The recent article Nine Ways the Postal Service Is Not Like a Real Business apparently struck a chord, or maybe a nerve, generating numerous insightful comments on this blog, various LinkedIn groups, and private emails.
Though the U.S. Postal Service must live off of the revenue it generates rather than on government appropriations, it differs fundamentally from private enterprises in numerous ways. Those distinctions are more than just an interesting point of discussion. They are a key to understanding the Postal Service and how it might be reformed.
So, with thanks to many Dead Tree Edition readers, here are xxx more ways the USPS is not like a real business:
- The concept of “investment” is nearly absent from the Postal Service, which must live from one annual budget to the next. It is not able to access private capital markets, such as the bond market, to finance major capital investments. That prevents it from making investments that would probably pay off in the long run, such as replacement of its aging, inefficient delivery fleet and more of the kind of automation that has enabled it to increase labor productivity.
- Similarly, the Postal Service is hamstrung when it comes to launching new products that are not immediately profitable.
- The Postal Service does enjoy low interest rates on its debt because it can borrow from the federal government. But it has reached the legal limit of its ability to borrow. And much of its debt was racked up to cover subsidies to the federal budget that were dressed up as prepaid retiree health benefits and pension-fund payments.
- “Real businesses are not required to invest ALL their pension assets in low interest government bonds but instead can choose to invest then in a balanced portfolio,” noted one anonymous commenter. “The difference in average returns on pension assets of the USPS and the average returns of a typical businesses pension assets amount to over $10 billion per year.”
- “They are forced to deliver to unprofitable addresses,” notes Mike Seethaler, president of Raintree Graphics in Jacksonville, FL. “If a customer is too far out and too small for us to make a profit, we don’t do business with them.” In contrast, one commenter noted, USPS “is mandated to serve all areas of the country, every address, every day.”
- Speaking of unprofitable customers, USPS can’t charge higher prices for customers who are expensive to serve. People who get front-door delivery pay no more than those who receive their mail curbside or in cluster boxes. When USPS has to rely on airplanes, boats, or donkeys to get mail to remote places, it can’t charge a premium for those services. And it costs you 46 cents to send a letter from Maine to Alaska, or to send it across town.
- “Real businesses report long term liabilities, like retiree health benefit liability, on their balance sheet, and only report them as an expense when money is set aside to fund the liability,” wrote Liam Skye. “USPS is the only organization that is required by law to report fixed amounts of the liability as expense, whether they put the money aside to fund the liability or not!”
- Unlike most postal agencies around the world, the U.S. Postal Service is legally restricted from straying outside of its core business of offering postal services. And even its delivery-related ventures can run into problems if they compete with private businesses. “Consider the fact that USPS came up with the concept of overnight mail first,” says R.E. Perry. “It made so much money for the service that USPS bought a bankrupt airline rather than continue to pay other carriers to provide that service. Complaints that private companies could be making this money led to Congress ordering the service to sell the airline, and return to paying others to move their mail.”
- The Postal Service is subject to a regulatory agency, the Postal Regulatory Commission, that has no authority over USPS’s private-sector competitors.
- “Another way USPS is not like a business: It is mandated by the Constitution of the United States,” wrote Kofi M. G. W. Opantiri. (Technically speaking, the Constitution authorizes but does not require Congress “to establish Post Offices.”)
- It is exempt from income, sales, and real estate taxes. On the other hand, USPS is not eligible for the kind of tax breaks that incent private businesses to expand and to become more energy efficient.
- “Real businesses don't have two private police agencies who have to enforce thousands of federal rules and regulation WITHOUT reimbursement,” noted one commenter.
- By law, postal workers cannot strike. But impasses in labor-management negotiations at the Postal Service lead to an unusual step – binding arbitration.
- Private businesses are not subject to the Freedom of Information Act. But nor do they have the power of eminent domain, exemption from many state and local laws, and some protections from being sued. “USPS considers itself above the law,” wrote “a lady veteran.” “Some of their trucks should never be on the road.”
- “Not even Wal-Mart risks electrocuting its employees,” tweeted Dave Berdych, alias Dry Mail Man, referring to OSHA’s four-year investigation of electrical safety hazards in numerous postal plants.
- “No real business would have this many layers of redundant management. (bureaucracy),” responded one reader, echoing a complaint often heard from postal workers.
- “Real business management incompetence is usually dealt with a demotion or termination,” wrote another. “Postal incompetence is rewarded with a promotion.”