Can Progressives Fix the U.S. Postal Service?

The agency is $15 billion in debt, and its inability to lay off workers hints at a problem that may be the left's undoing

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The US Postal Service is $15 billion in debt, its revenue is down, and its long term outlook is dismal: every year, Americans communicate more via digital technology and less by sending paper around the country. On the verge of collapse, is the agency laying off employees and cutting compensation? Quite the contrary. As reported by Devin Leonard in a lengthy Businessweek feature, salaries are rising and most USPS workers enjoy contracts specifying that they cannot be laid off, regardless of whether or not their employer can afford them. "In March, USPS reached a four-and-a-half-year agreement with the 250,000-member American Postal Workers Union," Leonard writes. "The pact extends the no-layoff provision and provides a 3.5 percent raise for APWU members over the period of the contract, along with seven upcapped cost-of-living increases."

An expensive but inflexible labor force is a significant drag on USPS, as on any organization. It is also another example of the public employee problem that threatens the future of the whole progressive project. A basic leftist goal is to persuade the American people that Ronald Reagan was wrong -- that given the proper resources, government can bring about solutions and isn't itself the problem. Various think tank fellows, Democratic strategists, and public employee unions are working to make that case. In the long run, however, strategic communication matters less than results. So long as public employees are highly paid, enjoy benefits more lavish than their private sector analogues, and work under contracts that hamstring the ability of their agencies to perform and adapt, Americans will eventually conclude that public sector investments are folly.

Mistrust of government can go too far. In California, we deregulated energy without sufficient care and oversight, and got rolling blackouts for our trouble. As the New York Times reported earlier this month, private prisons aren't necessarily cheaper to operate. Matt Yglesias suggests this general lesson:

The genius of the real private economy is that firms that are really poorly run go out of business. It's not that some magic private sector fairy dust makes the firms all be runs soundly. Lots of bad businesses are out there. But they tend to lose money and close. Meanwhile, well-run firms tend to earn profits and expand. The public sector doesn't have this feature. Just because a public agency is inept is no guarantee that it will go out of business. Resources are allocating according to political clout rather than any criteria of merit. It's a problem. But it's not a problem that "privatizing" public services actually solves. There's no magic private sector fairy dust.

There is a sensible point in there. What I want to tell you, however, is that there is magic private sector fairy dust. It's called the profit motive. It doesn't shimmer like glitter. It isn't a cure all, or even an unalloyed good: during wars, for example, private contractors with an eye on profit margins are incentivized to cut ethical corners even as they're entrusted to wield power over life and death.

But a desire to maximize profits and an aversion to losing money leads to certain efficiencies that ought to be exploited in less fraught enterprises. At UPS and FedEx, management has a powerful incentive to hold down overall labor costs, and to preserve the flexibility and adaptability of the respective companies. When USPS negotiates with the any of the four unions that represent its employees, the dynamic is completely different: management has fewer incentives to hold down costs, even as labor exercises substantially more clout due to is political influence.

The results are ludicrous. Here is an organization where the volume of work fluctuates significantly with the economy. Its own forecasts suggest that a decade from now 21 billion fewer pieces of mail per year will go through the system. But it is contractually prohibited from laying off most workers - and is in fact giving many of them a pay raise even as it is $15 billion in the red! 80 percent of the USPS budget goes to labor costs. There's no way to get into the black without cutting them.

In fact, Postmaster General Patrick Donahoe wants to cut the workforce by 20 percent over five years. Given the constraints he faces, however, attrition is his only hope. In other words, rather than laying off its worst workers on a sensible schedule, USPS is planning to leave the timing of workforce reduction and the specific personnel involved to fate. Donahoe also wants to shift some USPS services "into convenience stores and supermarkets, where nonunion workers can staff them." Perhaps new locations are a good idea regardless, but should union rules be a determining factor?

As a general matter, I want a smaller, more limited government. I'd love to do away with the DEA, most occupational licensing, and agricultural subsidies, for starters. But I don't have any ideological compulsion to eliminate the post office or public schools or certain public works projects. What I want is for pragmatism to win out. What's the most cost effective way to get mail to the American people? How are we going to improve educational outcomes for as many kids as possible? What's the best way to build that interstate highway, bridge, or flood control channel?

Despite my private sector bias, I acknowledge that the answers to these questions aren't always obvious. I can be persuaded that we ought to invest in various non-military, public sector efforts, or that privatization is a bad idea in specific instances.  But what am I to conclude when the government parcel delivery service is $15 billion in debt, doing less work than usual, paying more money to as many people as it always employed, and is unwilling to fire even a mail carrier caught defecating in the yard of a homeowner? What am I to conclude when teachers unions in Los Angeles and New York make it almost impossible to fire even physically abusive teachers? Or when prevailing wage laws needlessly raise the cost of government construction projects that would benefit the public? Or when legislators pass unsustainable pension deals that taxpayers bailout?

I'll share my gut reaction: Let's make an earnest effort to fairly compensate folks who deliver parcels, teach kids, and build public works - even as we do our damnedest to avoid public employee union labor. Absurd as it is that it takes moving post office counters into bodegas to hire clerks for less, so be it. If it takes vouchers or charter schools to get around seniority pay and failing teachers that cannot be terminated, bring 'em on. Can a certain kind of public employee retire at age fifty and draw 90 percent of their salary every year for life? Hire as few as possible.

In the short term, public employee unions are a net boon to the left, due to the campaign dollars they contribute and their ability to mobilize a sizable constituency. The longer the Democratic Party and the progressive movement remain complicit in their excesses, however, the more they'll undermine the effectiveness of government, and destroy whatever faith remains among Americans that the public sector is anything more than an unfortunate if necessary evil.    

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