Time for Another Government Bailout

Rep. Darrell Issa
The Washington Times
9/20/10

The declining demand for traditional mail delivery service presents a crisis for the U.S. Postal Service (USPS). A continued imbalance of costs and revenues means taxpayers could be asked to bail out the independent government agency, which is required by law to be self-funded.

As labor contract renegotiations between USPS and its employee unions commence this fall, Congress should reject requests to delay again billions of dollars in future retiree health insurance obligations that USPS is required to meet annually. The problems need to be addressed now. Postponing billions in unmet obligations won’t help.

The predicament in which USPS finds itself is not uncommon. Because of the ever-increasing reach of the Internet and digital media, bookstores, record stores and DVD rental chains have all seen their customer base and profits decline dramatically. Unlike these other affected businesses, USPS cannot simply go out of business or declare bankruptcy. The need to downsize the labor force and reduce costs to reflect declining demand and new market conditions needs to be the first priority of both workers and management.

Labor costs account for 80 percent of USPS operating expenses. Yet because of union contracts that contain “no-layoff” clauses, thousands have less than a full day’s work, and some are even paid to sit in empty rooms.

Last year, USPS revenues declined 9.1 percent, and without permission from Congress to delay requirements to pre-fund some worker benefit plans, the Postal Service would have lost $5.2 billion. A $7 billion loss is anticipated this year.

While postal employee unions have cooperated on efforts to reduce the work force through attrition and incentives for early retirement, those efforts simply have not resulted in the kind of change and transformation USPS needs to cover its costs. Unions have balked at the idea of changing contracts that refuse to allow necessary layoffs even if workers would be offered the opportunity to be retrained and fill other positions in the federal government.

The difficulty and uniqueness of the situation for USPS is that there is little incentive to cut costs. Under current labor agreements, if USPS and its employees have a dispute over compensation, the negotiations are sent to a binding arbitration board. Unlike almost any normal labor arbiter in a private business, this board does not have to consider the financial condition of USPS when deciding compensation questions.

Postal employees have incentives for holding tight to negotiating positions. They correctly recognize that USPS is too important to shutter. Moreover, they know that a deeply indebted Postal Service leaves the federal government with no real alternative to a taxpayer bailout as the situation approaches insolvency. Indeed, a sheep’s-clothes argument already is being put forward by the postal lobby and some Democratic lawmakers for a $75 billion taxpayer bailout of USPS.

No union has or ever will lobby for a layoff, so it’s up to USPS management and Congress to demand concessions. Congress must protect the clear interests of taxpayers and postal customers and demand an agreement between labor and management that lays the foundation for a viable business plan for a truly self-funding Postal Service. Allowing USPS to postpone billions in obligations just makes a bailout easier and takes away one of the few inducements for a compromise between USPS and postal worker unions.

If compromise fails, Congress has an obligation to fix the Postal Service’s budget imbalance not through a bailout, but through new mandates to cut costs and revise labor agreements.

Rep. Darrell Issa of California is the ranking Republican member of the House Committee on Oversight and Government Reform.