Mac-Coleman

6 September 2011 –

The summer is over. Already in Houston, the tune of the weather is following an eternal metronome. The nights’ temperatures are in the sixties, instead of the high seventies of just last week. The days are in the eighties to nineties, not the hundreds of just last week. Now, if we could just be blessed with a tropical storm to fill up our aquifer and our lakes. This drought is telling us that we are not as powerful as we would like to think. Nothing in nature convinces me that man is powerful enough to alter anything that nature decides to do according to its metronome. Our continued obsession with global warming based on man’s increased CO2 output is incredibly hubristic on one hand and faulty thinking on the other. More on that later. Today’s focus is on a much more mundane: the death throes of an American institution and the birth of its successor.

The US Post Office is a fundamental institution in the lives of the older generations of Americans. For the first 75% of my life, it was the only way most Americans move ideas and data—what we used to refer to as important stuff—around. Every town or suburb had its full service Post Office. The employees were secure in their jobs. After all, no one could see how there would not always be the need for the Post Office to bear the load of the U.S.’s durable communications. I can still see an elm-lined,“Leave It To Beaver” street with children playing in the front yards and the kindly postman waving to the housewives in summer dresses who are hanging up their wash in the line.

Well, the information technology revolution has done its share to change that scene forever. The USPS has taken the change on the chin. The Postal Service has responded with cost-cutting infrastructure changes to stay afloat fiscally as demand for its services dwindles. To its credit, the USPS has tried to reduce its services in many communities and to contract out services through retail stores that also provide private delivery services. And, I should be quick to stress, the USPS still reliably delivers the mail, no matter what. But, these cost-cutting moves meet employee and union resistance; they reduce jobs. Another example of union resistance to changing business conditions. This struggle will continue, but is not the nexus of the immediate crisis.

It is possible to build and implement an efficient business model, postal workers union resistance notwithstanding. The real problem is how to pay for the generous pension and health benefits for the postal retirees under the laws passed by Congress in 2006. Those laws require the Postal Service to “pre-fund” future retiree health care costs on a year by year basis out of receipts for that year. Congress did this because many of the postal workers are under the federal retirement program. I think pre-funding means that generous health benefits for the postal workers who retire each year have to be fully funded in the out years with funds in the bank today. Whatever fiscal prudence Congress was exhibiting when it passed this requirement, the USPS is the only part of the federal government—or its independent services and agencies—that is required to do so.

With falling revenues each year, partly because of a nearly obsolete requirement for first class mail, the Postal Service doesn’t have the funds this year and is begging for relief from these laws. Postmaster James A. Farley is asking Congress to allow the USPS to take over its pensions and healthcare benefits directly for its retired and active workers (480,000 retirees and 600,000 active employees). Such a restructuring would help the situation, but only in the short-term. Unless the USPS exhibits draconian discipline to cut the work force drastically and fit into a legitimate business model—union screams notwithstanding—, the numbers game will eventually overtake the USPS. The USPS retiree programs will become like the rest of the federal government benefit and entitlement programs: too many recipients; too few contributors; too few funds without borrowing from places like China. Even a substantial rise in postal costs may not cover the shortfall in the out years. Painfully, how much would the Post Office have to raise first class mail fees to keep the service afloat, especially since the Post Office may never provide the conveniences of other, profitable private delivery companies for all other services?

This bureaucratic struggle portends future pension and health funding crises in the state and federal governments, to say nothing of Social Security and Medicare entitlements: too many people collecting too much for too long with too few paying in. Ironically, private delivery companies pensions and medical benefits will never match the generosity of those of the federal government or the USPS. These companies, after all, have had to follow sound business practices to survive.

If you have any ideas how to solve this problem, I am sure your representative or senator will be happy to read them. Text, Twitter, e-mail, but don’t waste the time or money to send a letter.