The P.S. Fix
by Jim Davies, 9/13/2011
The USPS is running out of money fast; and its General has warned that absent a Congressional fix for that fix it will have to default, to go out of business, next year. Drastic ideas are being floated: an end to Saturday delivery, a closure of those nice social gathering-points, the thousands of small rural post offices. How come? - Why, the advent of email has cut deep into its first-class mail trade. Who would have thought it? Email is almost infinitely faster and its marginal cost is zero and, surprise! people prefer that. And people are paying bills on-line too, so all those mailed checks are not being mailed any longer.
The USPS employs 574,000 people according to Wikipedia, and pays pensions and health benefits to 480,000 retired employees. Its revenues are $67 billion and falling fast, and its profits are already negative at -$8.5 billion. In other words, it's a beached whale.
Like the government school monopoly, it's really a jobs program. If it were to declare bankruptcy and its monopoly were repealed, competing companies would leap to take over first-class letter delivery service and operate at a fraction of the cost with a fraction of the work force; hence, vast numbers of former overpaid postal employees would be out of work.
Can there be any fix for such a needless anachronism? - that question arose recently on PBS' News Hour and the Union spokesman was adamant that there can. The fix, he said, is to repeal a mandate that future health-care costs be prepaid. Do that, he said, and cash will flow in rivers; the current $8.5B loss would be wiped out. So we need to grasp what's going on here.
The Postal Service provides generous health care for employees and pensioners, and in 2006 Congress decreed that its future costs must be pre-paid. That seems a wise move; promises are cheap, but if thirty years from now half a million former postal workers need billions of dollars in health care benefits, they had better not rely on fat, current USPS revenues and profits to pay for them; although the rule for "Social Security" is "pay-as-you-go," by 2040 there will be no postal revenues left. So the Service must pre-pay, into a fund from which those benefits can be safely paid - just like an honest, commercial retirement or health insurance plan.
It was that prudent measure to which NALC President Rolando objected. He won't be around in 2040, but was emphatic that the pre-pay was not needed, and that it alone was the source of the USPS' financial woes. Such is the short-term perspective of a trade union.
Rolando was wrong; not only is the prepay mandate needed, the root problem is that the USPS is hopelessly non-viable. It has had a 200-year run, with a monopoly for most of that time, but now technology has overcome that monopoly and its business model is shot to bits. There is certainly a place for a letter carrying industry, but not with workers paid several times more than their labor is worth in a free, competitive market. Pay scales are published, and the average mail carrier is paid over $50,000 - plus benefits, including that gold-plated health insurance.
The US Post Office was never viable in a competitive market. Lysander Spooner saw that as early as 1844; so he set up a company to provide competition, charging 5 cents per letter (from Boston to New York) instead of 18.4 cents. The government service fought him in the courts tooth and nail, and lost; rates fell quickly to 3 cents. Eventually he was put out of business when Congress granted the monopoly, which has lasted ever since by making the inside of our mailboxes, which we buy, the property of the USPS. They can compete only by forcibly excluding all rivals.
How exactly the industry will evolve when the monopoly breaks down (I doubt it will ever be repealed; a million votes, from present and former employees, is too valuable an asset for any politician to throw away) makes an interesting question. There will, I think, be a continuing demand at some level for the conveyance of paper documents; we can be certain that businesses will meet that demand, by whatever means creative thinking can invent. We can also be certain that its workers will all treat us as customers who can discriminate, instead of consumers upon whom they graciously (though sometimes arrogantly) bestow their service.
That breakdown will take place during the critical final five years of the Government Era, during which an exponentially increasing number of all government workers quit their jobs and join the emerging "White Market." The monopoly law will still be in place, but it will become moot for want of anyone to enforce it. My Transition to Liberty shows the likely detail. Then, and only then, will the P.S. Fix be finally fixed.