
How to lose $5B - e15ctr0n
http://www.economist.com/news/united-states/21678794-united-states-postal-service-has-more-troubles-long-queues-how-lose-5-billion
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dragonwriter
The only reason for have providing a postal service be a Constitutional power
of government is because having one in place and operational was viewed as
having a public, externalized benefit. As such, one shouldn't expect it to be
profitable -- not that its bad if it is, but as long as the magnitude of the
net expenditure is less than the externalized benefit, its worthwhile.

Clearly, the unsubsidized-but-government-controlled model doesn't make a whole
lot of sense, either from the "it is a public benefit and should be a public
service" perspective or the "it is not a public benefit and should be provided
in the private market" perspective.

~~~
sophacles
One of the reasons it doesn't work is there are congressional rules and laws
limiting it to only "not working". Things like - requiring full pre-funding of
all benefits, limits to what it can carry that come from congress, etc. Many
of these rules seem to exist only to make the post office look bad.

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jbob2000
With the serious presence of corporate money in American policy making, I
wonder if that is the result of lobbying from FedEx and UPS. They stand to
profit from a weakened USPS.

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Jtsummers
They stand to profit regardless. USPS actually makes their lives easier.
UPS/FedEx would be taking on a huge expense trying to properly service remote
(rural) areas to the level of the USPS. If they can sit on top of it via
partnerships (FedEx, at least, already makes use of USPS for last-mile
delivery on some delivery tiers), they can focus on their high population
density and global logistics business instead.

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stephengoodwin
As a consumer who ships packages every now and then, I'm impressed with how
usable USPS's web site is compared to UPS or Fedex.

~~~
Phlarp
As a consumer that often buys many small low value items (electronics, often
from china) I find their level of service and rates to be phenomenal as well.
I don't understand why the TSA can be an open and shameless jobs program but
the postal service gets shit on?

The website is excellent as well, you can link your online package tracking
account with your physical mailbox so that incoming packages addressed to you
will often appear in the dashboard without any input from you.

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100k
How to tell if an article about the USPS is hackery: check and see if it
mentions that Congress requires the Postal Service to fund its pension
obligations for 75 years.

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tastynacho
Other fun fact with that nugget is that mandate was originally written and
lobbied for by UPS and Fedex. USPS's financial woes were manufactured by the
public competition..

Funny also how quickly perception of USPS changed. Prior to that many
considered them a model of an anti-red tape beaurucratic government entity.

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jellicle
Let's take a slightly more factual article:

[http://www.cnbc.com/2015/11/13/postal-service-
tallies-51b-lo...](http://www.cnbc.com/2015/11/13/postal-service-
tallies-51b-loss-in-2015-budget-year.html)

USPS made $1.2 billion in operating profit in the last fiscal year. The USPS
has been an independent, revenue-neutral agency since 1971.

~~~
sparky_z
But your link also says it had a $5.1 billion loss, and doesn't explain the
discrepancy. So which is it? Did the postal service gain or lose money this
year?

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jdmichal
There is no discrepancy to explain. "Operating profit" is not "net profit".
Specifically, operating profit consists of only line items generated from
operations, so mainly revenues less operating expenses. It does not include
things like funding liabilities, interest, taxes, etc.

~~~
sparky_z
Thanks for explaining the discrepancy to me (though I'm not sure why you
started by denying its existence). It would have been nice if the article had
included that info.

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jdmichal
I denied its existence because there is no discrepancy. A discrepancy is a
mismatch between two data sets. This is not a discrepancy, because the two
numbers -- operating profit and net profit -- are not the same data set.

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roymurdock
Here's the relevant data:

 _[The USPS 's] unfunded liability grew 76% between 2007 and 2015, to $125.2
billion. The Tax Foundation, a think-tank, doubts it can ever repay this
money. The service has done much to improve its financial state—hours have
been cut at rural branches and it has reduced work hours by 420m since 2002,
saving some $17 billion annually. It has shrunk its staff by nearly 300,000,
but it still has staggering labour costs. About 80% of its budget goes to its
workers. Under a law of 2006, the service has to pre-fund 75 years’ worth of
health benefits for retired workers, something no other company, much less a
government agency, is required to do._

Privatization isn't looking too bad. I'm all for strong employee benefits and
organized labor, but 75 years' pre-funded benefits for retired workers seems
excessive. We might end up losing a few of the more rural branches, but the
employee/employer negotiations and business model would be much more sane
under a private for-profit structure.

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SilasX
I think it's the opposite: any org (private or public) should be required to
pre-fund _infinite_ years of benefits. That is, if you're compensating the
employee with benefit X, you should book (the ROR-discounted present value of)
that full liability now, irrespective of when you would have to eventually pay
it. That one extra month of employee work earned them $100, 80 years from now?
Great, that should be $0.71 less you have to spend. No 75-year cutoff. (Or 50,
or 40, or 25).

Any other arrangement is forcing the employee to become an investor, in which
case the usual protections should attach.

No company should be able to play the game of "oh, man, we totally thought
we'd be making bank 40 years on, bummer we can't pay the rest of our worker's
employment compensation, tough s---." And then you have situations like GM,
Bethlehem Steel, etc.

Why is anyone cool with "don't worry, we'll be profitable _later_ " when it
comes to worker's wages? Why do people like gambling with workers' promised
benefits?

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danharaj
I don't see why this logic does not equally apply to debt and financing, which
are the structural foundation of capitalism.

~~~
sophacles
I think there is an aweful lot of handwaving that goes on...

Largely the justification for owners of equity get rewarded for taking a risk,
and the employees get wages less than the full value of their output because
they take no risk. If they are taking no risk, then any pension plan should
also be risk free, not a hidden tie-in to the risk used to justify their pay.

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mistermann
I wonder if these USPS losses have anything to do with the fact that I can
order something from China for $2 with free shipping.

~~~
Alupis
Shipping is _never_ free (and it's often more expensive than most would
assume). It just means the retailer/manufacturer has baked into the product
price, enough headroom to pay for shipping. In reality, you are still paying
the shipping, you just don't realize it.

Would you prefer to purchase a $60 product with $15 of shipping, or purchase a
$75 product with free shipping? Obviously it's the same, but psychologically,
most people gravitate towards the latter because it "feels" like it's less.
Paying shipping fees, for most people, often feels like a rip-off, so the lure
of "Free shipping" is very powerful.

In addition, it's common for some of a retailer's products to lose them money
(due to having to subsidize and/or pay for shipping out of the total invoice
price), while they make very healthy profits from other products (meaning it
averages out to a net profit in the end).

USPS' losses are purely due to being very inefficient. My company ships UPS,
FedEX, and USPS. USPS loses the most number of packages on any given week,
many of which they have to pay a partial re-reimbursement for (the retailer's
cost).

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542458
I think her/his point was that shipping is cheap enough that there's even room
to bake it in on a $2 product - I can't imagine that being viable were you
skipping exclusively with USPS. There are stores on aliexpress that sell
nothing but sub-$2 products, so I don't believe that those are all loss-
leaders.

~~~
Alupis
> so I don't believe that those are all loss-leaders

Probably not. If the products are from over-seas, it's likely a great many are
being shipped at the same time (a pallet of various products, etc... which
cuts down dramatically on shipping fees), then broken out into individual
packages once arriving at port.

The cheapest way USPS will ship a regular package is "USPS First Class Flats",
which offers no tracking information and is restricted to light-weight and
mostly small/flat packaging. It's $0.98 usually (anywhere in the US).

So, if you purchase a $2.00 item with includes "Free shipping", it's safe to
assume about $1.00 of the price is for packaging materials and shipping fees.
Perhaps another $0.50 is product cost, leaving less than $0.50 in profit after
labor is paid for. Seems like very little, but if you ship a large volume
every day...

~~~
djcapelis
You probably haven't ordered a sub $2 product with free shipping from
aliexpress recently, have you?

They are not shipped together and broken out at port, they get separate
tracking numbers in a separate package. There is no fulfillment middleman on
the US side.

Looking at USPS's domestic rate table to understand how most aliexpress
shippers get their products to the US isn't likely to be that enlightening.
Read up on epacket, which is one program between Hong Kong post and USPS that
is used pretty frequently.

~~~
Alupis
Just because they have individual tracking numbers certainty doesn't mean they
don't come over in a container together. For a domestic example, check into
UPS Mail Innovations (FedEx has a similar service).

Regardless, epacket appears to be a subsidy-like system setup by USPS (yet
another reason they are losing money), and masks the true shipping cost.

~~~
djcapelis
If you've ever looked at the packaging and the documents around it, it's very
clear that what you're saying just isn't the case. They are individual
parcels. I'm sure the post offices involved stuff a bunch of them into the
same container (it goes by air not by sea, by the way. So we're talking air
mail containers, not 40ft shipping containers.) when they send it, but that's
true of _any_ package.

I understand why you would speculate these things are true, but all the
evidence seems to indicate that none of those speculations are correct.

And yes, USPS may be losing money on those packages, but that doesn't really
matter to the shipper and certainly doesn't show up in the product pricing.

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fredgrott
The bigger question, obviously one could contract out mail delivery to FedEx,
DSL, etc..why has not the move been made yet? One could do areas to each one
like say Alcohol is done..and the public would still get the public benefit

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mywittyname
This is the end goal. Congress is pushing to destroy USPS so they can claim it
failed and justify selling it's profitable services off to a private company
who will then raise prices by a factor of 10.

Congress literally decided to tell USPS owed $125B one day [1], knowing full-
and-well that it would take USPS like 60 years to pay that much money.
Figuring that the population will grow tired of USPS running a billion dollar
(artificial) deficit for decades.

[1] [http://thomas.loc.gov/cgi-
bin/query/z?c109:H.R.6407](http://thomas.loc.gov/cgi-
bin/query/z?c109:H.R.6407):

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fijal
Wow. 125bln USD is half of greek GDP and just under a third of its debt.

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vezzy-fnord
The Postal Clause and the Private Express Statutes are looking heavily
anachronistic by now. If only Lysander Spooner's ALMC had prevailed.

