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Postal Service problems a microcosm of entire government

Mar. 18, 2012 - 06:00AM   |  
By GRETCHEN HAMEL   |   Comments

When was the last time you hand-wrote a letter to mail to a friend? Cheap, fast technologies like email and the rise of low-cost long-distance calling have almost made the handwritten letter a thing of the past.

It's striking that the U.S. Postal Service has changed so little in response. Sadly, we're paying a high price for that failure to adapt.

The news that USPS lost $3.3 billion in the last quarter is only the tip of the iceberg. In fiscal 2011, the agency reported a loss of $5.1 billion; the year before that, it lost $8.6 billion. If the Postal Service were a private business, it would be facing bankruptcy and in fact, there's a real possibility USPS will be completely broke within the year.

The difficulties facing USPS have been well-documented: reduced demand for physical mail; high spending and debt; a bloated and inefficient organization slow to adapt to change; and skyrocketing health care and retirement costs for employees.

Those are the same challenges, on a smaller scale, that threaten to derail our entire federal government.

Both USPS and the federal government are spending more than they bring in. Federal debt and spending are at all-time highs, with a national debt of more than $15 trillion and a deficit this year estimated at $1.08 trillion by the nonpartisan Congressional Budget Office.

Meanwhile, health costs and other required spending are creating inescapable burdens. For USPS, it's health care and employee pensions; for the federal government, it's skyrocketing spending on Medicare, Medicaid and Social Security, combined with high levels of defense spending, that command an ever-growing share of the budget.

Both USPS and the federal government have failed to adapt to changing times. The explosion of affordable information technology and Web-based communication tools have revolutionized the private sector, boosting productivity and allowing for leaner, more dynamic organizations. But the labor-intensive Postal Service business model has changed little over the decades, and the federal government shows a similar unwillingness to change how it does business.

A recent study by economists at George Mason University showed that the federal government workforce had grown by 1.7 million employees over the last 11 years, during which time the private sector was shedding jobs. From 2000 to 2011, the federal workforce grew at an average of 0.8 percent per year, while private- sector jobs declined at a rate of 0.3 percent per year.

There have been ample warnings about the dangers of this toxic combination of factors. USPS is facing bankruptcy as a result. Could the same happen to the federal government? The last thing we want is to see the U.S. face the same reckoning we see in many European Union nations, where spending, debt and unrestrained government growth have hobbled entire economies.

The comparison isn't perfect, since USPS derives most of its operating revenue from sales of products and services, rather than tax revenues. However, it's not stretching the analogy too far to say that USPS is the "canary in the coal mine" a warning of where the federal government is headed unless we see a commitment to spending reform.

Watch closely as USPS navigates these difficult times, because the federal government will soon need to follow course. USPS leaders have urged Congress to allow them to implement reforms to place the organization on solid financial footing. That will include getting their spending obligations under control.

Meanwhile, proposals have been floated in the Senate to address the Postal Service's woes, but it remains to be seen if Congress members will deliver in the middle of a heated election year. Here's hoping they do and then turn their attention to reforming the larger federal budget.

Gretchen Hamel is executive director of Public Notice, an independent, nonpartisan, nonprofit dedicated to providing facts and insight on the economy and how government policy affects Americans' financial well-being.

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