Postal Service Headed for Disaster
By Phil Kerpen
The United States Postal Service is careening toward financial catastrophe, posting a $5.5 billion loss in fiscal year 2014. It’s the eighth year in a row with multi-billion-dollar losses, and the Postal Service has maxed out its $15 billion line of credit from the U.S. Treasury. If it is declared insolvent, much of this debt is unlikely to be paid back, and taxpayers could be on the hook for an even bigger bailout. Against this dire backdrop, the Postal Service is aggressively moving into same-day package and even grocery delivery services, leveraging its first-class mail monopoly to unfairly compete with private businesses that are not backstopped by taxpayers. Even worse, improper accounting of these programs conceals the real financial costs of this risky strategy and the likelihood that it is piling on billions more in potential losses for taxpayers.
The Postal Service’s own financial report makes clear they fully expect, and are counting on, a taxpayer bailout, saying: "Disruption of the mail would cause undue hardship to businesses and consumers, and in the event of a cash shortfall, the U.S. government would likely prevent us from significantly curtailing or ceasing operations."
The agency's business strategy must, therefore, become an urgent matter for taxpayer consideration.
Unfortunately, the Postal Service’s desperate attempts to save itself by moving into businesses unrelated to delivering the mail are bleeding it dry and putting taxpayers at greater risk.
A recent filing with the Postal Service’s regulator by the government watchdog group Citizens Against Government Waste (CAGW) laid out the details of a remarkable failed pilot program of same-day package delivery in San Francisco. The program delivered only 95 packages, was plagued with operational failures, and ultimately earned a grand total of $760 against costs of $10,288. The result? The Postal Service is expanding the failed program to more cities, starting with another pilot in Washington, D.C.
Even worse is the Postal Service’s secretive deal with Amazon for Sunday package delivery and so-called AmazonFresh grocery delivery, “another example of the USPS jumping into new competitive ventures in a sector of the economy that is financially risky and already served by large private-sector companies,” CAGW notes.
Whistleblower Paul Barbot claims the deal with Amazon has caused pervasive distortion of the Postal Service’s core responsibility, saying: “an Amazon package trumps all others received to deliver that day; even the ones that are more profitable to the postal service.” He detailed instances of even priority mail being left undelivered so that Amazon packages could get delivered.
Adding insult to injury, the Postal Service announced in February a $5.5 billion purchase of 180,000 new trucks to shift even more aggressively into the package business. And it certainly doesn’t inspire confidence that, according to its own operations update, the Postal Service illegally warehoused inventory last year, which is expressly prohibited by law.It’s bad enough that the Postal Service is not effectively executing the delivery of first-class letters, a service on which it enjoys a government-guaranteed monopoly. Worse is that it appears to be using the proceeds of first class mail delivery to subsidize the costs of its competitive services, also a violation of federal law. It is impossible to be sure because the agency’s cost accounting attributes 45 percent of its operating budget to general overhead, concealing the costs of its competitive services.
Congress and the Postal Regulatory Commission, the agency’s regulator, need to, at a minimum, ensure that the law is being followed and that costs are being properly accounted for – before all of this blows up on taxpayers. But, more importantly, we need to decide whether it still makes any sense, in an era of the Internet and an intensely competitive private delivery market, to have a government-guaranteed monopoly mail carrier. If it does, we certainly shouldn’t allow the Postal Service to leverage its government monopoly to compete with private businesses in other arenas.