How Congress is killing the Post Office

By Felix Salmon
July 20, 2012
September: the long-term secular decline of postal mail, on the one hand, combined with all manner of Congressionally-mandated restrictions which make a bad situation much, much worse.

" data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

The Post Office’s problems are the same today as they were back in September: the long-term secular decline of postal mail, on the one hand, combined with all manner of Congressionally-mandated restrictions which make a bad situation much, much worse. And now the inevitable has happened: we’re going to have a $5.5 billion default.

A default of that magnitude sounds scarier than it actually is. Congress requires the Post Office to make inordinately huge pension-plan payments, for reasons which nobody can really understand. But in the final analysis, USPS pensions are a government obligation, and it doesn’t make a huge amount of difference whether they come out of a well-funded pension plan, a badly-funded pension plan, or just out of US government revenues.

What does make a lot of difference is the degree to which the Post Office is hamstrung by Congress. There’s still room for the Postal Service to reorient itself and become a successful 21st-century utility — but there’s no way that’s going to happen if it’s constantly on the back foot and if Congress prevents it from entering new businesses, possibly including banking.

To put it another way: the Post Office is broken, in large part thanks to unhelpful meddling by Congress. And it won’t get fixed unless and until Congress gets out of the way and stops forcing it into the corporate equivalent of ketosis, essentially consuming its own flesh in order to survive.

The talking point from the mailing industry here is that multi-billion-dollar defaults “could make consumers lose confidence in the Postal Service”, and thereby make matters even worse. It’s a bit like the argument we saw in Detroit in 2009, when lots of people said that if the big auto makers went bankrupt, no one would buy their cars any more. That argument wasn’t convincing at the time, and it turned out not to be true. Similarly, I’m not worried about that bickering in Washington will directly affect the confidence that Americans have in their postal service.

On the other hand, it’s pretty much certain that bickering in Washington will unnecessarily make the situation at the Post Office much worse than it needs to be. And as such, it’s a prime example of US political dysfunction. As Zero Hedge says, if the muppets in Washington can’t get this right, what are the chances that they’re going to be able to do the right thing when the fiscal cliff arrives at year-end?

The best hope for America is that politicians are more likely to create fights and dysfunction for things which don’t rise to the level of outright crisis, but that they somehow manage to come together to find solutions when the alternative is catastrophic. That’s often a good bet — but not always. And so while I’m reasonably confident that we’ll get through the fiscal cliff somehow, I’m not at all certain of it. Meanwhile, I am reasonably certain that Congress will starve the USPS of the funding and freedom it needs to succeed over the long term. Which of course will cost taxpayers enormously for as long as postal workers are collecting pension checks.

34 comments

Comments are closed.