At the PostalVision 2020 Conference earlier this year, Postmaster General Patrick Donahoe compared the U.S. Postal Service to Greece. Although the postmaster general has made the Greek analogy only a few times in passing, the topic is worth considering in more detail. Greece’s disastrous experience holds valuable lessons, applicable to the Postal Service, regarding the dangers of large and persistent deficits and the desirability of addressing financial problems sooner rather than later, says Michael Schuyler, a fellow at the Tax Foundation.
Thankfully, the Postal Service’s problems are less serious and easier to solve than Greece’s. In three welcome respects, the Service is in much better shape than Greece.
First, it has not attempted to deny or soft-pedal its problems.
Second, the Service has engaged in significant self-help measures, especially in the area of labor expenses. While both the U.S. Postal Service and the Greek government have too many workers and provide above-market compensation packages, Greece’s labor problems are worse. Moreover, the Service has reduced its total workforce (career and non-career) by 30 percent from 1999 to 2011, primarily through attrition and buyouts, while maintaining acceptable service quality.
Third, although the Service’s losses are so extreme that they would almost surely have driven a private-sector business into reorganization or bankruptcy, they almost look good compared to the financial imbalances in Greece.
The most crucial warning from Greece is that while it is painful to deal with financial imbalances promptly, the pain is many times greater if reform is pushed down the road. Delay lets imbalances worsen and deficits cumulate.
Postmaster General Donahoe used the Greek analogy to help people understand the peril to mail users if the Postal Service were to resist the operational changes needed to control its costs. The government agency’s finances amply justify the postmaster general’s warning. If the Service follows Greece’s path of pretending for as long as possible that problems do not exist, the eventual outcome will be extraordinarily bleak. Although some of the Service’s proposals are open to criticism, it is to be praised for firmly rejecting the Greek approach and, instead, attempting proactively to return to financial self-sufficiency.
Source: Michael Schuyler, “Is the Postal Service Like Greece?” Tax Foundation, December 4, 2012.