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Post Office Finances Now Officially High Risk — No Kidding

Mises Daily: Wednesday, August 05, 2009 by


Reading the July 2009 Government Accountability Office reportDownload PDF sparks about as much excitement as reading last month's headlines, yet I can crack a smile at its earnest concern.

GAO is adding the US Postal Service's (USPS) financial condition to the list of high-risk areas needing attention by Congress and the executive branch to achieve broad-based transformation.

I'm sure our bureaucratic wizards are in the lab cooking up the next round of public finance models, with complications rivaling those of String Theory. However, I'm also sure that there will be nothing new in terms of results, aside from increased stamp prices – and perhaps a spike in short-term disability by way of calculator calluses.

Within the GAO report, one will find the crowning achievement of government detective work. The United States Postal Service's incompetence has finally shrieked loud enough for our masters to take notice. Here are some of the report's most keenly embarrassing lines.

This year, USPS expects to increase its year-end debt to $10.2 billion, and incur a cash shortfall of about $1 billion.

Another key risk factor is the accelerated decline in mail volume. Mail volume declined by 9.5 billion pieces in fiscal year 2008 to about 203 billion pieces. As of the end of May 2009, mail volume had decreased another 18.5 billion pieces, and USPS expects to end fiscal year 2009 with mail volume of 175 billion pieces – about 28 billion pieces fewer than in fiscal year 2008.

Table 1: USPS's Financial Results and Projections, Fiscal Years 2006–2010

2006 $0.9 $2.1
2007 $(5.1) $4.2
2008 $(2.8) $7.2
2009 $(7.0) $10.2
2010 $(7.0) $13.2
* All dollars are in billions.

Even handicapped economists of the likes of Paul Krugman will attest that when falling demand is coupled with increased costs, we have a problem. Does the decrease in mail volume indicate that the public has finally come to terms with reality? The GAO doesn't think so. They believe it is simply a matter of economics:

To achieve financial viability, USPS must align its costs with revenues, generate sufficient earnings to finance capital investment, and manage its debt.

Well, duh!

My fellow free marketers, there's no need to worry. With a motto like "Accountability, Integrity, and Reliability," the Government Accountability Office will certainly correct such inefficiency. Just look at their success in reforming programs in the last two decades.

Table 2: Areas on GAO's Current, 2009 High-Risk List

Medicare Program 1990
DOD Supply Chain Management 1990
DOD Weapon Systems Acquisition 1990
DOE Contract Management for the National Nuclear Security Administration and Office of Environmental Management 1990
NASA Acquisition Management 1990
Enforcement of Tax Laws 1990
DOD Contract Management 1992
DOD Financial Management 1995
DOD Business Systems Modernization 1995
IRS Business Systems Modernization 1995
Protecting the Federal Government's Information Systems and the Nation's Critical Infrastructures 1997
DOD Support Infrastructure Management 1997
Strategic Human Capital Management 2001
Medicaid Program 2003
Managing Federal Real Property 2003
Improving and Modernizing Federal Disability Programs 2003
Implementing and Transforming the Department of Homeland Security 2003
Pension Benefit Guaranty Corporation Insurance Programs 2003
Establishing Effective Mechanisms for Sharing Terrorism-Related Information to Protect the Homeland 2005
DOD Approach to Business Transformation 2005
DOD Personnel Security Clearance Program 2005
Management of Interagency Contracting 2005
National Flood Insurance Program 2006
Funding the Nation's Surface Transportation System 2007
Ensuring the Effective Protection of Technologies Critical to US National Security Interests 2007
Revamping Federal Oversight of Food Safety 2007
2010 Census 2008
Modernizing the Outdated US Financial Regulatory System 2009
Protecting Public Health through Enhanced Oversight of Medical Products 2009
Transforming EPA's Processes for Assessing and Controlling Toxic Chemicals 2009

Alas, despite the comical notion of "government accountability," we can still imagine a room full of latté-drinking mental midgets listening attentively to what they believe to be breaking news; we can imagine their fingers scribbling away at newly devised plans for reformation; we can imagine them preparing for infinite inevitable boardroom meetings; we can imagine countless proposals for interventionist solutions, inspired by the broken window fallacy. And yet there is one thing we cannot imagine: the GAO bureaucrats accepting the solution of laissez-faire.