US Post Office Deficit will reach $9.2 billion this fiscal year?

While everyone wants Congress to give the Post Office billions of dollars, there is a solution to all this: get rid of the Post Office's monopoly. Whose fault is it that the Post Office has these horrible labor contracts that force all this inefficiency? From the New York Times:

the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances.
“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, said in an interview. “If Congress doesn’t act, we will default.”

In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers, nearly one-fifth of the agency’s work force.

The post office’s problems stem from one hard reality: it is getting squeezed on both revenue and costs.

As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail.

At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.

Missing the $5.5 billion payment due on Sept. 30, intended to finance retirees’ future health care, won’t cause immediate disaster. But sometime early next year, the agency will run out of money to pay its employees and gas up its trucks, officials warn, forcing it to stop delivering the roughly three billion pieces of mail it handles weekly. . . .

Judge Napolitano has a slightly old piece on why we should abolish the USPS available here.

In the 1840's, the cost of mailing a letter was determined by weight and distance. An average one-ounce letter cost $0.14.5 to mail from New York to Boston. And in 1841, it took five days to get there. Then a man named Lysander Spooner started a business to compete with the post office. He charged lower rates. He delivered in less time. And he brought the mail directly to your home, not just to the post office in your town. Not to be outdone, the post office kept lowering its charges for stamps.
By 1851, both Spooner's company and the government were charging $0.03 to deliver that same one-ounce letter from Boston to New York. And so the federal government, unaccustomed to competition, sued Spooner and his company and tried to get a jury to put him out of business. The jury loved what Spooner did. He made life better and cheaper. The feds lost. And then they did what they always do when they have competition they can't tolerate, they outlawed it.
So in 1851, the feds were losing money by delivering mail from post office to post office and Spooner was making money by delivering mail from post office to private homes and businesses. And Congress thought it would make the post office solvent by banning the competition from charging less than the post office charged. The $0.03 stamp stayed in place for over 100 years with Congress using tax dollars to fill in the deficits in the post office's budget. . . .
Since the 1960s, the price of a stamp has gone up from $0.05 up of $0.44. The service is worse. . . . .

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Blogger kjvonlybaptist said...

Hi again John.... I've worked at the post office now for 18 years. Great job. Supports my family. The job however, is unsustainable at current business practices. It's almost a loss cause. Upper management is as inept as the current administration. They can't seem to make the right decisions. Mainly because of two reasons. 1. Congressional approval to do anything at all. That should not be. We really do need to cut Saturday delivery and probably another day as well. They won't let us. At least not yet. I am a clerk and work nights when all the mail is basically worked. It has dropped off considerably. Change needs to be made and fast. The office I work in has adjusted to the volume by not hiring anyone in over 10 years even to fill a retiree spot. We still get overtime almost daily. Not always needed either...anyway. The 2nd is the union. They push and push our rights at our detriment. I would take a buck pay cut to ensure a job. Most would. Not the union though. I think we should consolidate the really large offices in areas. Close all really really small offices (small town near me does on average of $72 a week in revenue. The clerk who works there, makes about 30-45 thousand...extrapolate that across the country...big savings)
Cut middle management. This is always needed. We have lost over 30 people to retirement in last 10 year but have the same amount of supervisors. Not good. The elimination of Saturday delivery will be huge and give the post office a good chunk of money to fill in in other areas. No gas that day alone is a huge savings. I say these changes would allow us to make the pre fund payment (which the union is against by the way...I asked my local president if his back hurt from throwing our retired brothers and sisters under the bus. He doesn't get it.) If the PO doesnt change it's ways in other areas first, missing the payment will not help at all...we will be in same boat again shortly. So smart change is very needed. Thanks for all you do Mr. Lott

9/05/2011 3:03 AM  

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