07/30/09 Baltimore, Maryland The U.S. Postal Service is on track for a record $7 billion deficit this year. That’s more than double last year’s loss.
Postmaster General John Potter bumped up his previous projection by a billion bucks yesterday, citing the growing expenses of six-day delivery and employee retirement/health care plans. Potter and his team are scrambling to cut costs left and right — from a yearlong hiring freeze to early retirement offers to branch closures. But we wonder… will it even matter?
The Government Accountability Office recently labeled the USPS a “high risk” federal program, and while we’re hard-pressed to think of any risk-free government program, we’re inclined to agree.
The Postal Service is facing a perfect storm of business risk: The business is already loaded up with debt. Minimum wage and benefit costs are rising while revenues are plummeting. For example, they are expected to handle at least 27 million fewer pieces of mail this year than in 2008. Is there any business in America that isn’t looking to cut shipping costs? (There’s this new technology we’ve heard about called “e-mail.”)
Then there’s UPS and FedEx, two worthy private-sector rivals. And what about Peak Oil? A summer of 2008 redux could cripple the whole industry. Above all, the USPS is run by the government… c’mon.
Snail mail might not be dead, but we suspect the USPS is going the way of Amtrak, at best.
They can’t even deliver our mail without losing money, yet the public looks to the government to manage our health care? Oy…
Ian Mathias
Ian Mathias is the managing editor of Agora Financial’s Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report – Agora Financial’s flagship income investing advisory.
Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He’s also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he’s not at work, you’ll probably find Ian on a bicycle, racing up and down the “mountains” of Baltimore County. Ian has a BA from Loyola University in Maryland.
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This article should not come as a surprise, given that the postal rate increases are tied to the “official” rate of inflation, as opposed to the actual rate of inflation as reported at Shadowstats, for example.
And it hardly helps that they have increasing benefits expenses…
even though i am a strong believer in minimalist government i can tolerate the us government operating the postal service at a loss….i am not sold on the privatization of mail delivery – it has not proven effective….the intelligent action to cover losses is to raise prices….some argue that it would be a death spiral but i am sure equilibrium would be found soon enough…
ups and fedex are as incompetent as the usps…..in fact both companies are run by thugs and should be sued into the stone age…..
USPS should never have been “privatized.” That was the action of Greed, period. Now that the expenses are escalating because of false stat figures are used (my all government and business) we only have one option and that is to “shut it down.”
There are some things government does better than private business and some things not.
It is up to wiser pols (and citizens) that currently exist to know the difference.
And, in closing stop continuing the false conception that “single-payer” is a “government run healthcare”.
If anything else is passed (healthcare) then it will surely fail and continue to rob the people of progressive health care for all.
(After all, don’t we claim to be, “….an advanced society?” (????????????????)
If the same scientists who champion global warming were to get behind the plight of the USPS, we would soon hear of the relentless crushing onslaught of increasing mail volume. Why, look at the chart–it’s obvious. Except for the past few years, of course, but that is only an anomaly, and probably due to measurement error. But we must *do* something before it’s too late to save the country from a national postal meltdown. More money is needed, obviously.