As Government Expands, Beware the Post Office Example

Byron York
Monday, April 19, 2010

Back when Barack Obama was pushing for a public option in the new national healthcare system, he raised eyebrows with an out-of-nowhere remark about the U.S. Postal Service.

It happened last August at a town hall in Colorado. Obama claimed Americans shouldn't be afraid of a government insurance company -- the public option -- competing against private insurers, because even though the government has vastly more resources than any individual company, "You've got a lot of private companies who do very well competing against the government -- UPS and FedEx are doing a lot better than the post office."

Obama apparently liked the point, because he made it again at another town hall around the same time. "Private insurers should be able to compete," he said Aug. 11 in New Hampshire. "They do it all the time. I mean, if you think about it, UPS and FedEx are doing just fine, right? It's the post office that's always having problems."

It was a jarring moment. Here, Obama was trying to promote a huge expansion of government involvement in the health system, and he pointed to a sprawling, unresponsive and insanely expensive government bureaucracy. (It's also one that nearly every American knows from firsthand experience.) Not exactly the best case for government effectiveness.

Obama's words are coming back now, with news that the U.S. Postal Service is in even more of a mess than we thought. Without serious reform, it's set to lose $7 billion this year and $238 billion over the next 10 years, and a new report from the Government Accountability Office says the post office's business model is "not viable" given current business conditions. The report makes the post office sound like a government version of General Motors, if General Motors itself weren't already a government version of General Motors.

Demand for snail mail has been falling in recent years -- the GAO notes that first-class mail volume has declined 19 percent since its peak in 2001 -- and though the post office has cut some staff, it hasn't done nearly enough to keep up. The post office is supposed to pay for itself, but in recent years has been covering its losses by borrowing from the Treasury. But now, GAO notes, the post office "is nearing its $15 billion borrowing limit with the U.S. Treasury and has unfunded pension and retiree health obligations and other liabilities of about $90 billion."

Labor costs are killing the post office. Wages and benefits make up 80 percent of its expenses. About 85 percent of its employees are covered by union contracts, and many receive benefits beyond those of other federal workers. Union agreements force the post office to maintain more full-time employees than it needs; deny managers flexibility in assigning tasks, like having a retail clerk deliver mail; forbid the post office from outsourcing any city delivery routes; give about 500,000 employees total protection from layoffs; and "require (the post office) to pay a more generous share of employees' health and life-insurance premiums than most other agencies," according to GAO.

The post office operates under restrictions that do not burden private businesses. It has a legal monopoly on some types of letter mail, but it's also required by law to deliver mail to every address in the United States. Over the years, Congress has authorized the construction of too many post offices and the hiring of too many postal employees, and those are hard numbers to bring down. Altogether, it is a shining example of what happens when the government tries to operate like a business, only not really.

If it stands, the new healthcare law will establish government offices and agencies to create and run healthcare exchanges, to closely regulate insurance companies, to establish standards of care, to determine what are appropriate levels of coverage, to ensure compliance with the law -- it goes on and on. It is, well, a huge expansion of government involvement in the health system. And there is little doubt that many of its backers in Congress want to expand it further in the coming years. Some envision a day when the government, which already runs Medicare and Medicaid, runs health care entirely.

What could go wrong? It turns out Barack Obama has already told us: Just look at the post office.