Sam Ryan
Thursday, Sept. 23, 2004

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  Although the Kerry-Edwards stance may score points with the Postal Service's entrenched unions, it completely ignores the reality of USPS ledgers. Any serious assessment of the organization's finances shows that it is in desperate need of an overhaul.

Currently, the Postal Service has about $90 billion in unfunded liabilities. That's money it has promised to employees, mostly in retirement and health benefits, that it simply doesn't have.

Meanwhile, declining mail volume - spurred on by the e-mail revolution - spells big trouble for an organization whose sole purpose is to deliver the mail. This decline has resulted in $4.5 billion in lost revenue since 2000.

An efficient company would maneuver to address this problem by cutting costs. But Democratic candidates Kerry and Edwards would block such measures.

Unless the Postal Service is allowed to cut costs by downsizing or privatizing, it cannot long survive without massive successive rate hikes or taxpayer bailouts. In fact, we're already seeing this beginning to happen.

The Postal Service is expected to increase the price of stamps by between 9.5 and 12.5 percent by early 2006. And Postmaster General John Potter has just asked Congress to fork over $883 million.

If John Edwards really cared about postal workers, he would embrace cost-cutting and privatization - rather than making irresponsible promises that can only result in further financial hardship down the road.

Rank-and-file postal workers would surely welcome privatization that gives them ownership in their company.

William Henderson, the U.S. postmaster general from 1998 to 2001, wrote upon leaving that "what the Postal Service needs now is nothing short of privatization." He even recommended an employee stock-ownership plan that "would motivate workers by allocating stock to them over time."

Employees who are also stockholders would pressure their company to improve financially through cost-saving measures like cutting staff or shutting down little-used post offices, many of which currently process fewer than 10 transactions a day.

As shareholders, Postal workers would control their own careers, and no longer be at the mercy of an officious union boss or incompetent manager who can't be fired. And they would be able to hold their corporate leaders accountable for how efficiently their organization was run.

Postal privatization is certainly possible. In fact, it's already well underway in most of the industrialized world - with remarkable results. The postal services in Germany and the Netherlands have both held initial public offerings and thereby transformed themselves into aggressive and far more efficient operations.

Sweden Post and New Zealand Post were opened up to competition about a decade ago, and Japan is now in the process of privatizing its Postal Service as well.

Privatization is a proven way to make a bureaucratic national Postal Service more efficient. Short of such a remedy, the U.S. Postal Service ultimately has no choice but to downsize.

Over the years, the Postal Service has spent billions on ever more advanced mail-sorting equipment. Today's newest generation of mail reader/sorters can process over 30,000 pieces of mail per hour. But, and here's the core issue � to capitalize on this massive investment, the Postal Service must be able to reduce its workforce.

Currently, it can't easily do so. Even when it introduces a machine that can do the work of 50 sorters, the USPS can't downsize accordingly. The Kerry-Edwards ticket would keep it that way.

With 700,000 career employees, the Postal Service already pays the second largest civilian labor force in the United States, second only to Wal-Mart.

But unlike Walmart - and in contradiction of federal law - USPS pays its employees nearly 30 percent more than their private sector counterparts.

On a positive note, from 2001 to 2003, the Postal Service reduced its workforce by 8.7 percent simply by not hiring workers to replace those who retired.

Amazingly, this reduction was accomplished with no decrease in system performance. Although this reduction was a big step in the right direction, it also showed just how blubbery the organization had become. Facing a virtual tidal wave of oncoming pension costs, the Postal Service is in desperate need of downsizing, the natural remedy for any bloated organization faced with declining revenues.

A no-layoff, anti-privatization platform may help the Kerry-Edwards ticket score quick points with union leaders. But it bespeaks a fundamental disregard for the long-term plight of America's Postal Service and the people it employs. In the long run, prohibiting the Postal Service from addressing its excessive costs will leave all Postal employees to twist in the wind. The Kerry-Edwards postal platform should be returned to sender.

Mr. Ryan is a senior fellow of the Lexington Institute in Arlington, Va. He can be reached at ryan@lexingtoninstitute.org.