electronic, and the Postmaster General acknowledges that sometime next year the agency won't be able to pay its more than 500,000 employees. Without serious reforms, its debt will climb to over $92 billion by the end of 2016.

Postal Service management, to its credit, has a credible plan to put the agency on firmer financial footing (at least for now) so it doesn't need taxpayer money. Yet the Senate bill creates one obstacle after another to implementing that plan. According to the Postal Board of Governors, "the Senate's bill would not enable the Postal Service to return to financial viability."

This may be a first in Washington: a federal agency wants to reform itself to save money but Congress won't let it.

Management wants to close about half of its mail processing centers and some 3,000 unnecessary post offices—letting Wal-Marts or local stores take packages and sell postage stamps. But the Senate bill creates new rules to prevent or delay this.

For example, Postal Service managers want to save $2.7 billion by changing mail delivery standards (such as relaxing overnight delivery requirements for some first-class mail), but the Senate bill locks in current standards for three years.

Managers want to renegotiate absurd no-layoff labor contracts to shrink its labor force faster. The Senate bill denies that authority.

Managers want to end Saturday delivery as soon as possible. The Senate bill allows this in two years but only if a federal study certifies there is no viable alternative. Republican Senator Susan Collins of Maine, a cosponsor of the bill, has said she believes ending Saturday delivery will put the mail service in a death spiral. Compared to losing $25 million a day? . . .

The Government Accountability Office recently recommended that, given the Postal Service's precarious finances, the agency should be required to prefund its liabilities now. Instead, the Senate bill says that the Postal Service only has to fund 80% of those health-care benefits. Take a wild guess who will eventually fund the other 20%?

The Postal Service already has about $45 billion of unfunded liabilities in its retiree health-care accounts. It also has drawn down a $15 billion Treasury line of credit that it is unlikely to repay. In other words, the Postal Service already owes the Treasury billions of dollars, not the other way around.

The Senate bill is the result of one of those unholy political alliances of Democrats, who don't dare take on the union lobby, and Republicans who don't want local post offices shut on their watch. . . . Next issue?

We can only hope House Republicans have the good sense to laugh this out of the Capitol. . . .

The larger story here is how difficult it is to reform any government operation, even one that everyone admits is broken. In the private economy, a company that loses money every year eventually declares bankruptcy and restructures or dissolves. In government, political constituencies protect a loser as long as Congress can keep soaking taxpayers. This is a very good reason to limit what government does. We weren't kidding about the Pony Express."

Discussion and Analysis

This is a great example of government at work and the difference between the private and public sectors. In the private sector, companies go broke. In the public sector, otherwise broke government entities keep going.

It's easy to see what the union leaders of the postal workers are trying to do. They're trying to save their own jobs.

They can only do this by keeping the post office functioning as is and that means keeping their members employed. Otherwise there will be no membership dues and no jobs for the union leadership.

But what about the citizen taxpayers and the members of the Senate? Well, that's where Pogo comes into play.

My admittedly simplistic view of government officials is that they try to give us what we want (vote getting is easier that way) by not increasing our taxes (again, vote getting is easier that way).

Accordingly, the lesson of the post office fiscal fiasco is simple Pogo stuff: "We have met the enemy and he is us."

Summing Up

As individuals We the People like free and convenient mail delivery. We've always enjoyed free mail delivery. We probably like the people who deliver the mail as well.

Yet we don't want to pay for what it actually costs. So we don't, at least not directly.

In a free marketplace situation for mail delivery, the vast majority of us wouldn't be willing to pay what it costs the government to deliver our mail.

That high cost is due to the lack of market competition for mail delivery the past two hundred years. So what the government monopoly charges us isn't close to what it costs the postal monopoly to deliver it to us.

Today the postal service can't even begin to compete with email. Neither could they compete with UPS, FedEx or other private sector companies.

And their huge taxpayer subsidies and longstanding monopoly have prevented new direct competitors from entering the marketplace over the years.

When "creative destruction" and free market competition is outlawed, costs get out of hand and quality suffers. That's just the way it is.

So We the People continue to pay billions each year and the "Pony Express" saga keeps going. But we don't pay all the costs. We leave them to be paid by future taxpayers.

When will all the nonsense stop?  Not until We the People heed the teachings of Pogo and tell our politicians to change the way they play the game.

We indeed have met the enemy and he is us. The postal service story teaches us that.

But there's a much larger story here. It's time for We the People to act on what we all know to be true.

Thanks. Bob.