SIX days a week a US Postal Service mail carrier arrives on my porch to deliver coupons, exciting deals on credit cards, political fundraising letters, and other forms of waste paper. Occasionally, there's a magazine or a DVD from Netflix, which is somewhat exciting. When the UPS driver shows up, he's invariably dropping off something I actually want, usually from Amazon, usually two days after I ordered it. Given the manifest adequacy of the alternatives, it is not very clear to me why the government offers a credit-card-solicitation-delivery service sort of subsidised by a monopoly on first-class mail. I say "sort of" because it turns out that the mandate accompanying the monopoly—delivery and pickup to anyone anywhere at a low, single rate, regardless of cost—is not really feasible, especially given the fact that the Postal Service is chock full of government employees, all with those nice government-employee health plans and pensions and whatnot we keep hearing so much about. As Megan McArdle put it:
[N]ow that monopoly is an albatross. The only people who really need the service are the people who it is incredibly expensive to serve: those in remote areas that are far from stores, and only spottily serviced by UPS, Fedex, and broadband. So average cost is rising fast, while rates can't.
Congress has to decide whether universal mail service is valuable enough to subsidize, or whether it wants the post office to be set free to actually compete.
The other day, a well-meaning acquaintance implored his followers on Twitter to help the post office by sending a good old-fashioned letter to a friend or loved one. I didn't have the heart to tell him that this might make matters worse, since the USPS' problem is not that it processes and delivers too little mail, but that the cost of postage doesn't cover processing and delivery costs, especially if the mail is coming from or going to the sticks. But what about those folks in the boondocks? Can we really expect them to actually pay what the services they depend upon cost? Of course we can! Here's Josh Barro:
For some reason, politicians talk about living in rural America as though it were an involuntary disease whose sufferers deserve offsetting federal subsidies. But nobody is forcing anybody to live in a remote town in northern Maine. If you want to live there, you should pay a market price to have things delivered to you. If you don't like paying for that, you can move. It's not my responsibility to subsidize your postal service so you can live the rural lifestyle you enjoy at a below-market cost.
Suck it, country folk!
Sadly, not everyone shares this sentiment. And I assume the outright abolition of the USPS is out of the question politically. So what should be done?
At first blush, it seems sensible to allow the post office the leeway it needs to "work like a real business". So let it introduce variable pricing that takes into account its delivery costs. And let it slash its labour force and renegotiate contracts. Of course, that last part's not so easy to do. The management of a not-really-for-profit government firm will have neither the power nor the will necessary to turn the USPS into a lean machine. Thus, if it were to ask people to internalise the delivery costs of a first-class letter sent to or from remote towns in northern Maine, that would probably mean asking them to pay more than they would were they to slip the letter into a small box and send it FedEx. So why would anybody use the USPS? It seems to me taxpayers are going to subsidise the outfit no matter what. The real question is how.
My preference would be to lift the monopoly and shrink the USPS very gradually to, say, 20% of its present size (through a combination of buyouts, financed by the sale of USPS real estate, and a freeze on new hires) and transform it into a transparently tax-subsidized service (for households, not companies) that picks up and delivers mail once or twice a week for somewhat less than a private delivery service would charge. If you want to send a letter now, or want to send a piece of mail that gets where it's going fast, you can pony up and pay whatever DHL or FedEx or UPS or whomever is charging. Or you can wait for Wednesday, when that nice lady in the blue shorts looking forward to her very good pension comes by.
(Photo credit: AFP)
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From Kenneth Ellman, email:ke@kennethellman.com, Phone: 9738968284, Post Office Box 18, Newton, New Jersey 07860. September 14, 2011.
Kenneth Ellman on Analysis of Postal Service Issues. Analysis Comment on The Economist Article, September 8, 2011, “You Got Fail”and New York Times Article on Postal Deficit on September 4, 2011.
I now make the following points:
1. The United States Post Office and or United States Postal Service and the Postmaster General are governmental functions specifically authorized by the United States Constitution. The reason for the existence of the Post Office is the same now as it always has been. That is for the United States Government itself to provide a method for communication and delivery for the people of the United States. It is one of the most vital public rights and services performed by the Government. It is a promise by our government to our people that the government itself will always provide a basic method of communication for all the citizens.
2. The Post Office is and does provide a government office in communities across the United States of all sizes and geography. The dispatch of letters is unusually cheap and allows the transmission of paper documents and other envelope contents anywhere in the United States and in most places in the world. Further the various features of Certified and Registered Mail and other offerings create a scheme of protection for the sender and receiver of such communications and letters. At that price there is nothing like it. Nothing that comes close.
3. In addition the employment offered by the United States Post Offices has contributed to the existence of a “middle class” with secure and reasonable employment in decent and safe jobs.
This type of government employment is significant and important for the country.
4. The Post Office, its facilities and the mail dispatched by all our citizens is protected by the Postal Inspection Service and the Postal Police, all law enforcement employees of the United States Government.
5. Whether the Postal Service, which is nothing more than a branch of the United States Government (all fictions laid aside) needs more money or can be managed more efficiently really is a separate question from the fact that it is a part of our government that must always continue to be available to all citizens even if greatly subsidized by our taxes and governmental budget process.
6. Congress must do what is necessary to maintain this vital Constitutional obligation for all citizens everywhere. The availability of mail service in each and every community is part of the nation and a duty of our government to directly offer and make available such communication services.
Stop pretending that profitability matters, it does not. What matters is the rights of all Americans to be able to access cheap and timely communication services, directly provided by our government in the form of Post Offices across our nation. Increase our Postal Services, do not lessen them and do not further injure decent middle class employment opportunities which are already under severe stress for all Americans. When we lay off Postal employees we lay off our middle class government employees which does nothing but injure our country. Does anyone really believe we have no work for them to do?? Remember who we are and the values we must protect if our population is to flourish. Kenneth Ellman, email:ke@kennethellman.com, Box 18, Newton, New Jersey 07860
Copyright 2011, Kenneth Ellman, All Rights Reserved
From Kenneth Ellman, email:ke@kennethellman.com, Phone: 9738968284, Post Office Box 18, Newton, New Jersey 07860. September 14, 2011
Kenneth Ellman on Postal Service, A Constitutional and Practical Necessity.
Comment on The Economist Article, September 8, 2011, “You Got Fail”
and New York Times Article on Postal Deficit on September 4, 2011.
Unlike an email, to hold a written letter from a loved one or from some important event in your life, is not the same as having an email in your computer. It is why we send and give to each other something we can touch and feel and hold and experience. It is why the President awards the Medal of Honor by placing it physically on the neck of the holder and not just a computer note in the computer file of the soldier. Some time ago I sent an email of gratitude to the mother of a well known deceased author whose work I respected. The authors mother sent an email back to me with touching words of tears and thanks. But then I realized it was a printout from my computer as was my message to her. Yes, the words were sent and received but it was not the same as if I had written a letter to her and she to me. There was no signature, no authenticity, no paper. And this fact of difference goes on in each and every human contact that we experience.
The perennially recurring issue of governmental deficits, including that of the Postal Service, has attracted extraordinary interest and comments. Not less important is the role of employer performed by the Post Office and our government generally, for so many middle class citizens and families over so many years, that really has no peer. Sometimes I think that one of the reasons the Postal Service is so targeted for criticism and abuse is not just because as an institution it is everywhere, but because it represents a governmental employment that in many ways treats its employees significantly better than what we call the “private sector”. Government employment, when you strip away the justifiable complaints (which can and are also made of any private business), leaves the stark fact that Federal government employment tends to treat its employees better and with more decency than private employment. Yes, of course Federal government employment, does not normally provide the ability to become a multi millionaire with stock options and other business remuneration. But for the vast majority of our citizens, who are not successful millionaire entrepreneurs and tycoons, it gives our nation a reservoir of decent and valuable middle class jobs for decent and valuable people, to build a nation with and keep it safe. We created a “Civil Service System” that offers jobs without discrimination on a merit basis and couples that with a livable wage, job security, health benefits and credo that we used to know by the simple name of “Public Service”. There are rude, incompetent, and abusive people in all walks of life, and the Civil Service System or government employment system has its share, including a share of thieves. So what? What it does do is provide an employment vehicle and opportunity for our citizens to try to do some good, “for the public service” and to be afforded a middle class standard of living and job security to build stability in our communities. And this respect for the value of our fellow citizens and for public service is worth something and worth keeping. In return we demand a standard of honesty from our Civil Service and Public employees above that from other walks of life. The Civil Service has a duty to the public and not to a private employer or just to themselves. We expect this from our government service and that is why we are so angry when we do not get it. “Throw the bums out” is one of the expressions we use when public service is corrupted. I do not hear that expression to the private sector, for we cannot throw a private business out (of course we can stop doing business with them). It is hard to believe and remember but sometimes there is more to life than making money and getting rich and paying low wages and building up a privately owned company for the extreme wealth of the few . There is a balance in life and public works between the private purpose and public purpose and we forget this at our peril. We have tried to make the Post Office Department better by making it more structurally like a business enterprise, and for efficiency purposes that is fine and laudable. Our government is “our thing” and Public Service is something we should cherish and protect just as we expect the employees of our government to care for, safeguard and respect our citizens and the institution they work for.
Kenneth Ellman, Post Office Box 18, Newton, New Jersey 07860, email:ke@kennethellman.com, Phone: 9738968284
On Saturday I sent an express package (for which I paid $18.30) from New York City (Queens) to a small town 80 miles west of Chicago. Delivery was promised for Monday, before 3pm.
The package did not arrive. The online tracking system states the package went through the Los Angeles sorting facility on Sunday. Yikes...
I don't understand why the correspondent seems to have a problem with postal workers getting a pension. What's wrong with a pension? Does he not consider postal service a real job?
My wife and I live in relatively rural Kansas, and we're trying to figure out what comes or goes by mail that we would have a hard time doing without. So far, we've got nothing.
I walk about 30 seconds down the block to get my mail in a secure box 5 days a week (no Saturday delivery in Canada). We live in a semi-rural (read: formerly rural) area in western Canada. I've tried to convince everyone that we should all get our mail like this, even in cities. Apparently there is a cost to sidewalk space in, say, downtown Vancouver that makes it less appealing. Fair enough but the idea of having someone actually walk around to each house or apartment has got to be a thing of the past.
Someone who chooses to mail something is obviously choosing to not particularly care when it gets where it's going (but is assured it WILL eventually get there). Why not pickup and deliver 3 days a week? Monday-Wednesday-Friday? If I need to get something to its destination right away I fedex it or (actually more likely) go to the Post Office to express-post it.
We have postal systems built for times when mail was the be-all-and-end-all of information delivery. That's just not the case anymore and we need to rethink how it's done.
Right diagnosis and wrong solution. Yes, people in the boondocks should pay more, even several times more, for their mail. They also have cheaper land and housing costs. There are puts and takes.
The Post Office is just one example of a great many things our government does to favor rural over urban population (right up to the composition of the Senate as two members per state, regardless of population), which indirectly do great harm to the country. America is a backwards country because it doesn't give adequate political representation to, and actively discourages people from living in, its cities. All because of some frontier fantasy about "small town America" that flies in the face of the truth that the average American now lives in metropolitan area of almost 1.5 million people (Columbus, OH to be exact).
USPS made $9.5 Billion profit from 2003-2006
PAEA law passed in 2006 requires Pre-payment to fund for health benefits for future retirees. 10 year plan 2007-2016. About $5.5 Billion required each year. 2007, 2008, and 2010 received FULL payment. 2009 was reduced through H.R. 22 by around $4 Billion for a payment of around $1.4B.
Bottom line the losses from 2007-2010 are around $20B, but the prepayments were around $21B, so the USPS is operationally PROFITABLE. Artificial handicap is killing us. No reason to fully fund that account by 2016. That is akin to starving your family to pay off a 30 year mortgage in just 10 years. I am retiring in 2038, so my retired health benefits will NOT be required in 2016.
Pensions. Separate issue. Two types, defined benefit and defined contribution. People hired before 1984 are CSRS, and newer hires are under the FERS system. CSRS is pension, with no social security. FERS is smaller pension, social security eligible, plus a 401k type instrument called TSP.
The CSRS fund with $200 Billion is OVER funded by about $50-75 Billion. Depending on if you believe the OIG or PRC. The OPM miscalculated, but won't fully admit it.
The FERS fund is OVER funded by about $7.5 Billion.
So you can see the USPS has been BAILING out the Federal government for some time now. Any credit for these over payments WOULD NOT be a tax payer bailout, and the funds could go directly to the pre-funding of retiree health benefits, raising THAT fund from the current estimated balance of $43 Billion to the 2016 goal of over $70 Billion, also eliminating the remaining 6 annual payments of $5.5 Billion I wrote about earlier.
The USPS has reduced employee totals from 820,000 in 2000 to around 573,000 now. I predict that in 2020, the USPS will have 425,000 employees. So employee totals have been drawn down through attrition FASTER than mail volume declines, but that is rarely mentioned. The article mentioned better health benefits for USPS than other Feds. Fine, give USPS locality pay too.
The fact that 80% of the USPS $70 Billion in annual revenues goes to salary and benefits is NOT out of line. We are a labor intensive service industry. What should that percentage be?? I think it is too low. Actually only 53% goes to those who touch the mail......and Fed Ex owns an airline, we don't. Not a fair comparison.
Finally (for now), the USPS says 80% of post offices are losing money. That is low. It's more like 92%. The reason is that revenue is credited at the point of entry, so large plants get all the credit, and small offices that actually deliver it DO NOT get the credit for delivering it. The smallest, rural 10,000 post offices cost the $70 Billion dollar organization LESS than $1 Billion per year. If you shut them all down, rural America will suffer unduly.
I worked for the Post Office for 9 months back in 1999 as a supervisor, but I quit because I saw this train reck coming. The union created a monsterous/generous/unsustainable benefit package for postal employees. It's the best in the country in my opinion. And the executives in Washington simply don't know how to run a business. Yes the post office is a business. Technically, its a quasi-government agency. Guess what? Governments can't run businesses. Why? Because the government has no competion. And when there is no competion, you can bet there is no innovation. Without innovation, things just start getting expensive. We need to fire all the postal executives at the top and hire business professionals to straighten out this mess.
But....
without the Postmaster General...
who will be 10th in line for the Presidency?
Enquiring minds wish to know
When I first started paying attention to the plight of the USPS that was my response too: they have tons of items to deliver why are they in trouble? Ah, the price! Yes, now I know that the USPS is the best kept secret. They will pick up letters and packages for free and deliver them for barely nothing - anywhere! I am an Amazon seller and always use USPS for shipping. Sure it is not as fast as UPS/FedEx, but I never have to leave my house, now quite literally thanks to Amazon.com's newer online postage tool. I definitely though am in favour of going down to no weekend delivery. I get nothing important in the USPS mail anywhere except Netflix and that occasional post card from a traveling friend. Bills - online. Checks - now electronic transfers. Letters - now emails. Business letters - now rushed along by DHL. Packages - well those do still come USPS in my experience. When I order things from Amazon.com Marketplace most sellers I buy from do still ship via USPS. Which makes me pity the postman. First he has to drive my route handing out everyone's packages, then he has to walk his route delivering and picking up things. Not to mention his route is now longer than before... The economist should take a poll. How many people, if offered by the USPS, would be okay with having images of their mail scanned to them, and then providing instructions to the USPS as to what to do with it: recycle, shred, set aside for pick-up, deposit (checks), etc.... Many companies offer this (earthclassmail etc...) and I think the USPS could become this....
The US Postal Service hasn't spent a dime in taxpayer money since the early seventies. Postage is its sole source of income.
"It’s not my responsibility to subsidize your postal service so you can live the rural lifestyle you enjoy at a below-market cost."
Somehow, I don't think rural folks are getting a lot of value from the Homeland Security expenditures, which overwhelmingly benefit urban target dwellers. So lets make both the postal service and HSA a part of the armed forces so that funding will continue to be sacred. After all, both workforces are fed from the same tax trough.
"Suck it, country folk" is now my favorite blogging sentence ever. It makes me dream of a day when WW only writes about corn subsidies.
trustbutverify wrote: Sep 8th 2011 6:14 GMT
"If you applied the strict yardstick of profitability, the countryside would have no roads, airports, phone lines, or internet."
Don't be silly -- pretty much all of the early infrastructure of the U.S. began as private efforts -- toll roads, toll bridges, private shipping and steamboat service, etc. Even the first telegraph cables and phone lines were private enterprises. Later on, governments stepped in and began to take over.
The only major infrastructure efforts I can think of that were purely the result of federal government initiative (without regard to profit) are FDR's public works projects during the Great Depression, the Interstate highway system and the DARPANet (the precursor to the modern Internet). And two of these efforts were originally for defense purposes.
The USPS isn't just for people in sparsely populated rural areas, it's also for people in densely populated urban areas. Whenever possible, I have things shipped to me via USPS because when I inevitably miss fed ex or UPS deliveries (because I am at work), I am forced to go to the fed ex or UPS depots to pick it up. I am sure readers have had the experience of having to travel to their towns' UPS or Fed Ex depots. Inevitably there are only one or two of them, and inevitably they are located in the industrial area, which is by definition not near most people's homes. By car this trip can be long an annoying, and by bus it can take 2 hours.
The USPS, by contrast, can be counted on to have a branch office within 2 miles of any place I live, and often much closer.
Moreover, UPS wants to return my packages to the sender after 3 days. The USPS provides me at least 2 weeks and at most a month to pick up my package.
That is why even though I am not a rural customer, I am the opposite, I depend on the USPS. The service it offers can not be had at any price from the private mail carriers.
willstewart wrote: Sep 8th 2011 2:50 GMT
"Actually this problem might be addressed more simply. All the rubbish that gets delivered is carried at discounted rates. This may in some fundamental sense be justifiable but it is surely easy for the law that establishes the monopoly and no higher remote rates also to mandate no junk-mail (or any other) discounts?"
An eminently sensible idea, which means it won't ever happen. Even though bulk rate mailing is a massive money-waster for USPS (not to mention wastful in terms of paper and landfill space), Congress insists on having low mailing rates for "small businesses" so that they can send out their coupons cheaply. Nobody bothers to point out that the buisnesses that take advantage of these cheap rates are not "small" in any sense of the word.
It would be perfect if there was a single class of postage based on weight alone. That, plus cost-cutting of union benefits, would solve USPS problems in a jiffy.
"It’s not my responsibility to subsidize your postal service so you can live the rural lifestyle you enjoy at a below-market cost."
What a perfect example of the politics of selfishness. This line of argument appropriates all the costs to *my* tax dollars and suggests all the benefits go to undeserving others who have made irresponsible choices. But of course Josh Barro receives subsidies as well, with my tax dollars. Does he take a mortgage deduction? Then I have to pay for that tasteless McMansion he lives in, and I am mad as Hell. When the government is only taking in revenue equal to 50% of its expenditures, everyone is being subsidized. If Josh Barro doesn't like our rules, he should move to France.
As for you, I know it is only a blog post, but do you do any research at all? Fedex quoted me $19.98 to send a letter to the 04756 zip code, about as far north in Maine as it gets. And not overnight either, four business days, from Maryland. So your statement "if it were to ask people to internalise the delivery costs of a first-class letter sent to or from remote towns in northern Maine, that would probably mean asking them to pay more than they would were they to slip the letter into a small box and send it FedEx." seems very questionable to me. Does USPS need to increase its pricing more than 4000% to break even?
The problem is that Congress has capped USPS prices. Conservatives would be screaming bloody murder if a private business had its prices controlled and in consequence reduced supply, but in this case the whole problem must be that an employee has a good pension. God forbid anyone should have a pension in America. What a crazy idea that was.
Step 1: require all "junk mail" to pay full cost of delivery plus -- however big a "plus" you like. That has two benefits. First, it brings in needed funds. Second, it reduces the mass of trash appearing in my mail box.
Step 2: do the same for mail from businesses. (I'd say just mail from businesses to people who are not already customers. But I don't think there is a viable enforcement mechanism for that.) Same benefits.
The sooner the better!
Some of us who choose to live in rural areas have no more desire for subsidized postal service than those who live in urban areas. I honestly can't remember the last time I mailed something via USPS.