Congress’ Postal Service difficulties highlights threats to change and innovation

A story on Bloomberg today illustrates the problems when a divided Congress tries to set policy. The U.S. Postal Service, mandated by Congress to both deliver mail to every address in the United States and its territories and (since 1971) to be a self-funding public entity is now facing annual losses of $18.2 billion by 2015. The Service has developed a five-year plan to restore itself to profitability by ending Saturday mail, delivery, close underutilized facilities, reduce employment, restructure its health plan, raise postal rates and enter new lines of business.

As Bloomberg notes, “Each element of the plan has an opponent. Postal worker unions are fighting the closings and job cuts. Direct-mail advertisers and magazine publishers demand Saturday delivery and low rates. Rural constituents — for whom the post office is their strongest link to the rest of the world — and their representatives in Congress protest post office closings.”

The predictable result is that Congress will block the reforms necessary to cut costs to match revenue. The Senate passed a bill 62-37 last month that would block the Postal Service from ending Saturday mail delivery for at least two years. The service has estimated $2.7 billion a year would be saved by that cut. The Postal Service also drafted its own medical plan to bring health care costs, which consume 20 cents of every revenue dollar, under control. The Senate measure didn’t grant a new health plan and would make it more difficult for the service to close facilities soon enough to staunch its financial crisis. The bill’s passage capped more than five months of debate about how to prevent closings of as many as 3,700 post offices the Postal Service has deemed inefficient or redundant.

Like many other policy debates, when Congress makes choices to protect one group or another, it shuts off options and makes the ultimate adjustments that much more painful.

The biggest problem with government regulation and laws in the economic sphere is that they freeze existing conditions and stifle innovation. Yet, if the experiences of the last 4 years of government “stimulus” spending have shown anything, it is that government employees are not good at picking winners and losers in technology or creating jobs. It is only through rewarding those who are willing to take the risks of creating new enterprises, new goods or services, by spotting opportunities and risking their own money who will create the jobs and growth that lead to prosperity.

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