The United States Postal Service is an example of government's failure to deliver efficiency. Although the USPS does not receive federal funds, it's a quasi-governmental agency. The USPS is responsible to raise its own revenue yet it's bound to the mandates of the federal government. The USPS's abysmal financial situation is a direct result of government intrusion into business operations.
The USPS faces challenges that only government could create. Despite having a government imposed competitive advantage over UPS and FedEx, the USPS is in financial peril while the private companies are thriving. The USPS enjoys exemptions from federal taxes and other regulations by which UPS and FedEx must abide. It's illegal for private parcel delivery companies to compete with USPS prices. Yet, even with these competitive advantages the USPS has a $9 billion deficit this year.
The USPS cannot make significant decisions without Congressional approval. Worse, Congress imposes its will on the USPS forcing it into financial disasters like unsustainable labor agreements and the Postal Accountability Enhancement Act (PAEA). Labor costs account for 80 percent of the USPS's expenses whereas UPS and FedEx's labor costs account for 53 percent and 32 percent, respectively. The USPS must get Congressional approval to restructure its labor costs. Healthcare costs for retirees account for 30 percent of the USPS's expenses yet Congress has ignored repeated attempts to adjust the debilitating expenses.
Congress fails to act in the best interest of the USPS's financial health because ideology trumps economic reality for liberal members who are too concerned with big government solutions and their own reelection. That which sounded benevolent in theory is destroying the USPS in application yet left leaning legislators refuse to accept the desperate financial reality of the situation.
Union lobbyists influenced enough members of Congress to support mandates that advantaged union members over other USPS interests. The USPS could have used its monetary resources to expand services and hire more employees but far too much of its expenses were tied up in union member labor costs.
Aside from labor costs, Congress mandated the USPS to fund an account for 75 years of future retiree benefits. The USPS had ten years to fund the account beginning in 2007. This year's payment has more than doubled its deficit to $9 billion.
Although, many left leaning legislators may have thought the notion of supporting union members was sound, the long run consequences are leading to the USPS's demise. The USPS has pleaded with Congress multiple times to restructure labor agreements and remove the mandates of the PAEA but Congress has ignored the USPS's requests.
The USPS's financial insufficiency is emblematic of the broader troubles of government intrusion into business affairs. Leftist political ideology trumps common sense and blinds legislators from the realities of economics. As the USPS presents logical arguments about the necessity to remove Congressional mandates, ideological Congressional members hold on to their failed theories and protect union members while ignoring executives.
Currently, the USPS has two ways it could avoid insolvency. The first is through a government bailout. The second is through privatization. The USPS's best chance to return to financial health is through privatization. If it were detached from the government completely and released from its obligations to labor unions and Congressional mandates, the USPS could find the liberty to become an efficient organization.