Going Postal

Going Postal

Going Postal

Do postal employees deserve the label “going postal” that has now become a common reference to any incident of crazy violence in the workplace? If I had to put up with the crap that the US Post Office gets from everyone, I think I’d have gone postal a long time ago. You see, the USPS exists in a kind of purgatory, caught between the federal government and private industry, where it is punished for failures that are forced upon it and prevented from achieving too much success.

When I started to write this post, I originally had intended to rail against the incompetence of the US Post Office and their inability to operate without losing billions of dollars. I’ve never been a fan because their tracking system often doesn’t work, they don’t have drop boxes for parcels like UPS or FedEx, they often refuse to accept packages that have printed labels dated the day before, and they won’t even let you print some kinds of postage from their web site, forcing you to go to a third party service. It never seemed as though they were able to do things well and the customer service usually sucks. However, I had to admit that they do manage a huge, and relatively efficient, national service for mail distribution.

But when I looked into the details, I found that my common perception was wrong. Many of their problems appear to be the result of restrictions imposed by Congress on an agency that might otherwise be free to invest in service improvements and innovations.

Benjamin Franklin, Postmaster General

Benjamin Franklin, Postmaster General

The USPS is a regulated but independent agency of the US government that is legally obligated to serve all Americans, regardless of geography, at uniform price and quality. It is one of the few government agencies explicitly authorized by the US Constitution. It traces its roots to 1775 during the Second Continental Congress, where Benjamin Franklin was appointed the first Postmaster General.

Contrary to popular belief, the USPS has not directly received taxpayer-dollars since the early 1980s, with the minor exception of subsidies for costs associated with disabled and overseas voters. The US Post Office has experience losses in the past several years, but they are mostly unrelated to the direct costs of running the postal system. They are related to unprecedented mandates that Congress imposed with the Postal Accountability and Enhancement Act of 2006.

USPS Pre-Funding of Benefits

USPS Pre-Funding of Benefits

This act obligates the USPS to pre-fund the present value of future health care benefit payments for 75 years into the future, but to do so within a ten-year time span. This adds up to about $5.5 billion annually for a business that can only break even at best and has no pile of profits from which to draw. No other government organization is subject to such a requirement and no private organization pre-funds benefits to such an extent. The rest of the government does not pre-fund health care benefits at all, and only 38% of Fortune 1000 companies pre-fund at a much lower level of 37%. The USPS also does a better job of funding its pension program. It funds 100% of its needs, compared to 42% for the rest of the government and 80% for the average Fortune 1000 company. Yes, the USPS is still losing money, but most of the losses come from this Congressional mandate.

Why can’t they break even or make money? Are they just incompetent because they are a lame government bureaucracy weighed down by expensive unionized employees? That is what we have been led to believe and I will admit that is what I thought. The truth is that the post office already offers some of the lowest rates in the world, but cannot charge what it actually costs to provide mail service, since postal rates are regulated by Congress. It also has been prevented from innovating whenever private businesses run to Congress to put a stop to potential competition.

Online Payment Methods

Online Payment Methods

A USPS plan to develop an online payment system in 2000 was stopped by Internet industry competitors. Just think about how many people use electronic payments such as Paypal today, a service that generates billions in profits annually for eBay. Paypal earns even more than eBay gets from its online auctions! Imagine how much money the postal service could have made while preventing fraud by making electronic payments contingent upon the successful delivery of a package that they carried and insured! Today, wary consumers have to use third-party intermediaries to ensure that they do not get ripped off by unscrupulous buyers or sellers, which is a far less efficient system.

USPS plans to install public copy machines at post offices generated objections from office supply stores. Sales of phone cards, postal meter cartridges, money transfers, and other initiatives were stopped by other private competitors. And, of course, rivals such as UPS complained about parcel delivery, ultimately leading Congress in 2006 to restrict USPS to mail delivery.

The USPS has partnerships with FedEx and UPS for “last mile” delivery because it charges less, which is a kind of subsidy for these private companies. In fact, more than 30% of FedEx Ground shipments in 2011 were delivered by the post office. This is because the USPS provides service that is cheaper than what UPS and FedEx can provide for many locations, but is restricted from charging a higher rate.

When the Postal Service launched an extremely effective ad campaign showing that its express mail service was just a fraction of the price charged for overnight delivery by UPS and FedEx, competitors took them to court to have the ads stopped. They lost in court, but then ran to Congress, which forced the Postal Service to pull the ads. Is this fair competition that helps consumers? On one hand, Congress chastises the USPS for losing money and failing to operate like a business. On the other hand, it prevents the service from actually running itself like a business in order to at least break even.

Privatizing the agency in whole or in part is likely to lead to higher rates for some locations because it actually costs more to deliver to rural destinations. UPS and FedEx have no requirement to deliver mail at the same rates to rural destinations and they have no obligation to service an area at all if they don’t think they can make money.

To me, the USPS is like the poor step-child of a government that will not take responsibility for its care, yet places heavy burdens on it and whips it when it fails. Congress will fall all over itself to please large private businesses in order to gain their favor and generate campaign donations. But when the post office tries to shine brighter than its step-siblings in industry, it is reprimanded and put back into its place.

What does the US Post Office provide that nobody else does? First, in 1792, a wise Congress established a mail system that was protected by law. Many white-collar criminals have been convicted of mail fraud, a federal offense that does not exist when private carriers are used.

Air Mail Delivery to Rural Idaho

Air Mail Delivery to Rural Idaho

Second, it provides universal service, even to extremely rural locations. They still even deliver mail by airplane to residents living along the Salmon and Selway rivers in Idaho.

Rural delivery may not be quite as important in a digital age when most communications can be transmitted electronically. However, the country still lacks a secure digital communications infrastructure backed by the legal protection afforded to mail carried by the postal service.

Several international postal services already provide a protected email system. Israel provides a secure email box for government communications. This isn’t just a technical issue, it is a legal one. For years, faxed copies of signed documents were not legally recognized. Other forms of electronic signatures have since been recognized, but their status varies from state to state and country to country. The law has been lagging technology for years.

The United States, which first developed the Internet, should have been the first to provide a legally-protected electronic messaging and document service to all. Instead of treating the USPS like an unwanted step-child, maybe Congress should provide it with a mandate and the needed body of law to legally protect the security and validity of digital information. Some private companies already provide electronic delivery services, so it’s my guess that even if the postal service tries to enter that market, they will be immediately foiled by Congress.

When you exist in purgatory under the thumb of Congress, no good deed goes unpunished. Ben Franklin himself would go postal if he were around today to watch Congress slowly kill the agency he championed at the founding of the republic.

We have met the enemy and he is us

We have met the enemy and he is us

I guess the lesson I take away from this is that our government cannot do anything well when it has to compete with private enterprise. This is not because government employees are totally incompetent. It is because industry will seek to influence Congress in order to undermine an agency’s ability to operate effectively and to innovate. To quote the Pogo comic strip character, “We have met the enemy and he is us.” To be more precise, it is our increasingly corrupt representatives in Congress.

If we want an effective and innovative government, we either have to privatize a function completely or establish a monopoly. However, to avoid the problems inherent with any monopoly, we should require that monopoly to outsource some of its work with competitive contracts and establish a system that promotes intra-government competition, accountability, and transparency.

USPS Privatization

USPS Privatization

In the case of the US Postal Service, we need a balanced approach instead of pure privatization. I think the time has come to end the monopoly on first class mail but to also set the USPS free of Congressional control. However, this is what the private carriers want because it will let them take the most profitable parts of the mail delivery business. So, if we want to keep down the cost of first-class mail and provide guaranteed mail delivery to unprofitable rural areas, then the government has to issue competitive contracts to carriers that bundle first-class and rural delivery services with other high-value express and package delivery contracts. We can make them an offer they just can’t refuse, so to speak. UPS and FedEx, among others, can make a profit while still being forced to meet the universal service obligations to our citizens. I think the USPS is efficient enough to survive and thrive and consumers will ultimately get better service at a reasonable price.

Post Office Automation

Post Office Automation

What if the USPS and private services such as UPS or Fedex could offer First Class mail alternatives? They could install their own automated ATM-like devices and locking mailboxes with an automated system that alerts you when mail has been sent to you or has been placed in your mailbox. Or maybe they could offer an E-class mail system that allows anyone to send an electronic version of a letter, pamphlet, or newsletter and have it automatically printed out and delivered on the same day by the local delivery facility. If senders allow the option, customers could opt to receive such mail via email or the web and get a partial credit for the printing and delivery costs. Most information has already gone electronic, but many businesses still send paper, especially when sending bulk mail to a wide geographic area.

Maybe they could offer a delivery service that comes with an unsubscribe option to let you reject junk mail or catalogs by scanning a barcode into their smartphone app. It would tell the sender to take you off their mailing list or automatically redirect future unauthorized mail into a recycling bin. I’m so overloaded with unsolicited catalogs that most of them already go directly into my recycling bin, but result in a huge waste of time and resources. Or maybe you could scan the code to subscribe to an electronic catalog that can be automatically downloaded to your computer or tablet instead of the paper copy.

If we want to extend current legal protections to physical mail or electronic mail delivered by other carriers, then they could be offered contracts only if they meet government-specified rules for first-class mail or email.

However, all of this will probably never happen. Congress has no real interest in serving consumers. They are too busy serving and protecting the interests of private companies, which benefit from the existence of a hobbled postal service that can’t effectively compete and has to take on all the most unprofitable delivery services. I’m just waiting for the day that people start to go postal on Congress!

Go Postal!

Go Postal!

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