The Postal Service: Such Great Heights?

By FITSNews || One of our favorite songs is “Such Great Heights” by the Postal Service.

No … not the Postal Service.  The band named “The Postal Service.”

And clearly, “such great heights” is not a term that you can apply to the actual Postal Service these days, which is singing the big government blues.

In fact, in the latest (but by no means greatest) example of why the government shouldn’t be placed in charge of something the private sector can do better, the U.S. Post Office has announced that it is facing a $238 billion shortfall over the coming decade.

Among the chief reasons for this massive deficit?

Government price controls, excessive regulation and unionization – an unholy trinity of anti-competitiveness that has this “agency” on the verge of a fiscal abyss.

Governed by both the U.S. Congress and the U.S. Postal Regulatory Commission, the Post Office is trying to compete in the marketplace with both hands tied behind its back. First, it is prevented by law from raising prices beyond the rate of inflation or from setting its own delivery schedules. That means it cannot adapt its prices to a changing market, or eliminate something like Saturday delivery service, which has been mandated by the federal government since 1983. On top of all that the “agency” is required to prepay more than $5 billion in retiree health benefits each year as part of the so-called “Postal Accountability and Enhancement Act of 2006″ – no matter how much money it loses each year.

In 2008, the tab for those benefits was $7.8 billion – or ten percent of the Post Office’s operating budget. No other Fortune 500 company or government agency is required to make such exorbitantly-high advance payments.

While many limited government advocates support the privatization option there’s a problem there, too. In fact, recent studies have concluded that privatizing the Post Office is “untenable” due to its poor business model. Like GM and Chrysler, it would appear that only the “command economists” in the federal government are willing to bet (with your money) on such a highly-regulated, union-controlled operation.

Of course you never know what could happen till you try …

Anyway, last year, when the outlines of the Post Office’s impending disaster were becoming self-evident, Postmaster General John E. Potter warned Congress that the government-union stranglehold was crippling his agency and that something must be done. Congress did nothing, and as a result the Post Office lost $3.8 billion last year, on top of a $2.8 billion net loss the previous year.

This year? It’s even worse. According to Potter if no changes are made then the Post Office’s net loss for 2010 will be $7.8 billion – which is well above the agency’s $6 billion credit limit (also set by the federal government, ironically).

Once again, though, there is absolutely no appetite for reform. In fact, President Barack Obama’s recently-released executive budget includes mandatory six-day delivery, despite the Post Office’s clear inability to pay for this service. Also, Obama has also shown no interest in releasing the Post Office from its pre-funded retiree health care obligation, which has a $5.5 billion installment due on September 30, 2010 – just six months from now.

So what happens now?

“There is significant uncertainty as to whether the United States Postal Service will have sufficient liquidity to make this payment,” an independent audit of the agency recently concluded.

Really?

No surprise there. Of course, that means we are headed for more deficit spending at a time when taxpayers can least afford to subsidize anything – let alone a money-losing proposition.

Like Fannie Mae, Freddie Mac and numerous other examples of government “competing” in the free market, there is a critical lesson here that U.S. policymakers must eventually learn. The ongoing, systemic failure we are currently witnessing with respect to government “oversight” of the Post Office is yet another potent – and expensive – reminder that government does not know best.

In addition to exacerbating inefficiencies, government is simply not equipped to respond to the marketplace of the 21st century – nor should it be. It should perform its core functions and then get out of the way.

Where a private company would simply make price, delivery or benefits adjustments, the Post Office is racking up billions in debt because it is prohibited from doing so.

As President Obama and his Congressional allies contemplate dramatically expanding government control over a huge swath of the health care industry, we should keep this costly lesson fresh in our minds.

Oh, and here’s the song we were referring to at the beginning of this article …

For those of you who can feel your “Ironymeter” cranking up, yes – that’s the song featured in the UPS “write board” ads. Funny, huh?

There’s also a nifty down-tempo version of the song performed by a band called Iron and Wine.