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COLE: Postal Service delivers bill of goods to taxpayers

Now a failing government agency is seeking its own bailout

- The Washington Times - Monday, March 28, 2011

In 1844, Lysander Spooner, founder of a short-lived competitor to the U.S. Post Office, reasoned that the federal government had "authority to carry only such letters as individuals choose to offer them for carriage."

Shorty afterward, Congress, threatened by Spooner's temporarily thriving American Letter Mail Company, forced his enterprise out of business.

Almost two centuries later, our government's monopoly on mail delivery carries on in the form of the United States Postal Service (USPS), an institution whose origins actually predate America's founding, and whose business model is similarly antiquated.

But in the 21stcentury, faced with private competition for parcel delivery from the likes of UPS and Federal Express, and profoundly transformed electronic commerce and communications landscapes, this inefficient quasi-government institution is hopelessly anachronistic.

Revenues support this assertion. According to a report issued by the Government Accountability Office last year, first-class mail (which constitutes the bulk of mail) has declined 19 percent since 2001 and will continue to sink by 37 percent over the next decade. Likewise, standard mail delivery has dropped 20 percent since 2007.

In 2010, the USPS, currently $12 billion in debt, lost $8.5 billion. It's likely to lose another $7 billion this year.

Meanwhile, in a familiar scenario, it is also nearly $7 billion short on funds (which must be prepaid, per the Postal Act of 2006) to cover promised health care benefits for its 596,000 employees. Eighty-five percent of these employees are unionized, contribute less of their earnings than other federal employees to premiums (21 percent compared with 28 percent), and earn 15 percent to 20 percent more per hour than their counterparts in the private sector. Their salaries and benefits also consume 80 percent of the service's expenditures.

Only in government hands could a business produce such abysmal results, compound them with a billion-dollar benefit shortfall and keep on trucking.

In addition to a suggested increase in stamp prices, in 2010 then-Postmaster General John Potter, who has since been replaced by Patrick Donahoe, proposed discontinuing Saturday delivery and shuttering some of the USPS' 36,400 facilities, whose locations and continued operation are unrelated to profitability.

None of these stopgap steps were taken. Instead, the USPS set out in search of a bailout of sorts. According to the organization's inspector general, the USPS is owed $50 billion to $75 billion by the Treasury as a result of overcontributing to employee pension plans.

This claim's roots reach back to 1971 when, in an effort to improve efficiency, Congress turned the USPS, then a federal department, into a separate (though still government) organization. Workers hired before the restructuring remained in the old Civil Service Retirement System pension plan. The USPS alleges the Office of Personnel Management (OPM), which oversees federal retirement plans, overcharged on these particular employees and proposes to use a theoretical refund to shore up its unrelated health care commitments.

Though the OPM disputes these claims and the idea that a repayment would equal long-term sustainability, postal unions and friendly politicians are now clamoring for a billion-dollar lifeline to the USPS.

Sen. Susan M. Collins, Maine Republican, recently introduced the "U.S. Postal Service Improvements Act of 2011," which would facilitate such a rescue. President Obama has thus far ignored pleas to support this scheme but his proposed 2012 budget did include $11 billion in aid for the USPS.

Both taxpayers and interested consumers should be wary of any such reprieves. Far better to give today's would-be Lysander Spooners the freedom to offer a cheaper and better alternative and grant consumers the liberty to use it.

And if Washington is serious about sustaining the USPS, cash transfers and operational tinkering won't work. Shrugging off burdensome labor costs and government regulation via the Postal Rate Commission might, however, help it attract customers by virtue of better services, not a government enforced monopoly.

Though the concept of privatization of state assets remains mostly politically toxic in America, nations as far-flung as Germany and New Zealand have privatized parts of their postal services and seen increased productivity and profits. Japan has privatized Japan Post, the country's state-owned mail service - which also happens to be the world's largest financial entity.Other nations are heading in the same direction. It's time we did the same.

The USPS is a rare federal operation that actually sells a marketable good. The numbers, not to mention millions of Americans' firsthand experiences with its service, indicate that it does this poorly.

Instead of granting the USPS taxpayer-subsidized CPR, it's time, per Lysander Spooner, to end its monopoly and create a true marketplace for mail delivery.

Ryan L. Cole was a speechwriter in the George W. Bush administration at the U.S. Department of Health and Human Services.

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