Tuesday, November 24, 2015

How to lose $5 billion - The U.S.Postal Service has more troubles than long queues

The postal service’s problems are bigger than any number of nicely wrapped packages can fix. Its unfunded liability grew 76% between 2007 and 2015, to $125.2 billion. The Tax Foundation, a think-tank, doubts it can ever repay this money. The service has done much to improve its financial state—hours have been cut at rural branches and it has reduced work hours by 420m since 2002, saving some $17 billion annually. It has shrunk its staff by nearly 300,000, but it still has staggering labour costs. About 80% of its budget goes to its workers. Under a law of 2006, the service has to pre-fund 75 years’ worth of health benefits for retired workers, something no other company, much less a government agency, is required to do. Congress would need to pass legislation for that to change.

Congress is perhaps the postal service’s biggest impediment. Though created by, and operating under the authority of, the federal government, it does not receive federal funding. It must rely on stamp sales and shipping revenue to operate. But this hybrid model, not fully private or public, is paralysing and constrains business. Elaine Kamarck of the Brookings Institution, a think-tank, says it “impedes innovation”. The USPS cannot, for instance, ship alcohol, a lingering ban from the temperance movement, but expanding what it may deliver would require congressional approval. There is little political will to act.


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