The COVID-19 virus, which was effectively shipped to the U.S. and around the world from China, and the political response to the virus seem to be the lead story every day.
In this veritable flash flood of virus news coverage, one thing many media outlets have missed is the U.S. Postal Service’s release of its second quarter financials. Perhaps, Postal Service financial information sounds boring, but we must pay attention because they’ve been requesting $85 billion in what is essentially bailout funds as part of the numerous stimulus packages.
If the Postal Service gets its way, you and your children may be on the hook once again for the Postal Service’s failed business model and its refusal to get its finances in order. After all, the USPS has lost more than a billion dollars for 13 consecutive years. And it has promised time and again to revise its business model and reform itself but has not made good on that promise. As a result, they are coming back to the taxpayer asking for billions in bailouts.
Maybe the public doesn’t really care if the USPS is losing money or uses a failed business model. After all, if some local business operates inefficiently and loses money, the problem will solve itself as it will go out of business and others who perform the service or provide the product more efficiently will take its place. But that’s not how government related things work.
When a government related organization loses money and begins to fail, the taxpayer is asked to pump billions into it to keep it afloat. It refuses to change its business model or to right its financial ship because it doesn’t have to. It can go to Congress and ask for more cash. Why restructure? Why innovate? Why focus on core profitable business products? Just ask Congress to give you billions to maintain the inefficient and wasteful status quo. That’s the Postal Service’s business model.
One of the curious things revealed in the financial report is that the Post Office claims that its package delivery business is highly profitable and it experienced an almost exponential increase in its package delivery business. That should be good news. Anytime a normal business is able to sell more of its profitable goods or services, that means higher profits. But not so with the Postal Service which still claims to be losing billions. How do you dramatically increase the sale of your most profitable products and still lose money?
Separately, in regard to letter mail, the Postal Service has a government granted and enforced monopoly on First Class Mail. It is illegal for any competitor to provide a competing First Class Mail service. So naturally, the Postal Service makes a lot of money on First Class Mail. Quite frankly, if you can’t make money as a legally sanctioned monopolist, you’re horrible at what you do.
The Postal Service takes the profits from that monopoly business and uses it to compete with other private companies in the package delivery business. And despite the Postal Service’s claims, it is clearly losing a lot of money on its package delivery business. Their financial records and cost attribution practices are so poor and substandard that they can lose billions and still claim that almost all of their products, including packages, are profitable. But the bottom line can’t lie and the bottom line reveals that the Postal Service is losing its shirt in package delivery.
That may explain why a group of USPS customers have come out to support the Postal Service’s request for a taxpayer provided bailout. If you could get taxpayer subsidized shipping and thereby lower your costs, you’d be for it too. It’s just a matter of self interest.
So these companies using the Postal Service’s package delivery services are effectively asking every American to subsidize their multi-billion dollar business and help them keep their shipping costs below market rates so that they can increase their profits. Wouldn’t it be great if all of us could reach into the taxpayer’s pocket to increase our salaries?
All of this is troubling. But the fact that a government sanctioned monopoly is using its monopoly profits to subsidize competition with other legitimate businesses is even more troubling. Imagine if the government set up a monopoly with guaranteed profits and then unleashed that monopoly to compete with you and used its monopoly subsidies to undercut your line of work. They could afford to lose a ton of money, but still harm your business, reduce your salary and profits, and get the taxpayer to cover their massive losses. Does that sound fair? Is that a good use of government power and taxpayer funds?
While the Postal Service claims that its package delivery service is profitable, that simply cannot be true. If it were true, as their package business grew, they would stop hemorrhaging so much money. But they haven’t stopped losing money. Every quarter, when they release their financial reports, it’s just more bad news. If you drill down in their financial information, it is clear that the Postal Service is delivering packages at a loss. But the USPS uses its profits from First Class Mail to subsidize those losses. And when their losses overwhelm their monopoly profits, they call upon the taxpayer to bail out their failed business model.
It is time for real reform at the Postal Service. It is time to stop the perpetual taxpayer bailouts. If nothing is done, next year even after COVID-19 has passed, the Postal Service will concoct another excuse to get more taxpayer bailouts. The Administration should impose meaningful reform because it is in the taxpayer’s interests for the Postal Service to get its business model and financial house in order. COVID-19 shouldn’t be used as a phony excuse to bailout failed monopolists.
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