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As USPS Spins Further Out of Control, France Prepares to Exit Mail Business

Leonard Gilroy
July 30, 2009, 9:21pm

Following up on my posts here and here, things continue to get worse for the U.S. Postal Service. Ed O'Keefe at the Washington Post writes:

The U.S. Postal Service urgently needs restructuring to meet rapidly declining mail volume and must immediately cut costs, according to a new report by the Government Accountability Office. The Congressional auditing agency today added the nation's mail delivery service to its list of "high risk" federal government agencies and programs that either need a massive overhaul or cost taxpayers billions of dollars in waste, fraud, abuse or mismanagement.

The GAO report is available here. Robert Brodsky's piece in Government Executive offers some helpful stats that convey a sense of how well the federal government runs its postal business enterprise:

The Postal Service is projecting a net loss of $7 billion for fiscal 2009, with its outstanding debt rising to more than $10 billion and a cash shortfall of roughly $1 billion. Those losses are expected to continue in 2010.

The agency's budgetary woes are so bad that it doubts it will have enough revenue to fully fund its $5.4 billion annual payment into the Postal Service Retiree Health Benefit Fund and the approximately $1.1 billion it is required to pay to the Labor Department for workers' compensation, according to the quarterly report.

"Without legislative change ... we project a cash shortfall of approximately $1.5 billion on Sept. 30, 2009," the report said. "If this happens, the Postal Service may be unable to pay certain obligatory payments due in September 2009. Continuing significant losses in 2010 and future years could also result in cash shortfalls that would ultimately cause the $3 billion annual borrowing limitation and overall $15 billion debt limitation to become insufficient without additional structural changes."

Meanwhile, countries across the pond are moving to get government out of the mail business. Gabriele Parussini at The Wall Street Journal reports today that:

The French cabinet took the first step toward a possible privatization of the country's postal service as it approved a bill that will turn La Poste into a joint-stock company on Jan. 1.

The bill now goes to Parliament for approval. The UMP conservative party of President Nicolas Sarkozy and its allies have a firm majority there, so the bill's passage is assured.

"We need to give La Poste the means of pursuing its modernization and its development," Finance Minister Christine Lagarde said.

Mail services will be opened to competition in the European Union in 2011.

Some combination of service cuts, facility consolidations and employee salary and benefit cuts may ultimately be the short-term, stopgap measure we see emerge from Capitol Hill, but I'm thinking that D.C. officials should quickly start looking across the pond for better ideas.

» Reason Foundation's Privatization Research and Commentary


Leonard Gilroy is Director of Government Reform


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