The United States Postal Service has lost over $8 billion in the past two years and going for a third year in the red. Labor — wages and benefits — accounts for 80 percent of USPS costs. Annual mail volume has dropped from a peak of 213 billion pieces of mail to a projected 170 billion in 2010.
In the words of Anthony Vegliante, executive vice president of USPS, “If the Postal Service was a private sector business, it would have filed for bankruptcy and utilized the reorganization process to restructure its labor agreements to reflect the new financial reality.” Given the USPS’s quasi-government agency status, reorganization is out of the question. Congress would prefer the taxpayer foot the bill.
Elected officials on both sides of the aisle, along with Postmaster General Thomas Donahue, are asking for reform of USPS. In general, they want to provide flexibility enabling USPS to react to market conditions.
This has been tried. The bipartisan Postal Accountability and Enhancement Act of 2006 was supposed to bring about greater flexibility and cost saving. Annual billion-dollar deficits prove the Act has failed.
Now Republicans and Democrats have bills heeding the call from USPS for legislative assistance. The Democrats’ bill does not even attempt reform. It relies on accounting gimmicks and adjustments of supposed over-payments to federal pension funds by USPS. Rep. Darrell Issa’s Postal Reform Act is a valiant attempt to fix the Postal Service. However, his bill would likely serve as a mere Band-Aid and would not resolve the long-run structural problems. Congress is too slow to handle a changing market and privatization is the only way to save USPS. Without acknowledging privatization as an option, statements made by Rep. Darrell Issa and Sen. John McCain on the Postal Reform Act describe the numerous ways Congress is killing USPS:
Rep. Issa: “according to the Postal Service’s own economic analysis, postal workers enjoyed a 30 percent to 40 percent edge in pay and benefits over comparably skilled private-sector workers”
Postal Service unions have acquired these generous contracts through favorable unelected arbitrators, which has resulted in no layoff clauses despite the annual declining mail volume. Congress passed the law that mandates arbitration and USPS must adhere to pro-union wage laws, Davis-Bacon Act and Service Contract Act, which increase costs.
Rep. Issa: “Congress has played a part. The Postal Service has been prohibited by law from altering services such as reassessing Saturday delivery or revising delivery-to-the-door (vs. curb) policies. It can’t address special-rate deals or even consolidate retail and processing infrastructure without bumping against policies put in place by Congress.”
Sen. McCain: “According to the Postal Service, the ‘current mail processing network has a capacity of over 250 billion pieces of mail per year when mail volume is now 160 billion pieces of mail. Congress, however, continues to put up political road blocks that prevent these closings and consolidations.”
Sen. McCain: “Additionally, there are certain types of mail upon which the Postal Service routinely loses money. This bill would require that the vendors responsible for this mail be responsible for covering their costs. In Fiscal Year 2010, the Postal Service lost nearly $1.7 billion on these type of ‘underwater’ postal products that failed to cover their costs.”
USPS needs to reduce its career workforce to the tune of 222,000 by 2015 in order to return to profitability. You cannot believe the “man on the spot” would hire over 200,000 extra workers. Congress is too bogged down by special interest politics and bureaucracy to enact real reform. Our elected representatives are killing the Postal Service and another bill passed by Congress could either be the final nail in the coffin for USPS or another taxpayer bailout (hopefully the former).