OK…another one I just HAD to write…

Today’s news is filled with articles about how the US Post Office is warning Congress that it will default if they don’t do something very soon.

There are so many things wrong with that statement I don’t know where to start.

The US Post Office is a shining example of What Not to Do. A government-run business (mistake #1) that continually applies a broken business model (mistake #2) and refuses to change the fundamental reason they are going broke (mistake #3), instead insisting that Congress (read: Mommy) repeatedly bail them out so they can continue doing things wrong (mistake #I lost count).

With apologies to the Post Master General, the reason the Post Office can’t make it financially has nothing to do with the economy. It has nothing to do with the “rapid transition to electronic communications”. It has everything, instead, to do with the Post Office making really bad financial decisions.

The main problem with the current Post Office business model is cost. The US government has for decades hired postal workers. These postal workers immediately become employees of the US government, and are thus entitled to US government pensions. As the population of postal workers has grown and matured, the financial burden of both paying current retirement and providing for future retirement payments is crippling the Post Office. Until this changes, the Post Office will continue to lose more and more money.

There are only TWO possible solutions to this mess:

1. Do nothing. Continue to raise  postal rates until it costs dollars, not cents, to mail a letter. This will have two effects:

a. It wil hasten the transition to electronic communication. Anything that can be scanned or otherwise sent via email, will be, and

b. It will make sending letters financially attractive to package delivery companies like FedEx and UPS. They will start offering “LetterBoxes” and superior delivery service to grab the lion’s share of the Post Offices’ most profitable mail transactions.

–> Both of these effects will do nothing but hasten the demise of the Mail Service. This has been the path we and our fearless political leaders have been on for several decades now. And it’s only a matter of time (I predict less than 10 years) before it all comes crashing down. I submit that, if we are going to go this route, we avoid the wait and shutdown the Postal Service now. It will save us a lot of money in the end.

2. The other possible solution is my ultimate recommendation, but since it involves one of the precious quantities so scarce in Washington, resolve to act, my guess is is wil never happn. In any event, here goes:

Solution to the US Postal Service Mess:

I. “Snap a chalk line” on retirement benefits. Anybody now due benefits will get them. We may have been stupid to promise them, but still a promise is a promise, so let’s just admit our mistakes and move on. The government should separate all benefits promised (payable now or in the future) from any current Post Office business balance sheets and guarantee their payment. Period.

Now, onto the business of delivering the mail.

II. The government should not be running businesses. Period. Unless required for existence (ie we have to) or protection (read: miltary), we should stay as far away from running businesses as we can. We must, however, find a way for the government to set and enforce operating metrics for businesses we deem critical to the harmonious operation of our society. If, after some debate, we all deem that delivering the mail is one such business, then I propose here is how we manage this process:

III. The government awards the right to take over all existing assets and duties of the US Postal Service to an outside company. This company will have to submit to serious scrutiny by both the government and whomever the government appoints to monitor them. This is the key: the government should set standards and then choose a company to execute on them. It should also choose a different company to monitor the first company. The government can and should monitor both companies.

IV. The New Post Office (NPO) gets a five-year contract. It gets a set of operating specifications (“you must deliver the mail”) and a set of quality metrics (“cust SAT must be no lower than 75%”). As long as it operates according to these specs and maintains the min cust SAT, it is guaranteed the full length of it’s contract. If it exceeds them, it may get automatically renewed. If it falls below them, the business automatically gets re-bidded and the process repeats.

Sure…there are many caveats to this proposal, but it does solve two main issues. It gets the US Government out of running a business and into what it should be doing, setting standards and being the watchdog for critical US businesses. That should be the main function of the government. It also removes the structural financial impediments to the Post Office that exist today – we simply cannot afford to continue to pay Postal Workers the same benefits as we have in the past.

This model can and should be applied to all sorts of critical businesses if debate ultimately agrees. Businesses like airlines and utilities come to mind. We don’t need government employees operating businesses; we need them watching, monitoring,and checking to see that certain critical businesses are doing the right things and if not, blowing the whistle.

Sorry for the long-winded post. But it’s labor day.

Tom