7/27/2012 1:03:58 PM
The former Director of Management and Budget, Peter R. Orszag authored an editorial reprinted by the Postal Reporter titled Best Fix for Postal Service is to take it Private. A review of the editorial reveals the opinion of an intellectual snob who to date has not succeeded in any responsible undertaking. As a former administrative official with no direct responsibility for the Postal Service he has less than sterling credentials in the field of budgeting. But after serving in the Obama administration and now moving to the investment community it is necessary to prove that you are still one of them. What is a better target for privatization and support for free markets than the Post Office?
Throughout the years of his budgetary oversight, the record reveals a period of breathtaking deficits. Now he brings this dismal record to the think tank arena and pontificates on a subject that he has absolutely no experience and even less knowledge, postal – private or public. Citing statistics, Mr. Orszag makes a general observation that “the economic slump has caused a further drop-off of mail;” a brilliant observation. What he does not explain is that the economic slump also caused a further drop off in the sale of cars, computers and hamburgers. That is why it is called a recession, and would one expect the mail to be immune? During this period, the revenue generated by the federal government declined dramatically and using Mr. Orszag’s logic there would be justification to privatize the federal government because during a recession revenue declined. Ridiculous!
He goes on to inform that Germany, the Netherlands and Japan have privatized postal services. This is true, but further review reveals that they also have significantly higher postage rates.
Is this the model that he wishes to replicate, higher postage for the American public? In his politically motivated broadside Mr. Orszag never once mentions service to a geographical area 10 times the combined size of Germany, the Netherlands and Japan.
A fair analysis of the US mail service would reveal that delivery has been privatized for many years. UPS and Fed Ex routinely deliver to the home of American citizens and are appropriately compensated for services far exceeding the rates charged by the Postal Service for the delivery of similarly shaped items of similar weight. Comparable deliveries generate cost of 45 cents for postal and $20 to $30 for UPS and Fed Ex. In fact, the Postal Service is so efficient that Fed Ex relies upon its delivery network for many rural deliveries.
An in-depth review of this euphoria with the private sector would reveal that while the management officials do well for themselves and generate indecent salaries, bonuses and benefits there is no evidence that the cost of goods and services is reduced. In fact, China, India, Viet Nam and a host of third world countries are proof that the American private sector is not competitive, and if he had taken the time to investigate the political assertion that postal wages consume a greater share of revenue than UPS, he would have learned that unionized UPS workers are actually paid more than postal workers. If the objective in privatization is to increase employee wages, I am sure that the postal unions would be pleased to oblige while continuing to provide superior service.
Mr. Orszag deliberately misstates the USPS’ financial condition writing that the Postal Service “has lost $25 billion from fiscal year 2007 to fiscal year 2010.” If he is qualified to serve as vice president of global banking at Citigroup he knows the differance between “losing” $25 billion and being unable to pay the politically imposed future health care cost. If the same obligation was imposed on a private postal service it would suffer the same financial deficit or rates would be so astronomical that its demise would be imminent.
And finally, in suggesting the privatization of postal services, does Mr. Orszag propose the same rules? Does the business model of this private system include an obligation to pre fund health care costs, a universal mandate and rate increases limited to the CPI? I am sure that Citigroup would have zero interest in such an investment and there is not a privately held firm in the world, including the China model that could succeed without a huge subsidy that is hidden in the analysis. And that would be truly revolutionary, a private corporation receiving a subsidy from the federal government. Not a tax credit or refund, but a subsidy. Now that would be a novel way to rip off the American taxpayers.
Mr. Orszag is unqualified to provide an in-depth analysis of the Postal Service and its future. We in the postal community would suggest that he stick to his knitting. (rate chart credit)