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Columns September 15, 2011 //  by  // 12 Comments

Privatization of US Postal Service could be costly

When a government agency veers towards obsolescence or its function becomes redundant with those of private industries, it is the duty of the overseeing bureaucracy to eliminate the wasteful entity while ensuring the continuation of any essential services. Given the state of the nation’s economy, it is expected for members of Congress to step up their efforts to identify and remove poorly performing agencies.

However reluctant the federal government is to cull members of its own herd, politicians have seized onto this popular sentiment by blacklisting any and all agencies that have the appearance of being inefficient.

Unsurprisingly, the US Postal Service (USPS) has fallen under congressional crosshairs. Labeled obsolete, redundant and fiscally irresponsible, the postal service seems to be a poster child for failed agencies. Some members of Congress have called for its immediate privatization in the belief that the open market can offer the same services more efficiently and at a much lower cost to the consumer. They point to the fact that last year the USPS lost more than $8 billion dollars and is now fast approaching the statutory limits on its ability to borrow money.

What is not disclosed is that most of the USPS deficit is actually the result of Congress imposing a ridiculous mandate.

The USPS is required to fully fund its retiree benefits for the next 75 years, and it must do so by the year 2016. This costs the agency nearly $6 billion dollars a year. In effect, this is a fiscal death spiral; they must take out a loan to pay for a future that becomes less likely to happen the more money they borrow. The argument can be made that even after removing this mandate the USPS would still run a deficit of close to $2 billion a year. While this is still an enormous cost, the burden is not placed directly on taxpayers. As an independent government agency, the USPS is expected to be fully self-financing and receives essentially no tax dollars. Recognizing the need to address their financial losses themselves, the USPS has put forth a plan that would cut nearly 120,000 employees, close 3,700 locations and end Saturday delivery. Such drastic measures demonstrate the agency’s ability for internal reform, and suggest that privatization is unnecessary to restore its financial balance.

However, proponents for privatization claim that the cost to consumers would be reduced by removing the mail service from government control. But market prices suggest otherwise. Currently, a 44 cent stamp will get a letter from Houston to New York in two to three days. According to the FedEx website, two-day delivery of a similar letter to the same destination will cost between $20-30 dollars.

As a private company FedEx is expected to make a profit, and its rates reflect this fact. As a government agency, the USPS is intentionally designed with no requirement to make a profit in order to provide a universally accessible service to the country. And while it is not a private corporation per se, the USPS has a substantially positive influence on the free market by keeping shipping prices in check. The loss of the USPS as a low cost competitor would grant existing private shipping companies greater ability to increase their own costs, secure in the knowledge that the consumer has little alternative when sending mail.

The profit motive of a privatized postal system would have a significant impact on UH as well. A study out of the State University of New York – Buffalo found that a university the size of UH spends between $1-2 million a year on mailing costs. If mailing rates were to double, a conservative estimate by some, the additional financial costs placed on the University would invariably be passed on to the students through an increase in fees. In addition, many of the textbooks that students order using online retailers are shipped via the USPS at a considerable cost savings when compared to other delivery options. A privatized postal system would erode the purchasing power of already cash-strapped students.

The issue is not whether the USPS can be made to perform better; one would be hard-pressed to find any government organization that could indisputably be called efficient, and the current state of the USPS leaves much to be improved.

The issue is whether the USPS can be reformed while retaining its status as a government agency. There are certain functions that the government is ideally suited for, and privatizing the USPS would destroy its ability to offer low-cost mailing options to all parts of the country.

Congress should first remove the onerous funding requirements it has leveed on the USPS so that the agency can focus on its current state of affairs. Then Congress should implement a truly hands-off approach to governance and allow the USPS autonomy in implementing its own proposed changes.

While the postal service’s financial problems will require painful decisions, they will ultimately prove to be a storm that mail can weather on its own.

Marc Anderson is a 3rd-year cell biology Ph.D. student and may be reached at opinion@thedailycougar.com.


  • Grey Old Dragon

    I have personally witnessed the internal demise of the system from the inside. If the GAO would investigate the flow of monies from beginning to end, they would find who has sold out the USPS to the highest bidder. If you create the atmosphere of despair with fear and intimidation as your weapons, you can cause an entity (like the USPS) to become unstable, therefore reducing the value of the USPS. If the value were reduced to the point of financial collapse it would sell off to private industry at a very depressed market rate. Someone stands to make billions by degrading the value of the USPS. The destruction of the USPS as we know it should be made a treasonous offense and prosecute the perps to the fullest extent of the law.
    A Postal Drone.

  • RandyF

    As the article stated, there is one thing that has been driving the USPS to insolvency. A provision in the PAEA of 2006 that required the USPS to PREfund FUTURE retiree health benefits. This provision takes $5.5 Billion out of USPS revenue every year. If not for this requirement made by CONGRESS, the USPS would have actually had a profit of around $800 Million over the past 4 years. This $55 Billion fund is meant to ensure the funding for FUTURE retirees for the next 75 years. In essence, USPS is being required to put money aside for people who do not work for USPS yet and some that aren't even born yet. This fund was to be paid in only 10 years. There is no other business or organization anywhere that has to make such payments.

    The USPS has also, due to a flaw in the formulas, OVER paid into the two pension funds by over $60 Billion. You can do the math here, and so can Congress. Congress will not talk about these over-payments or pre-funding requirements. They're too busy paying lip service to their constituents about keeping little bitty Post Offices open.

    Cut out the PAEA funding and return the over-payments. Then, since there is already $23 Billion in that fund, USPS can take that $60 Billion and put $22 Billion into the future retiree health benefit fund, pay off the debt to the Treasury of $15 Billion and still have some left over for a rainy day.

    But this is too simple for Congress to grasp. They, as well as the public, grab onto the Union Contracts as being the bane of the USPS. In specific, the No Lay-off clause. Think about this. When the last agreement expired in November 2010, hiring was frozen. Anyone on the rolls prior to that is protected against being laid off. Once the contract was ratified, hiring resumed. Those newly hired are not covered by the no lay-off clause, Besides, who would be laid off first anyway? That's right, the new people.

    Another thing you don't realize in characterizing the Unions as evil money grubbing monsters. The APWU, realizing that we are all in this together gave up some financial issues to help with this problem. Specifically, we will be paying a larger portion towards our health benefits which, contrary to popular belief, were never ever paid in full by the USPS. We also waived any Cost of Living Adjustments for all of 2011. COLA for 2012 is deferred until the same period in 2013. Our first chance of a raise is only if inflation causes the CPI to rise. The first general wage increase will be 1% starting in November 2013. That will make 3 years that APWU represented workers have gone without any raise in salary. Definitely the sign of evil money grubbing monsters. We're feeling the pinch too.

    So, NO, it isn't the Unions. The blame lies solely with your CONGRESS. If you really want to do something, contact your representative and senator and urge them to support H.R.1351 which will go very far in resolving the current problem and resolve the over-funding problem.

    As far as a bailout, the USPS has repeatedly stated that it is not looking for a bailout and does not want a bailout. Getting to your question of the Union blocking any attempt at restructuring all I can say is, Hogwash. In the latest contract, the APWU agreed to allow the USPS to hire a greater percentage of temporary workers as well as allowing management to post and fill "Non-Traditional" jobs. These jobs could be 4 10 hour days, or 5 6hour days and a 10 hour day or even just 5 6 hour days. Workers only need work a regular schedule of 30 or more hours to be considered full time.

    This allows the USPS to fill positions that may not have 8 hours of work every day. It alleviates the problem of having a worker on Stand By for 2 hours every day. I am sure that you have heard about the USPS paying workers to do nothing. Sure doesn't sound like a stonewalling tactic to hold the USPS hostage to a contract.

    Also consider that USPS Management agreed to the terms of this contract just a few months ago as something they could live with as well as the APWU.

  • http://twitter.com/dryMAILman @dryMAILman

    Why not restrict all electioneering to USPS mail with the contributor fully disclosed on the mailpiece? $ is not speech, but the expenditure of $ enables speech. Why isn't postage (with disclosure) the best way to ensure 'free' political speech. Given that most politicians are bought and paid for, wouldn't the USPS be the best way to inform the electorate who's doing the buying? We may never know if this idea might work, the incumbents are working hard to dismantle the USPS.

  • Frankie

    The Post Office is planning on consolidating 252 processing plants. If this happens, not only will there be local job loss but a local letter will take 2-3 days to get to the destination. Save Americas Postal Service without using tax payer dollars. Print the Petition at http://www.saveamericaspostalservice.com and have your friends, family, & co-workers sign it. Then send all the signatures you collect to your congressman. To find your congressman’s address, visit House.gov. You can also email you congressman. Just goto House.gov, type in your zipcode, and then email your representative. Ask them to support the Bill HR 1351.

  • MontanaKate

    There are so many incorrect statements in this I do not know where to begin. The writer really needs to do more research before they publish anything like this. This really reads like someone sat down and wrote what came to mind, oh and googled a bit and then finished. This is a shame.

  • Navy&Postal Veteran

    Why is it a college student can grasp the situation better than ANY Republican member of Congress? Because Marc realizes how very real the impact of privatizing the USPS will affect campus costs across the US. I specifically stated Republicans because the problem goes even further than the column writer suggests. Under the Bush Administration, the Postal Accountability and Enhancement Act of 2006(PAEA), sponsored by Republican Senator Sue Collins, was passed by a voice vote late in the year while Congress wasn't fully in session. Think of the legislative move when Congress typically votes themselves pay raises late at night at the end of a news cycle; a move that is designed to garner little to no public coverage. This is the type of situation that the PAEA was passed in 2006.

    Fast forward to 2010. Because the Republicans now control the House of Representatives, AND all revenue bills must originate in the House, Republicans control which legislation even comes up for a hearing. You have seen reference to HR 1351, a Democratic Rep from Massachusetts sponsored bill that would return overpayments from the USPS of over $50 billion, BACK in to USPS coffers, which would solve all the budget problems. It is a very simple fix. But like anything in life, the plot thickens.

    Congress has forever raided postal surplus monies to apply to the overall deficit. Were Congress to return the $50 billion overpaid funds back to the USPS, that payment would immediately raise the deficit # by the same amount. Thus, while it is OUR(USPS) money to begin with, Republicans have framed this repayment as,….you guessed it…..a government bailout. But wait; there's more.

    US Rep Darrell Issa, a Republican Congressman from California, chairs the committee that has oversight of postal affairs. Issa has introduced a bill, HR 2306 or 2309(memory lapse,sorry), that piggybacks the PAEA of 2006 in the following manner. In that the PAEA of 2006 put the untenable debt load on the USPS of a $5.5 billion annual payment, Republicans know that the USPS cannot possibly make this payment. Issa's bill would use this lack of payment to trigger conditions in his bill that would bust the unions and ultimately privatize the Postal Service. His bill would grant him authority to outlaw collective bargaining, rip up current contracts, reset the wage scale to about half its current setting, and immediately close about half the Post Offices in the country. It would completely restructure the Post Office as we know it, putting it on the fast track to complete privatization in less than 3 years.

    Now, guess which bill Chairman Issa will put on the floor for a vote. That's right, all of these obvious points raised by Marc Anderson will be moot, as Issa controls the solution, and his solution dovetails the Republican agenda of busting unions and killing off government services of any kind. The Wisconsin debacle in the news earlier this year was just the tip of the iceberg in the Republican agenda of waging war on unions and middle class families, all the while while touting family values and christian behavior. To Republicans, the right to collectively bargain in good faith with employers is not allowed. Republicans even want to abolish the minimum wage, in their ongoing efforts to widen the gulf between rich and poor.

    The Republican solution to what ails America is in short, a recipe to continue the demise. In insisting on only spending cuts, with NO increase in revenues of any kind,(taxes), Republicans want to dismantle the entire portion of the US government that basically aids anyone making under $100,000 by "starving the beast". By withholding revenue from programs they do not support,(USPS, Social Security, Medicare, Medicaid), they can effectively end such programs from behind the scene.

    There is but one surefire solution to save this country. Return BOTH the House and Senate to filibuster proof majorities of Democrats, raise taxes on the rich, end oil subsidies, and get this country moving again. Until American voters realize and act on this, there will be a divided Congress that will continue to fiddle while Rome burns; a situation that can only lead to the continued demise of our way of life in the United States.

    • cbb

      I totally agree. I have been saying this for the last year.

  • mercedes

    When reporters and posters refer to "The Postal Service", it helps to keep in mind that "The Postal Service" is too broad of a label. The culprits are real people, Donahoe and his cronies, top executives and governors have bled the entire system dry. Instead of reporting the issues fed to the media through postal PR, the media needs to do it's own investigating and find out how the wasteful spending, salaries, benefits, perks,awards, bonuses incentives, travel and expense accounts, cars, homes, timeshares, spa and countryclub memberships, etc. have destroyed our service. Instead of reporting how much "The Postal Service" lost, a number that is easily manipulated, ask how much "they" earned. First class mail volumes may be down {which happens in summer months as a rule} ask how other types of mail volumes are way up. The list goes on, and I am tired of hearing the same old story in the news. Give us both sides of the story, talk to some real worker's for a change, to tell the public what's really going on.

  • coleymcdonough

    Donahoe wants to void our contracts so that he can fire the work force from the top down,seniority wise,so all you people with 30+ yrs,bye bye.Nice guy,real genius,a morale booster

  • coleymcdonough

    Donahoe wants to void our contracts so that he can fire the work force from the top down,seniority wise,so all you people with 30+ yrs,bye bye.Nice guy,real genius,a morale booster

  • Alex

    Some of you may be too young to remember a President named Nixon and the postal strike of 1970. You may also have missed the part in the history books which notes that he removed the Postmaster General as a Cabinet position, reorganized the postal service — essentially privatizing it. The USPS used to be the courier of choise for ALL mail, mags, bulk, etc. Now mostly the little start-ups from that era, UPS, FED EX, etc, handle it, and who are now global in scale. Pivatization? There use to be a SINGLE postal service. That's in the past. That's funny. Really, keep squabbling. It's amusing.The reason for the "reorganization" was to break the union. It didn't work, but we ended up with beter postal service. Nixon did manage to get that one right — albeit by accident.

  • Quikboy

    It should be well aware that the cost to send a letter, whether it's from Texas to Alaska or Texas to Lousiana is the same. Given that we have one of the cheapest prices for sending mail in the world, and the fairly quick delivery under such circumstances, shouldn't a reasonable price increase on stamps sound reasonable?

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