Monday, September 05, 2011

Luqidate!

(Via the Drudge Report)

"...liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

Thus did Andrew W. Mellon exhort President Herbert Hoover at the beginning of the Great Depression. These days, we see the same situation--we have been living far to high for far too long and the debts have piled up until we are all under water.

The US Postal (Dis)Service is a great case in point. Their business is slowly shrinking to some small fraction of what it once was. The Intertubz and fax machines are eating their lunch, and justifiably so--they provide the equivalent service faster and at a fraction of the cost. Yet the USPS is stuck in a business model from the early 1900s, with high labor costs and a government mandate to supply services to areas that can never be profitable.

Now, they want Congress to bail them out (once more). And believe it or not, I'm in favor of that, as long as the bailout is allowing them to right-size their business, renegotiate (or arbitrarily change, if the unions won't go along) their labor contracts and start acting like a business that has to make a profit (Constitutional mandate or not).

They just don't get one dollar of tax-payer money. Feel free to raise rates though, if you think the market will support it.

3 comments:

SciFiJim said...

I work for the post office and am frustrated by the lack of knowledge that people have about the USPS. The USPS hasn't had a tax subsidy since the reorganization in 1972 and could actually make a profit if Congress didn't want to use it as a cash cow.

The money quote from the article "They add that a major factor for the post office’s $20 billion in losses over the past four years is a 2006 law requiring the postal service to pay an average of $5.5 billion annually for 10 years to finance retiree health costs for the next 75 years."

NO ONE else is required by Congress to prefund retirement for workers that haven't been born yet! Congress however is looking anywhere and everywhere for more money to spend. Any money in a government retirement account will be replaced with an IOU as quickly as computers can manage.

Yes, the USPS could use some sound business practices to save more money. And Yes, the USPS needs to be able to more quickly respond to the market. However, conservative that I am, it appears to me that the Republican Party is intent on destroying the Postal Service.

The Freeholder said...

Jim, the Post Office has two huge problems. The first is the union contracts, which includes the medical garbage. That's easily fixable, although the union will scream bloody murder.

The second, and long term, biggest problem is a business that is, in essence, going away. I know all this little towns don't want to give up their Post Offices, but you can't keep them there and lose money on them forever. NPR (yes, I will listen to them every so often) had an story on one in Virginia. Averages 28 pieces of mail a day, brings in $30k, cost $80-something k per year to run. That isn't a sustainable business model. The Internet and fax machines, couple with UPS and FedEx, are eating their lunch. Even cell phones are getting in on the act with various unlimited texting and calling plans. There are simply other ways to communicate, and people like them better. They're more immediate, and that's what they want.

I'm perfectly OK with doing whatever needs to be done to correct the retirement stuff. But it's going to take closing a lot of small Post Offices, maybe replacing them with some sort of contract thing ran in a local store. A lot of workers are going to need to be automated out of work. Saturday delivery will need to get gone. And probably a lot more things, if you want it to stay around.

SciFiJim said...

Yes, there are more efficient ways of conducting business than through the mail. However, there are still a lot of people that aren't tech savvy enough to be comfortable doing it that way. From the piles of catalogs I deliver each week, someone is using them or it would not be profitable for the companies to send them out. There are still automation steps that the PO is working on to reduce man hours in getting the mail ready to deliver. Automation is an ongoing process in the Post Office. They are also not just closing non-profitable offices. They are combining and reducing staff at levels above the local office (something that has needed to be done for decades). The USPS leadership has a plan to make it work if they are allowed to implement it. I belived that Saturday delivery days are numbered. I also think that the no layoff clause in the contracts will be removed. The letter carriers union (NALC)contract is up for renewal this November. It has gone to binding arbitration 8 of the last 9 times. It will be interesting to see what the result is.