The U.S. Postal Service vs. Radio Shack

The U.S. Postal Service has announced a loss of $754 million in the fourth quarter up from $354 million for the same period last year. (The net loss included a $1.4 billion expense accrued for the mandated prepayment to the Postal Service Retiree Health Benefits Fund.)

According to a USPS filing:

The Postal Service continues to suffer from a lack of liquidity. Cash balances remain insufficient to support an organization with approximately $73 billion in annual operating expenses. The Postal Service’s average daily cash and cash equivalents balances during the three months ended December 31, 2014 were $5.7 billion, which represents only 21 days of operating cash. The Postal Service does not have the ability to borrow additional funds under its existing borrowing arrangements, and this level of cash balances could be insufficient to support operations in the event of another significant downturn in the U.S. economy.

And, yet, taxpayers will continue to be coerced to fund this dinosaur.

Compare and contrast this with the news that appeared this week on another dinosaur, Radio Shack (SEE: Radio Shack Expected to File Bankruptcy Today).

Radio Shack is closing its doors because, like USPS, it had financial problems. The company just couldn't compete in the current world of big box electronic retailers and online sellers of electronic equipment. There will be no taxpayer bailout. Radio Shack will be gone within weeks. The demand for the retail space and employees that Radio Shack employed will be replaced by demand for the same by retail outlets that can pay the current rents and wages, and remain profitable. That is, the space and employees will end up serving consumers where the demand is greater,

I have no idea what parts of the USPS business are viable, if any. Perhaps the problem is mostly with the government mandated pension fund prepayments. But because the organization is propped up with taxpayer money, there really is no incentive to reorganize or close down, or run the organization efficiently. And this even though the government has a monopoly on first class mail delivery.

This is what the new US Postmaster General, Megan J.  Brennan, said about the results:

Our employees delivered double-digit growth in packages this holiday season, which shows our growing ability to compete for and win new package delivery customers. To keep the momentum going — and to ensure we are the shipper of choice for our residential and business customers — we will continue to expand customized delivery solutions and package capacity while delivering high levels of service.

If she was attuned to the efficiency of free markets this is what she should have said:

Despite the government granting us a monopoly in the delivery of first class mail, we once again showed massive losses. Under current circumstances, we will need further taxpayer support to continue operations. This situation needs to change. It is high time we get lean and mean. Our monopoly privilege should be pulled and taxpayer support should be ended. This will provide the boot in the butt that will cause us to focus on what operations may actually make sense running in a competitive market. Further, since it has been taxpayers that have supported the organization all these years, we should immediately re-organzie as a joint stock company, with all shares distributed on a per capita basis to taxpayers. 

 -RW