Last week, I wrote about proposed legislation that would make it easier for banks to confirm sub-prime loans. So just when you think that government cannot become any more delusional.... in comes H.R. 5445, the "Postal Jobs Protection Act of 2014".
I was utterly stunned when I read this. The gist of the bill consists of just 26 words:
"Notwithstanding any other provision of law, no mail processing facility operating as of September 1, 2014, may be closed or consolidated prior to December 31, 2015."
Let that sink in a minute: they want to pass a law to ensure that NO US postal center can be shut down through the end of next year. Also, the bill has 85 sponsors. Shocking.
For the sake of context, let's walk through the numbers.
In its most recent quarter, the US Postal Service lost a massive $1.9 BILLION. That's far worse than the $699 million loss they rack up over the same quarter last year.
And so far this fiscal year, USPS has lost over $4 billion.
What's more-- the post office has maxed out its $15 billion credit line. They have almost no liquidity left to continue financing operations, they're not profitable, and they have no capacity left to borrow more money in order to plug the shortfall.
Perhaps most alarming is that, according to the US Postal Service's own financial statements, its NET worth (i.e. assets minus liabilities) is NEGATIVE $44 billion.
This doesn't happen by accident. And it's not the result of some temporary downturn. It takes years... decades of mismanagement and structural issues to reach this point.
Just for laughs, I compared 2-day shipping rates among major carriers in the US for a simple envelope package.
FedEx: $25.12
UPS: $24.16
And the US Postal Service? $5.05 if I order online.
It doesn't take a rocket scientist to see the problem here and since I am a rocket scientist, I am appalled by this complete and utter stupidity.
Bear in mind that FedEx and UPS are, you know, profitable, earning $3.3 billion and $6.7 billion in pretax income, respectively. (And they each paid an effective tax rate of more than 35%.)
Curiously, there was an article in Ethiopia a few weeks ago. The Ethiopian postal service has become profitable after being a drain on the local economy. Ethiopia has never been considered the paragon of economic growth.
Think about this..... postal services around the world have the same problems. A place like Ethiopia has a massive rural population, and it costs a lot to maintain those small offices. Everyone face rising fuel costs and declining volume.
Yet even in Ethiopia they've figured it out. They know they can't continuously run an unprofitable operation, so they reinvent the business model. That's life.
In fairness, the Postal Service knows what to do. They're at the end of their rope. And if they're going to survive, they need to raise revenue and cut costs dramatically.
This includes the uncomfortable prospect of laying off employees and closing down unprofitable processing centers. Do you remember a few years ago when they closed 10% of the post offices, yet refused to lay off a single person?
But Congress doesn't want that. And they're lifting legislation directly from the pages of Atlas Shrugged to ensure the post office keeps operating at a loss.
This is yet another example of incredibly dangerous central planning being planned, proposed, or in progress in the Land of the Free.
Paddy Deighan J.D. Ph.D
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