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Tenpinmaster's avatar

How is the United States Postal Service going broke when they are government run? I thought the government can't go broke?

Asked by Tenpinmaster (2915 points ) January 24th, 2010

I never understood how the Postal Service has money problems when they are part of the government umbrella. Isn’t by nature the US government the only entity that is legally able to go into debt without worrying about going broke. I hear about all these layoffs with postal workers but am confused because if they are government run, how in the world do they have to make budget cuts in this manner.

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28 Answers

HasntBeen's avatar

Governments (and their agencies) most certainly can go broke and often do. But the consequences of “going broke” vary, it doesn’t mean they’ll cease to exist entirely. Orange County, CA—one of the richest counties in the U.S.—“went broke” and declared bankruptcy in 1994 due to putting too much risk into its investment portfolio (http://en.wikipedia.org/wiki/Robert_Citron). The consequences were widespread layoffs and cutbacks, and higher interest on future borrowing.

Ron_C's avatar

The conservatives, in their wisdom, declared that the post office was to be a profit center instead of a government service. They however kept a good deal of bureaucratic control over it. Personally, I believe that we need a public service post office to set a baseline of service. If civilian companies want to compete, fine, but put the post office back in the government where it belongs.

Tenpinmaster's avatar

So because it is a For Profit entity, it relies on a bottom line in order to stay alive? So technically it is a business and not a government run program? So i guess what is confusing is if the postal service is a business, but is technically a government run business, wouldn’t it just keep bailing itself out if it keeps having budget problems?

The_Idler's avatar

Financialization pretty much ended up making everyone slaves to the Bank.
The Government is not the supreme power in a modern nation, money is.

Added to this, is the implementation, over the past few decades, of the incentivized, for-profit system of public services.

As anyone, without vested interest in the creation of such a system, could’ve easily imagined, this has resulted in poorer service, higher prices, worse employment practice, and the total and utter decay of any sense of public duty, resulting in a dying civil service and broken public services, the commercialism of which engenders individualistic and profiteering attitudes in their employees; total antithesis to the ideals that inspired their original conception.

This happened in the UK and in the USA, at least.

Ron_C's avatar

@Tenpinmaster so now you see the problem. The post office is in between it has neither the capitalization possibilities of a real business and now of the power of a government agency. Basically, I think under Reagan, congress said that we want a post office but don’t want to pay for it. Of course that didn’t stop them from installing their own leadership and mandating services. They did the same with Amtrak. I think the conservative reason was so that they could eventually refuse to help and blame postal and rail authorities for failure.

The same thing seems to be happening to prison services also. We should all dread the trend towards private prisons at least as much as the private militias like Black Water.

Cruiser's avatar

The current business model that the USPS operates is obsolete and the paperless world we now operate in had drastically impacted the volume and revenue of the USPS. They need to make some serious expense cuts and being an entity created by the mindset of a government agency they have an overhead with government pensions and salaries that are out of step with independent businesses that would have already made necessary cuts in their expenses to maintain a profit.

HasntBeen's avatar

I think @Cruiser pegged the answer to ‘why?’

mattbrowne's avatar

A country can go broke. Take Iceland as an example. Greece is a bit better off.

The_Idler's avatar

@Ron_C Yes, Reagan started this trend in the US, and Thatcher followed in the UK with deregulation and privatisation and incentivization.
What’s worse, when Labour got in in 97, they carried on full steam ahead, fully incentivising and commercialising the civil service. I really do expect this country to be ruined by this, in combination with unlimited immigration. We will be ruined.

@Cruiser all correct, but if what has happened in the UK is anything to go by, the government suddenly wants as much “decentralisation” as possible
in the areas with loads of pensions, commitments and not much profit, anyway.

Cruiser's avatar

@The_Idler You are 100% correct and is what all businesses are facing right now. This current economic downturn is testing the mettle of every single business in our country. It is these similar corporations with legacy expenses like the automakers and other unionized corporations that are so over burdened by these expenses that make it impossible to compete with China and N Korea whose labor and overhead is a fraction of what it is in the US. It should come as no surprise that US Companies are running overseas to avoid the taxation onslaught from our bloated out of touch Government.

PandoraBoxx's avatar

The postal service operating model has changed a lot through its inception. First, people came to the post office to claim their mail. Then, mail was delivered as it arrived. Then mail delivery was structured into routes, with delivery twice daily, but not on Saturday. Then service changed to one daily delivery and Saturday was added. Very little personal mail is delivered because people don’t write letters or send cards the way they used to. Most mail is advertisements and solicitations. Do we really need that on a daily basis?

john65pennington's avatar

Here is just some food for thought: did you know that each Post Master receives a hugh bonus check each year? just asking….............

Ron_C's avatar

@The_Idler noting good comes from privatizing state responsibilities. Look at Russia for the results of extreme privatization.

Pandora's avatar

News flash, we are broke. We owe more than what we make in taxes. What can I say. Bush had no accounting skills. The government just can’t declare bankruptcy. Who would pick up the bill? But with emails and commercials and the economy being hurt and rival companies springing up the USPS just doesn’t bring in enough cash to support itself in smaller regions. Of course it could always cut the fat instead of closing places. There are people who do very little for their pay check. Ever notice while waiting to be serviced there is that one postal worker who is as slow as mollassas and rude to boot.
If they continue to raise the cost of stamps, Less people will use their system.

HasntBeen's avatar

It’s not actually true that we owe more than we make in taxes. We have debt, and we have a chronic deficit. We make that up with borrowing, which we can do because we still have a pretty good credit rating. That doesn’t make us broke, but it does call into question the sustainability of the strategy.

AstroChuck's avatar

Think of the United States Postal Service as quasi-federal. The USPS is run more like a utility company that a federal agency in than it is mostly left alone but rates are regulated. And although our checks are from the U.S. Treasury the money is in a seperate fund than other government agencies (which works out nicely when the government can’t make a budget because we still get paid while others get vouchers). The Postal Service receives no tax revenues and solely relies on sales for it’s funding. The USPS is forbidden from making a profit and is the only government agency that is required to pre-fund retiree’s health benefits. That last fact is a big part of what is killing the USPS. Another fact is that revenues from sales is down as a result of the post office’s shortsightedness of electronic mail and the Internet. Anyone who works for the USPS can back me on this: the upper management in the postal service is shit. Everything is short term and performance determines management’s bonuses. As a result the craft employees bear most of the burden, being pushed to extremes due to an incredible workload (with carriers that means long routes) and understaffing.

HasntBeen's avatar

Well that all sounds bad. But at least they’ve stopped shooting their coworkers :)

AstroChuck's avatar

@HasntBeen- Stopped? Or just taken a break?

The_Idler's avatar

@AstroChuck They have a word for that:
strike…

AstroChuck's avatar

@The_Idler- Employees of the USPS are forbidden by law to strike.

The_Idler's avatar

Really? wow.
happens often at the Royal Mail

Tenpinmaster's avatar

That clears up a lot about the business practices of the USPS in previous answers. Thank you very much. So about the strike thing.. THey are against the law to strike? So what happens if they don’t like their contract? Who do they complain to?

The_Idler's avatar

Yeah, I thought the government was supposed to be the guarantor of workers’ rights?

AstroChuck's avatar

Federal employees have to rely on binding arbitration when management and labor are unable to agree on a national agreement.

The_Idler's avatar

I guess that’s why they call it the Land of the Freeā„¢

MissAnthrope's avatar

Just a thought.. they could save money by not buying that awful kitschy crap with the intent to sell it for extra revenue. Does anyone actually buy those framed thingies they sell?

AstroChuck's avatar

@MissAnthrope- Actually, yes. You’d be surprised. And philatelic sales are especially profitable.

jerv's avatar

@AstroChuck What about prophylactic sales? Seeings how we are getting metaphorically boned, I would think that there is money to be made there.

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