6 ms·

The truth about the US Postal Service

8 points by joeyespo 15y ago

JumpCrisscross 15y ago
The retirement prepayment point, if true, is ridiculous and deserves more scrutiny. But as someone who rarely if ever uses the postal service, I don't see why they can't raise stamp prices to 60 cents or so. That would cover most of the shortfall. I don't think the nostalgia for a post office argument really holds water, though. We don't need to keep the post office around for the sake of it. Fortunately, there is a market for the service they provide. The moment that demand starts evaporating (at the market price) we shouldn't have an emotional qualm about amputating inefficiency.
- glenra 15y ago
  > I don't see why they can't raise stamp prices to 60 cents or so. That would cover most of the shortfall. Why do you believe they'll sell the same number of stamps if they raise the price? When GM was in trouble, would you have posted "I don't see why they can't raise car prices by $1000 or so to cover the shortfall"? USPS sells an overpriced product. If private companies were legally allowed to charge less than the post office to stick mail in your mailbox, the post office would go under in a heartbeat; the only reason they survive at all is that they have a legally-protected monopoly on non-urgent mail. But even monopolists can't charge whatever they want because there are substitutes for every good. People who send a lot of mail will notice small price increases and be ever-more-prone to switch to alternatives (fax, email, web, phone...) the higher the price gets. In short, raising the stamp price might raise revenue, but it also might lower revenue.
  - OpieCunningham 15y ago
    USPS sells an overpriced product. If private companies were legally allowed to charge less than the post office to stick mail in your mailbox, the post office would go under in a heartbeat; Do you have a citation for that? I fail to see how on the one hand there is the argument that the USPS can't stay afloat and on the other hand a private company can succeed in the same business by charging less. Further, what service would these private companies be offering, exactly? Door to door pickup/delivery? So Fedex and UPS would ramp up massive infrastructure to support door to door service, but each would effectively only have 1/2 the houses in a neighborhood. And that would be profitable for less than 45 cents a letter? Doesn't seem likely to me.
    - glenra 15y ago
      The USPS was losing money on package delivery - especially "priority" delivery - when private companies were initially allowed to enter the package and "express mail" business. FedEx and UPS made a profit providing the exact same service the USPS lost money on, and eventually did it so well that the post office now subcontracts a lot of that work to FedEx. As for "ramping up massive infrastructure", Fedex and UPS do door-to-door already. In fact, in many areas they deliver to the door where the post office only delivers to a "mail stop" that might be miles from the relevant "door". One thing they don't do is waste resources cruising the entire neighborhood on the random off-chance that somebody might have put out a package for delivery. Instead, you can either drop off a package at the nearest Kinko's or supermarket or corner drop box, or you can tell them (by phone or over the web) that you've specifically got a pickup for them to get and they'll come get it. They also don't ludicrously overpay their workers. Package delivery should probably be a minimum wage job, not a career. The fact that the private companies could do the work with fewer offices - combining with companies like Kinko's as they do rather than maintaining a separate office - and fewer workers (due to more streamlined competitive processes) and cheaper workers (due to it not being a federal unionized workforce) suggests they could do the job more cheaply. How much more cheaply is an open question, but I would tend to expect the cost of delivering a letter to drop over time (relative to inflation) as technology improves and as the population grows.
      - OpieCunningham 15y ago
        All you're really stating is that if the USPS disappeared, everything would be just fine and FedEx and/or UPS might even start accepting letters with 5 day delivery times for less than 45 cents instead of $10+ they currently charge for approx. 3 day delivery times. (Of course, the actual service would be totally unlike what the USPS provides.) I remain unconvinced. I would like to see wage comparisons between FedEx/UPS delivery personnel vs. USPS carriers. I doubt there is a ludicrous expense difference.
        glenra 15y ago
        We don't need USPS to disappear. We just need it to be legally allowed to undercut the post office. So long as it is illegal for FedEx to deliver envelopes to your home slowly (because that would indicate it's not "urgent") or for less than a price of "$3 or twice the First Class Mail rate, whichever is larger", it's not fair to criticize them for specializing in the sort of quick, expensive service which is the only type of service they're allowed to engage in. http://en.wikipedia.org/wiki/Private_Express_Statutes http://en.wikipedia.org/wiki/Private_Express_Statutes The last time a private firm was allowed to freely compete on regular mail delivery was 1844, but at that time the post office charged 12 cents for a stamp and the new firm was able to make a profit charging 5 cents for delivery anywhere in the country while providing free local delivery as a bonus. http://en.wikipedia.org/wiki/American_Letter_Mail_Company http://en.wikipedia.org/wiki/American_Letter_Mail_Company
Lazare 15y ago
There are two methods for funding pensions: PAYGO (pay as you go) or funded. With a PAYGO plan, you pay current retirees out of current income, and hope that future income will be enough to cover future retirees. Public bodies often use PAYGO plans, in large part because they can always tax (or print) money in order to cover shortfalls if they have to. With a funded plan, you put aside money from current income to pay future retiree claims; current retiree claims are paid from money put aside in the past. Private companies often use funded plans, in large part because any shortfalls can lead to pensioners not being paid. The USPS is a very unusual hybrid of public and private and, in many ways, has the worst of both worlds. Rather than follow the "normal" rules other government agencies or other private companies follow, the USPS is "lucky" enough to get rules written especially for it by Congress. And THAT is the source of the current controversy. There's nothing unusual about prefunding retirement benefits, but there are legit questions about the precise rules that Congress has written for the USPS. They argue they're being asked to prefund too much; the counterargument is that they face unique challenges, and the prefunding requirements are sensible. It's a very very dry, very very complex issue, and honestly, I don't have a clue who's right. :) HOWEVER, I can say who's wrong: The linked article. Contrary to the article, the USPS is not making an operational profit. In FY 2010 it had an operational loss (NOT counting any pension funding) of $600 million. In FY 2011 that rose to an operational loss of $2.2 billion (again, before the disputed pension funding payments). It's projected to keep rising. The USPS is seeing collapsing mail volume in every profitable category. Their fundamental market (delivering first class mail) is vanishing before their eyes, and nobody has the slightest plan to fix it. Right now they're little more than a government subsidized catalogue delivery service with an eye-wateringly expensive retail outlet network and legacy staff costs. And THAT is the real issue. A normal company would respond by trying to change their cost base, but again, the USPS is neither fish nor fowl. They can't close post offices or fire workers the way a private business can, but they can't rely on seemingly infinite funding from the US government the way a normal government agency can. They're are, well, going broke. And that, in turn, is why the pension funding argument is so heated. Is the USPS going to be around in 40 years to pay worker pensions? If you're confident the answer is yes, then letting them leave pensions unfunded is safe, and might help get them through the current crisis. But if you're wrong, then pensioners will suddenly see checks stop coming. (We tend to think that's a Bad Thing.) So if you're afraid the USPS might not be around down the road, that makes pension funding very important. shrug Make your guesses and you get your policy outcome. :)

8 points by joeyespo 15y ago

The retirement prepayment point, if true, is ridiculous and deserves more scrutiny. But as someone who rarely if ever uses the postal service, I don't see why they can't raise stamp prices to 60 cents or so. That would cover most of the shortfall. I don't think the nostalgia for a post office argument really holds water, though. We don't need to keep the post office around for the sake of it. Fortunately, there is a market for the service they provide. The moment that demand starts evaporating (at the market price) we shouldn't have an emotional qualm about amputating inefficiency.

glenra 15y ago
> I don't see why they can't raise stamp prices to 60 cents or so. That would cover most of the shortfall. Why do you believe they'll sell the same number of stamps if they raise the price? When GM was in trouble, would you have posted "I don't see why they can't raise car prices by $1000 or so to cover the shortfall"? USPS sells an overpriced product. If private companies were legally allowed to charge less than the post office to stick mail in your mailbox, the post office would go under in a heartbeat; the only reason they survive at all is that they have a legally-protected monopoly on non-urgent mail. But even monopolists can't charge whatever they want because there are substitutes for every good. People who send a lot of mail will notice small price increases and be ever-more-prone to switch to alternatives (fax, email, web, phone...) the higher the price gets. In short, raising the stamp price might raise revenue, but it also might lower revenue.
- OpieCunningham 15y ago
  USPS sells an overpriced product. If private companies were legally allowed to charge less than the post office to stick mail in your mailbox, the post office would go under in a heartbeat; Do you have a citation for that? I fail to see how on the one hand there is the argument that the USPS can't stay afloat and on the other hand a private company can succeed in the same business by charging less. Further, what service would these private companies be offering, exactly? Door to door pickup/delivery? So Fedex and UPS would ramp up massive infrastructure to support door to door service, but each would effectively only have 1/2 the houses in a neighborhood. And that would be profitable for less than 45 cents a letter? Doesn't seem likely to me.
  - glenra 15y ago
    The USPS was losing money on package delivery - especially "priority" delivery - when private companies were initially allowed to enter the package and "express mail" business. FedEx and UPS made a profit providing the exact same service the USPS lost money on, and eventually did it so well that the post office now subcontracts a lot of that work to FedEx. As for "ramping up massive infrastructure", Fedex and UPS do door-to-door already. In fact, in many areas they deliver to the door where the post office only delivers to a "mail stop" that might be miles from the relevant "door". One thing they don't do is waste resources cruising the entire neighborhood on the random off-chance that somebody might have put out a package for delivery. Instead, you can either drop off a package at the nearest Kinko's or supermarket or corner drop box, or you can tell them (by phone or over the web) that you've specifically got a pickup for them to get and they'll come get it. They also don't ludicrously overpay their workers. Package delivery should probably be a minimum wage job, not a career. The fact that the private companies could do the work with fewer offices - combining with companies like Kinko's as they do rather than maintaining a separate office - and fewer workers (due to more streamlined competitive processes) and cheaper workers (due to it not being a federal unionized workforce) suggests they could do the job more cheaply. How much more cheaply is an open question, but I would tend to expect the cost of delivering a letter to drop over time (relative to inflation) as technology improves and as the population grows.
    - OpieCunningham 15y ago
      All you're really stating is that if the USPS disappeared, everything would be just fine and FedEx and/or UPS might even start accepting letters with 5 day delivery times for less than 45 cents instead of $10+ they currently charge for approx. 3 day delivery times. (Of course, the actual service would be totally unlike what the USPS provides.) I remain unconvinced. I would like to see wage comparisons between FedEx/UPS delivery personnel vs. USPS carriers. I doubt there is a ludicrous expense difference.
      - glenra 15y ago
        We don't need USPS to disappear. We just need it to be legally allowed to undercut the post office. So long as it is illegal for FedEx to deliver envelopes to your home slowly (because that would indicate it's not "urgent") or for less than a price of "$3 or twice the First Class Mail rate, whichever is larger", it's not fair to criticize them for specializing in the sort of quick, expensive service which is the only type of service they're allowed to engage in. http://en.wikipedia.org/wiki/Private_Express_Statutes http://en.wikipedia.org/wiki/Private_Express_Statutes The last time a private firm was allowed to freely compete on regular mail delivery was 1844, but at that time the post office charged 12 cents for a stamp and the new firm was able to make a profit charging 5 cents for delivery anywhere in the country while providing free local delivery as a bonus. http://en.wikipedia.org/wiki/American_Letter_Mail_Company http://en.wikipedia.org/wiki/American_Letter_Mail_Company

Lazare 15y ago

There are two methods for funding pensions: PAYGO (pay as you go) or funded. With a PAYGO plan, you pay current retirees out of current income, and hope that future income will be enough to cover future retirees. Public bodies often use PAYGO plans, in large part because they can always tax (or print) money in order to cover shortfalls if they have to. With a funded plan, you put aside money from current income to pay future retiree claims; current retiree claims are paid from money put aside in the past. Private companies often use funded plans, in large part because any shortfalls can lead to pensioners not being paid. The USPS is a very unusual hybrid of public and private and, in many ways, has the worst of both worlds. Rather than follow the "normal" rules other government agencies or other private companies follow, the USPS is "lucky" enough to get rules written especially for it by Congress. And THAT is the source of the current controversy. There's nothing unusual about prefunding retirement benefits, but there are legit questions about the precise rules that Congress has written for the USPS. They argue they're being asked to prefund too much; the counterargument is that they face unique challenges, and the prefunding requirements are sensible. It's a very very dry, very very complex issue, and honestly, I don't have a clue who's right. :) HOWEVER, I can say who's wrong: The linked article. Contrary to the article, the USPS is not making an operational profit. In FY 2010 it had an operational loss (NOT counting any pension funding) of $600 million. In FY 2011 that rose to an operational loss of $2.2 billion (again, before the disputed pension funding payments). It's projected to keep rising. The USPS is seeing collapsing mail volume in every profitable category. Their fundamental market (delivering first class mail) is vanishing before their eyes, and nobody has the slightest plan to fix it. Right now they're little more than a government subsidized catalogue delivery service with an eye-wateringly expensive retail outlet network and legacy staff costs. And THAT is the real issue. A normal company would respond by trying to change their cost base, but again, the USPS is neither fish nor fowl. They can't close post offices or fire workers the way a private business can, but they can't rely on seemingly infinite funding from the US government the way a normal government agency can. They're are, well, going broke. And that, in turn, is why the pension funding argument is so heated. Is the USPS going to be around in 40 years to pay worker pensions? If you're confident the answer is yes, then letting them leave pensions unfunded is safe, and might help get them through the current crisis. But if you're wrong, then pensioners will suddenly see checks stop coming. (We tend to think that's a Bad Thing.) So if you're afraid the USPS might not be around down the road, that makes pension funding very important. shrug Make your guesses and you get your policy outcome. :)