2011 May 28 Saturday
US Postal Service Insolvent

Update: Want to cut back on the size of bloated government bureaucracy and save money for yourself and make the economy more efficient? Want to shrink an agency that employs over half a million people? Move all your banking, bill-pay, and other correspondence online. Then see at the bottom of this post for ways to cut your burden of junk mail. Some steps are easy to do. Also, every time you get junk mail see if they have a web site and then go to it and look for a way to cut off junk mail from them. I've just done this for half a dozen places.

The US Postal Service is bleeding billions of dollars because people are shifting to online everything (ordering, online bill-paying, and online correspondence with friends, businesses, governments, etc). In spite of this its most recent union agreement granted its overstaffed unionized workforce cost-of-living salary increases and raises and a no layoff clause. The USPS wants escape from having to set aside money for future retiree health care benefits.The USPS, unlike most employers, actually pays retiree health care benefits - at your expense. This Businessweek article takes a long look at the depth of the problems at the post office.

The USPS has stayed afloat by borrowing $12 billion from the U.S. Treasury. This year it will reach its statutory debt limit. After that, insolvency looms.

On Mar. 2, Postmaster General Patrick R. Donahoe warned Congress that his agency would default on $5.5 billion of health-care costs set aside for its future retirees scheduled for payment on Sept. 30 unless the government comes to the rescue. "At the end of the year, we are out of cash," Donahoe said. He noted that the unusual requirement was enacted five years ago by Congress before mail started to disappear.

Bricks-and-mortar post offices and hand-delivered mail are so 20th century. Why bail out a relic from the past? I rarely even look at what I get in the mail because months go by between the arrival pieces of mail that matters. In fact, as the ratio of useless-to-useful mail has gone up into the hundreds it is a problem that I do not want to look thru hundreds of mail items just to find one letter that matters. You have the same problem? Then on top of this we are supposed to subsidize our getting pelted with junk mail?

How can this be? Money politics. Bribery has bought (or at least rented) friends in the Democratic Party.

Democrats receive the vast majority of the contributions made by postal workers' unions, according to campaign finance records, so they tend to be sympathetic. President Barack Obama inserted a proposal in his 2012 budget to absolve the USPS of $4 billion of its retiree health-care liabilities in 2011.

The union's influence-buying has yielded them a no-layoffs contract. So Postmaster General Donahoe has to take a much more gradual approach to cost cutting.

He wants permission from Congress to cut weekly delivery from six to five days, which he says will save $3 billion a year. He says he wants to reduce the USPSís headcount by 20 percent over the next five years through attrition; the agencyís union contracts prohibit layoffs.

Donahoe isn't legally allowed to close a post office just to save money. Really. The US government can't run a business. Donahoe wants to shift post offices into small presences in stores where store employees (non-union usually) can service the sporadic flow of customers. Makes sense. Could be done much faster and save billions of dollars. The article cites examples of European nations which have outsourced most post offices to convenience stores and other retail outlets. These European nations forced their postal services to compete. We need their reforms here. Read the full article for details.

The US government is running a massive and unsustainable deficit. Economic growth will not save the government by boosting tax revenue. We are now in a low growth era. The liability side of the balance sheet (accumulated debts, Peak Oil, aging population, and declining skill sets of work force due to immigration) are going to swamp whatever is going right. Therefore the US is headed for a sovereign debt crisis. Really, our governing class needs to start acting like we are in a real crisis.

Update: Hey, some web sites provide easy ways to opt out of junk mail and catalogs for your physical mail box. Some associations of direct mailers have online forms for turning off the junk. I just went thru and listed myself on DirectMail.com's Mail Preference Registry. Opting out there is easy to do. I also registered (more steps required) for the DMAchoice.org mail preference service of the Direct Marketing Association (which one web page claims can cut your junk mail by 75%). Once you've registered and logged back in from the email response you need to go into each category and click on the bottom right button on each category to opt out of the entire category. You can also selectively do steps for individual companies listed there. Those are my first two steps to cut back on junk mail. If you are like me and rarely find anything useful in junk mail I suggest you do likewise.

Update II: To get rid of credit card or insurance mail offers use OptOutPrescreen.com which tells Equifax, Experian, Innovis, and TransUnion credit report firms not to use your credit info to help credit card and insurance companies know to mail to you.

Also, you can turn off Valassis Red Plum and Cox Target Media ValPak. For other web pages and also email addresses to send opt-out junk mail requests to see the Ecycycle.org opt-out suggestion list, the WikiHow Get Rid Of Junk Mail,and the Privacy Rights Clearinghouse fact sheet on junk mail.

After taking the steps above after a month to wait for the flow to stop I am going to make it a habit to look at all remaining junk mail and go to their web sites to try to get off their lists. My hope is to make arrival of physical mail a rare event.

Share |      By Randall Parker at 2011 May 28 01:15 PM  Economics Government Effectiveness


Comments
Quequeg said at May 28, 2011 3:35 PM:

Yea, I've got that problem with a high ratio of junk mail to actual mail. There really should be a "no junk mail" list like the "do not call" list. Actually, I found out from my post office that if I buy a PO Box, I can avoid getting junk mail. So, I was thinking about doing that and then just giving the PO address to those I would like mail from. And then just never opening my mail box.


MarkyMark said at May 28, 2011 5:13 PM:

As if the Postal Service doesn't have enough to worry about Peter Schiff has pointed out the disaster that is waiting to happen with "forever stamps". As I understand "forever stamps" are a type of non-denominated stamp where you buy now at current rates but they can be used at any time in the future to send a letter. Peter Schiff has pointed out that in an inflationary environment these things are deadly to the seller - the Postal Service receives a little bit of revenue now but at the cost of having an obligation to provide a service at some point in the future which, due to inflation, may be a lot more expensive. Just one more nail in the coffin of the Postal Service.

Randall Parker said at May 28, 2011 6:59 PM:

Quequeg,

I did not know about post boxes and junk mail. But you have to pay a regular fee for the PO Box? Or is it a one-off expense?

MarkyMark,

Yes, I have enough "forever stamps" to last me 10 years now that I've shifted almost everything to online. I probably use less than 10 stamps per year.

JCJ said at May 28, 2011 8:03 PM:

We could cover Post Office shortfalls for at least a century with the money we've wasted in Iraq. And build the fence.

black sea said at May 29, 2011 12:16 AM:

I believe Seinfeld dealt with this issue about 10 years ago:

http://www.youtube.com/watch?v=Hox-ni8geIw

Francis said at May 29, 2011 7:47 AM:

We could cover Post Office shortfalls for at least a century with the money we've wasted in Iraq. And build the fence.
----------------------

Not gonna happen. I'd plan for the worst.

In said at May 29, 2011 9:22 AM:

I call anyone that sends me junk mail and have them remove me from their mailing list. Most of them do it with out issue.

Benefits:

  • Saves time filtering out junk
  • Saves trees and other resources
  • Further starves a dying government service

It only takes a few minutes per vendor to call. The only catch is it usually takes a few months to stop receiving junk because they preprint the items.

Randall Parker said at May 29, 2011 3:33 PM:

Black Sea,

Yes, great skit with Kramer at the post office. The writing was obviously on the wall 10 years ago.

USPS has got to ultimately shrink by 90+%. Really, why get anything in the mail besides packages? I just sent emails and filled in web forms to cut back on some of my sources of junk mail. I'm going to start watching for more sources of it the way In does and cut them off one by one.

REN said at June 3, 2011 1:41 PM:

Japanís post is now privatized. But, their bank and insurance arms are still public. If you want to know how Japan can have a 200% debt ratio and still operate, then read on.
http://www.atimes.com/atimes/Japan/MD01Dh02.html

April 2010 article in The Australian, Peter Alford called Kamei "the man who masterminded a major change to Japan's public finance arrangements in the guise of restructuring postal services". Alford wrote:
It was accepted that he would halt and disable the previous government's privatization program to separate and sell the bank and insurance businesses by 2017.

But now, without any apparent consultation with ... other fiscal and administrative policy ministers, he has moved to significantly alter private savings behavior and public funding capability. ...

The irascible 73-year-old Financial Services Minister proposed - well, demanded, actually - that Japan Post Bank's individual deposit limit be raised to Y20 million ($230,000) and Japan Post Insurance's maximum policy coverage rise to Y25m.

In doing so, he has significantly expanded Japan Post's capacity to use those savings and premiums to finance public debt.

As of March 31 last year, 74% of the postal bank and postal insurer's combined assets of Y303 trillion (that's right, $3,480 billion) were held in Japan government bonds (JGBs) and another 4% in local government bonds.

Utilizing the post office's 24,000 shop fronts, Japan Post Bank (the world's largest savings bank) and Japan Post Insurance (the nation's largest personal insurer) held Y280.2 trillion of deposits and insurance reserves, equivalent to 19% of Japanese household financial assets. ...
Kamei justified the move by saying, "The reality is we issue a massive amount of Japan government bonds and we need someone to buy them - we should be thankful the Post Office is willing to buy."


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