The Make-Believe Postal Service Panic and the Tenth Theorem of Government

Politicians and interest groups periodically fan the flames of temporary panic to push for misguided policy. We’ve already seen three big examples this century.

• The so-called PATRIOT Act was enacted in the feverish aftermath of 9-11, but many of its provisions simply added bureaucracy and gave government new/expanded powers unrelated to fighting terrorism.
• The TARP bailout allegedly was needed to save us for financial collapse, but in reality was a substitute for a policy (FDIC resolution) that would have recapitalized the banking system without bailing out Wall Street.
• Obama’s stimulus scheme had to be enacted to supposedly save the nation from another depression, but unemployment soared beyond administration projections and cronies got rich from boondoggles.

The same thing is now happening with the Postal Service, which ostensibly is on the verge of catastrophic collapse because of an expected increase in mail-in voting and sabotage by the Trump Administration.

The real story, though, is that bureaucracy has been losing money at a rapid pace for years and the only sensible solution is privatization. But that would upset the various postal unions and related interest groups, so they’ve created a make-believe crisis in hopes of getting more cash from taxpayers.

And this has nothing to do with Trump vs. Biden.

Let’s look at some rational voices on this topic, starting with this column by Charles Lane of the anti-Trump Washington Post.

Harder to account for is the progressive left’s idealization of the USPS, which began well before the uproar over new Postmaster General Louis DeJoy’s cost-cutting and its alleged impact on election mail. …when you look at what the agency actually does, a lot of it turns out to be a federally underwritten service for — profit-seeking businesses.Of the 142.6 billion pieces of mail of all kinds that the USPS handled in 2019, 53 percent was advertising material, a.k.a. junk mail, up from 48 percent in 2010. Junk mail makes up an even bigger share — 58 percent — of what individual households receive. …Companies pay a special rate, 19 cents apiece, to send these items (in bulk), as opposed to the 55 cents for a first-class stamp. …Some progressives are stuck in the pre-Internet age. Last week, Sen. Bernie Sanders (I-Vt.) said, apropos alleged mail delays: “I am not exaggerating when I say this is a life-and-death situation. The Post Office…delivers Social Security checks to seniors who rely on those benefits to survive.” He is exaggerating — a lot. Over 99 percent of all Social Security payments are sent by the more secure route of direct deposit; a 2013 law mandates it. …Crying “privatization” is the perennial scare tactic of progressives who oppose postal reform. That’s an odd one, too: Several European countries and Japan…have either fully or partially privatized their postal services. Actually, privatization is highly unlikely in the United States, given resistance from the two key lobbies — junk mailers and postal unions — that most influence Congress on this issue. …Something must be done to stem the Postal Service’s losses, which have totaled $83.1 billion since 2006, and to reduce its unfunded pension and health-care liabilities, which exceed $120 billion.

Here’s a twitter thread debunking some of the political hysteria about missing mailboxes.

Turns out the Washington Post uncovered the Great Mailbox Conspiracy ELEVEN YEARS AGO!

2009: "…half of the blue boxes in the Washington area have disappeared in the last nine years, and 200,000 nationwide have been plucked up in the last 20 years, leaving 175,000 total." pic.twitter.com/oLYV8rbEYn

— Jeryl Bier (@JerylBier) August 16, 2020

And how about this column by Nick Gillespie of the anti-Trump Reason magazine.

By now you’ve probably heard that President Donald Trump and Postmaster General Louis DeJoy “are sabotaging democracy in plain sight” through a mix of nefarious ploys, ranging from removing “blue Post Office drop boxes” to scrapping mail-sorting machines to allegedly mandating a slowdown in delivering the mail. …The truth is far less incendiary… Here’s a little bit of math that should give voters succor. In 2016, about 140 million total votes were cast in the presidential election…with “nearly 24 percent…cast using by-mail absentee voting.” …Assume, for the sake of argument, that the same number of votes will be cast this year as in 2016. Even if all voters used the mail and posted their ballots on exactly the same day, that would comprise only 30 percent of the amount of mail the USPS says it processes every single day. So if the USPS screws up delivering votes in a timely and efficient manner this fall, it won’t be because of any sinister actions by the White House. It will be because of longstanding, well-documented managerial and cultural problems… For those who are interested in the post office’s chronically bad performance and “unsustainable” situation, the Government Accountability Office (GAO) has produced a long list of studies on where the problems come from and how they might be addressed. The short version is that Congress has blocked all sorts of serious reforms to an operation that has seen a 33 percent decline in mail volume since 2006.

And here’s another twitter thread that’s worth a look.

https://twitter.com/garyhe/status/1295360446795583491

 

Or what about this article by Jack Shafer from (probably anti-Trump) Politico.

The USPS really is hurting finanically, and really is worried about delivering ballots on time. It’s legitimate to worry about postal delays botching the vote, if a mass of votes are cast by mail just before Election Day. But don’t extrapolate from news accounts, USPS union protestations and candidate carping… the USPS has sent letters to 46 states expressing its doubts about delivering all the ballots in time to be counted. But, as the Washingtonn Post also mentioned in its story, those letters were in the works before Trump’s new postmaster general took office. …What about those vanishing USPS mail collection boxes? As it turns out, the USPS has been culling the boxes since 2000, when their numbers peaked and 365,000 of them stood sentinel on U.S. streets. Today, their numbers have dwindled to 142,000. Why has the USPS deleted them? Because the volume of first-class has nose-dived.

So what’s actually going on?

As I noted at the beginning of this column, we’re getting scammed. The folks who benefit from the current system want to create a sense of panic so they can get a big bailout for the Postal Service.

The Wall Street Journal (which isn’t anti-Trump, but understands how Washington works) opined accurately on what’s really happening.

Mrs. Pelosi is trying to put on a political show, starring Democrats as the saviors of the post office. She says she wants to pass a bill that “prohibits the Postal Service from implementing any changes to operations or level of service it had in place on January 1.” Also in the mix may be a $25 billion cash infusion. Then Chuck Schumer will demand that the Senate come back to town for the same vote. By the way the letter-carriers union endorsed Joe Biden on the weekend.

My modest contribution to this discussion is to unveil aTenth Theorem of Government.

I’ll close with a prediction that politicians at some point in the future will manufacture a crisis (probably about deficits and debt) in order to impose a value-added tax.

P.S. Here are the nine previous Theorems of Government.

• The “First Theorem” explains how Washington really operates.
• The “Second Theorem” explains why it is so important to block the creation of new programs.
• The “Third Theorem” explains why centralized programs inevitably waste money.
• The “Fourth Theorem” explains that good policy can be good politics.
• The “Fifth Theorem” explains how good ideas on paper become bad ideas in reality.
• The “Sixth Theorem” explains an under-appreciated benefit of a flat tax.
• The “Seventh Theorem” explains how bigger governments are less competent.
• The “Eighth Theorem” explains the motives of those who focus on inequality.
• The “Ninth Theorem of Government” explains how politics often trump principles.

 

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Postal Service: Return to Sender

I don’t mind being polemical on occasion, but I generally don’t accuse my opponents of being “socialists.”

American leftists generally focus on redistribution and regulatory intervention and socialism technically means that the government directly owns, operates, and controls various sectors of the economy (think, for example, of the difference between Obamacare and the U.K.’s system, where doctors are public employees and the government operates the hospitals).

But we do have a few islands of socialism in the United States. Education is probably the biggest sector of our economy that is dominated by government. The air traffic control system is another unfortunate example.

Today, though, let’s focus on the Postal Service.

I wrote about this topic a couple of years ago, but we now have lots of additional evidence on why we should replace this costly and inefficient government monopoly with a system based on real competition and no subsidies.

My colleague Chris Edwards explains that, from an economic and taxpayer perspective, the postal monopoly is a dumpster fire.

The U.S. Postal Service (USPS) has lost more than $50 billion since 2007, even though it enjoys legal monopolies over letters, bulk mail, and access to mailboxes. The USPS has a unionized, bureaucratic, and overpaid workforce. And as a government entity, it pays no income or property taxes, allowing it to compete unfairly with private firms in the package and express delivery businesses. …the USPS needs a major overhaul. It should be privatized and opened to competition. But instead of reform, congressional Republicans are moving forward with legislation that tinkers around the edges. Their bill adjusts retiree health care, hikes stamp prices, and retains six-day delivery despite a 40 percent drop in letter volume since 2000. The bill would also create “new authority to offer non-postal products,” thus threatening to increase the tax-free entity’s unfair competition against private firms.

Amazingly, this is an area where European nations actually are more market-oriented than the United States.

Republican…timidity is particularly striking when you compare their no-reform bill to the dramatic postal reforms in Europe. …Since 2012 all EU countries have opened their postal industries to competition for all types of mail. A growing number of countries have privatized their postal systems, including Britain, Germany, Portugal, and the Netherlands. …On-the-ground competition is small but growing in Europe. In a dozen countries, new competitors have carved out more than five percent of the letter market, and in a handful of countries the share is more than ten percent. …the Europeans are giving entrepreneurs a chance. In response to even the modest competition that has developed so far, major European postal companies have “increased their efficiency and restructured their operations to reduce costs,” according to the EU report.

Veronique de Rugy of the Mercatus Center weighs in on the issue in a column for Reason.

The Postal Service is a major business enterprise operated by the federal government. Thanks to Congress, it has something many business owners would love to have— protection from competition. Its monopoly on access to mailboxes and the delivery of first-class and standard mail means it doesn’t have to worry about someone offering a better service at a lower price. …unlike private businesses, the Postal Service has access to low-rate loans from the Department of the Treasury, effectively pays no income or property taxes, is exempt from local zoning rules and even has the power of eminent domain.

In addition to all these favors, the Postal Service is getting a huge indirect subsidy for it’s unfunded pension system.

Congress mandated that the Postal Service start making payments to fund the generous retirement health benefits it has promised workers. This was an important reform because the Postal Service has built up an unfunded liability for these benefits of nearly $100 billion. Ideally, postal workers should be paying for these benefits from payroll contributions rather than leaving the liabilities to federal taxpayers down the road. Sadly, Congress is too timid to take on special interests that benefit from the inefficient status quo, such as postal unions, and won’t support serious reforms… A few years ago, President Barack Obama called for a $30 billion bailout from the federal government, a five-day delivery schedule and an increase in the price of stamps. Unfortunately, that would be a bad solution from the perspective of customers and taxpayers. It also would perpetuate the blatantly unfair competition with companies such as FedEx and UPS.

Amazingly, some statists actually want to expand the Postal Service.

One bad idea that “reform” Postal Service supporters are pushing is to allow the government service to compete with private firms in other industries, such as banking. That would be hugely unfair to taxpaying private businesses, and do we really believe that such a bureaucratic agency as the U.S. Postal Service could out-compete private businesses in other areas if there were a level playing field?

The simple way to think about this issue is that an expanded Postal Service would be like Fannie Mae and Freddie Mac, only able to operate because of special privileges.

Shane Otten, writing for E21, has an “undeliverable” message for the Postal Service.

…the United States Postal Service (USPS)…an independent agency of the U.S. government, …has exclusive control over the postal system. Like every other government monopoly, it has lost money—$56.8 billion since 2007. The Postal Service is a smorgasbord of common government failures, including high labor costs due to unions (including the American Postal Workers Union, the National Association of Letter Carriers, and the National Rural Letter Carriers’ Association), congressional burdens restricting needed changes, unfunded pensions… Postal workers earn between 24 percent and 36 percent more than comparable workers in the private sector.  Because of this, labor costs represent approximately 80 percent of all expenses incurred by USPS. For comparison, private delivery service UPS’s labor costs only make up 62 percent of expenditures, even though UPS is unionized. And at union-free FedEx, labor costs come in at just 38 percent of total operating expenses.

Shane echoes Veronique’s argument about the Postal Service’s dodgy approach to pensions.

…the Post Office has not made a prefunding payment since fiscal year 2011. …the Postal Service pays nothing in federal, state, and local taxes on income, sales, property, and purchases. This saves the agency over $2 billion each year, giving it a major advantage over private competitors. The USPS is also immune from zoning regulations, tolls, vehicle registration, and parking tickets. …The Postal Service…can borrow money from the Treasury at a reduced interest rate. …borrowing at this artificially low rate is equivalent to a subsidy of almost $500 million.

By the way, I got castigated for saying it was a “bailout” when Congress said it was okay for the Postal Service to skip payments for employee pensions. I was basically correct, but should have referred to it as a “pre-bailout” or something like that.

The bottom line is that there’s no reason in a modern economy for a government to operate a business that delivers pieces of paper (and more than it would make sense to have government deliver pizzas). Indeed, this is such a slam-dunk issue that even the Washington Post is on the right side.

P.S. For what it’s worth, the Postal Service actually is constitutional. It’s one of the federal government’s enumerated powers. But the fact that the federal government is allowed to maintain postal service doesn’t mean it’s obliged to do it.

P.P.S. Here’s my only example of Postal Service Humor.

P.P.P.S. Though if you have a very dark sense of humor, you may laugh at the “action” of this postal employee. I think he may deserve a retroactive promotion to the Bureaucrat Hall of Fame.

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Time for a Free-Market Postal System

It’s not often that I agree with the Washington Post, but a government-run monopoly is not the best way to get mail delivered.

Moreover, it’s not often that I agree with the timid (and sometimes reprehensible) Tory-led government in the United Kingdom, but they just put the Royal Mail into the private sector. And that’s something deserving of loud applause.

Here’s a slice of the big news from the Financial Times.

The goal of privatising Royal Mail had defeated governments for 40 years. …Even prime minister Margaret Thatcher balked at the political risk of selling off a public service that carried the Queen’s head on its stamps. This time, the legislation went through parliament.

My Cato colleague, Chris Edwards, is suitably impressed.

Here’s some of what he wrote for Cato-at-Liberty.

Britain privatized its Royal Mail in 2013, proceeding with an initial public offering of shares that raised about $2.7 billion. …privatization in Britain has been hugely successful. Prime Minister Cameron should be applauded for having the guts to build on the privatization reform legacy of Thatcher, Major, and Blair. Meanwhile on this side of the pond, Republican Darrell Issa is having trouble getting his own nominally conservative party to accept even small changes to the broken government postal system.

Not surprisingly, some folks in Washington think we should move in the wrong direction by retaining the monopoly and allowing the Postal Service to enter new lines of business.

In this interview with Neil Cavuto, I explain why the Postal Service should be unleashed – but only after getting weaned from the taxpayer teat.

You’ll notice that I took the opportunity to explain that many poor people can’t afford banking services in part because government “anti-money laundering” rules impose very high costs on banks.

And since I’ve already mentioned that I have strange bedfellows at the Washington Post and UK government on the issue of postal privatization, I may as well note that the World Bank agrees with me about the poor being disadvantaged by these ill-advised financial regulations.

Let’s close with a good cartoon by Jerry Holbert.

It’s not as good as his classics about Obamacare, sequestration, big government, and Patty Murray’s budget, but obviously very appropriate for today’s topic.

P.S. In there was a contest for government stupidity, the Japanese might be front runners.

No, I’m not talking about their bizarre policy of regulating coffee enemas.

Instead, I’m baffled by the notion of government-funded dating. I’m not joking. Check out these excerpts from the British press.

The Japanese government is funding matchmaking events in a desperate attempt to boost a birth rate that has halved over the past six decades. …The support of marriage – and the active encouragement of young people to settle down – is regarded by government policy-makers as a key strategy for boosting the nation’s birth rate. …Matchmaking events organised by local authorities, where young singles are introduced to one another in romantic settings, are becoming increasingly common in areas such as rural Kochi, a prefecture around 500 miles west of Tokyo.

By the way, Japan does have a severe demographic problem.

And when you mix falling birthrates and increasing longevity with a tax-and-transfer welfare state, the results are catastrophic.

But the right way to deal with that problem is with genuine entitlement reform, not another bound-to-fail government-run version of Match.com.

P.P.S. If you like making fun of foreign governments, here are some more examples.

Taxpayer-financed friends for mass murderers in Norway.

Spending 800,000 euro to collect 25,000 euro of tax in Germany.

Giving welfare handouts to foreigners in the United Kingdom.

Remember, nothing is too stupid for government.

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In Perfect Symbol of How Government Treats Taxpayers, Postal Worker Keeps Job after Getting Caught Defecating in Someone’s Yard

What’s the difference between a real job and working for the government? I used the think the answer was that bureaucrats are overpaid, usually for being in positions that shouldn’t even exist.

Then I thought the difference was that bureaucrats got lavish benefits, about four times as much as people in the productive sector of the economy.

But now I realize that a government job means you get to dump on taxpayers, both figuratively and literally. Here are the unseemly details from KOMO News.

A mail carrier who was caught using a yard as his personal toilet will not be fired. The incident happened last month at a home in southeast Portland and a neighbor, Don Derfler, captured the man in the act with his camera. …The incident was an embarrassment to the post office and the worker was immediately placed on unpaid leave. Now, a decision has been made to keep the worker but he will be transferred to a different route. A spokesperson said the administrative action was taken based on a postal service investigation but he did not elaborate. He also did not say which route the mail carrier has been assigned to cover.

I’m almost at a loss for words. I knew that it was virtually impossible to fire a bureaucrat. But surely this was an example of crossing the line?!? But I was wrong.

Two final thoughts: How many of us would keep our jobs if we did something like this? And isn’t it wonderful that the Postal Service monopoly isn’t giving any warning to the potential victims on the bureaucrat’s new route.

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Post Office Humor

Here’s a great snarky comment from Jimmy Kimmel. Jokes like this are funny because we’ve all experienced he misery of waiting in a line at the Post Office or DMV while bureaucrats chat with each other and otherwise goof off.

The U.S. Postal Service announced plans to close an additional 2,000 branches after losing $8.5 billion. Maybe in retrospect, making people wait in line while you slowly finish your bag of fiery hot Cheetos isn’t such a good idea.

Of course, when taxpayers bail out the Postal Service, the joke will be on us, but let’s not think about that right now. Instead, let’s dream that the government-imposed monopoly on mail delivery will end and the private sector takes over. Heck, even the Washington Post has acknowledged this is the right direction.

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Great Moments in Government Waste and Stupidity

Here’s a depressing story from the Columbus Dispatch that shows the government’s ability to be incompetent and wasteful at the same time. A labor dispute that never should have existed (but did, thanks to the incestuous relationship of unions and government) eventually led to nine employees getting paid for an entire week to take naps and have a coloring contest:

A group of Postal Service employees in Columbus spent five days in late May and early June being paid to do no work. A supervisor told them to stay in an area of the processing and distribution center near Port Columbus. The nine men played cards and took naps. One of them brought in coloring books, and they had a contest to see who could make the prettiest picture. They all earned their regular wages, $20.58 to $26.34 per hour. This was the latest move in a labor tangle that began with the Postal Service trying to save money. …Months of negotiations and legal filings followed. In May, a Postal Service attorney argued to a board administrative judge that the appeals were now moot. The truck drivers had been given their driving jobs back, the attorney wrote. Except that was true only on paper, say Kidwell and the eight other drivers. They weren’t driving trucks. They were playing cards and having a coloring contest. They spent a few days training to be letter carriers, a job they wanted even less than mail handler. But they never drove trucks. Letters from the Postal Service to the drivers also make it clear that they would be “drivers” for one, two-week pay period only. Then, “you will be placed into the Letter Carrier Craft,” said the letters, signed by Marvin B. Coleman, the manager of labor relations for the Columbus Postal District.

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Washington Post Calls for Postal Service Privatization!

Do my eyes deceive me? Has you-know-what frozen over? Something strange clearly has happened in the universe, because the Washington Post’s editorial page has published a very sensible piece about the Postal Service, noting the system is fundamentally unsound and stating that privatization is the only realistic long-term option:

Approaching the limits of its federal credit line, the USPS must change drastically or go bust. …Postmaster General John E. Potter…has acknowledged the scope of that challenge, and last week he proposed new product lines, efficiency improvements and workforce attrition to generate $115 billion in revenue or savings between now and 2020. But that’s not even half the projected losses. To really transform, the Postal Service needs congressional action. Some 26,000 of the Postal Service’s 32,000 post offices lose money. …There is only so much that can be accomplished without tackling the item that accounts for 80 percent of the Postal Service’s expenses: labor costs. To be sure, 50 percent of postal workers come up for retirement in the next decade, and that will help cut costs. But attrition has its limits. Management and labor must aggressively tackle uncompetitive wages, benefits and work rules — including no-layoff clauses that cover most personnel. …Given the state of technology, privatization is probably the only long-term solution for the USPS. But it is so saddled with legacy costs that no investor would touch it. If Congress gives management the tools it needs to meet the crisis, and if management uses them effectively — two big ifs, we admit — the Postal Service will have a chance to get its house in order and one day attract private capital, as European postal services have done.

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