A future bailout in the making

The most significant piece of union-busting legislation passed in recent years is the Postal Accountability Enhancement Act of 2006. This is the law that is crushing the postal service. It requires them to pre-fund pensions 75 years out by 2016 – to the tune of $5-6 billion per year. No other firm has such stiff requirements. Add this to the other problems it faces – inability to adjust prices where it competes with UPS and FedEx, the subsidy of advertising and other junk mail by first class mail, and the natural slow-down it is facing as people more and more use the Internet to pay bills and correspond, and it’s looking bleak. But take out that pension requirement, and the USPS would be in much better shape, perhaps approaching solvency.

The Postal Workers Union has about 286,000 members, and they are the target of the legislation, which essentially cripples postal operations. This is standard operating procedure, the same thing that Obama is doing with Social Security by use of the payroll tax cut. It’s the first step in the “free market” attack on any public enterprise: de-funding.

It’s not hard to predict the future: The Postal Service will have to cut back on operations, and service will suffer. People will complain, and private companies will be let in to “compete.” But they won’t “compete” under the universal mandate that USPS honors.* Instead, they will want to slice out the profitable operations in bigger metropolitan areas, leaving small towns and outliers to rot. They will avoid unions, pay crappy wages and offer few benefits. Even with all of that, they will likely run deep in the red, be inefficient as hell**, non-responsive, suffer bankruptcy, and have to be bailed out by taxpayers. Maybe we’ll get our Post Office back at that time, maybe good service will be restored.

Could happen.
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*There is a widely-held assumption spread by economists that capitalists are “risk-takers.” Quite the opposite, those who have already accumulated large pools of capital are risk-averse, and so seek out opportunities to “invest” where risk is minimal. In this case, they look to an already-existing market that is well-served by a public entity, and would “enclose” it (as they have with health care), and then proceed to expel those elements that are least profitable. This is why public entities offer far more social benefit than private ones – the need to maximize profits is at odds with universal service.

This is also further justification for high marginal tax rates. Accumulation of large pools of wealth changes the essential nature of competition from the desire to acquire capital to a desire to preserve it, from risk-taking to risk-aversion.

**Can it be any other way? After all, by definition, the new “investors” are not looking to innovate or increase public satisfaction with mail delivery. They are merely looking for a safe haven to park capital and insulate it from market forces. They hate markets, as we all do.