Kevin Drum observes that the Post Office is more efficient and effective than we give it credit because ... it fully accrues for future pension and medical costs.

Over at Jon Cohn's place, Alexander Hart explains why the post office is better run than you think. Go read it. I don't have any big axe to grind in favor of the USPS "” in fact, I'm pretty annoyed at how complicated it is to calculate postage these days on supposedly "odd" size envelopes "” but the fact is that they're actually pretty efficient and pretty cost effective. I'd welcome private competition for first class mail, but just go ahead breathe the words "universal service" and see how many private sector companies are still eager to compete with the post office for 46 cents an ounce.

Wow, I have been so unfair to the post office.  I commented:

Great - the post office is really efficient because ... it fully accrues for benefits plans that are way beyond anything paid in the private sector, and reliably pays these benefits to huge, bloated work forces.  I am confused Kevin.  I read the article you linked.  What the heck did you find in the linked article that had anything to do with "efficient" or "cost effective."  Postal rates have grown at something like twice the rate of inflation.  Even industries you demagogue against, like oil, have raised prices less than the post office.

I don't know much about Alexander Hart, but my suspicion is that this is somehow a broadside in the public-private battle.  If so, then his focus is awfully narrow.  The feds may have accrued for their pension and health benefits, but they sure have not socked away any assets besides government IOU's to pay for them.  At the end of the day, most private company health and retirement plans are actually backed with real, 3rd party assets.  If you want to talk about pension law, private companies are not allowed to invest but a small percent of pension funds in their own stocks and bonds.  Not so the Feds -- the Post Office is running the equivalent of the Enron 401K invested 100% in Enron bonds.

And oh by the way, if we turn our attention to the states or local governments, the situation is entirely reversed.  In fact, many US public entities have ZERO percent funding of health plans and ZERO accrual of future costs, taking retiree benefits entirely out of current cash flow.


  1. sudipa:

    Website is very comprehensive and informative. I have enjoyed the visit. From

  2. allan:

    The Great American Liberal Crash is coming - complements of the federal, state, and local governments.

  3. TomG:

    Warren, when you have time, look up the history of the American Letter Company, Lysander Spooner, and the legal enforcement of the monopoly on the US Postal Service carrying the mail... it won't surprise you, but it is still an eye-opener for others who seem to think the post office is some great example of the federal government at work.

  4. NJConservative:

    Universal service is, arguably, a public good. But that should be limited to 1st class mail. Why has the already bloated USPS branched out into package delivery, packing material sales, passport photos, etc? I would be curious to hear the defense of entering a market that already had at least two incredibly efficient and ultra-competitive companies (UPS and FedEx).

  5. forest:

    I've been working on a project where I have to send out registered letters a few times per week. It doesn't matter what time of day, or which day of the week, there is always at least a 15 minute wait to send them. The office is quite large, and they have all kinds of displays with packaging and whatnot, but there is always one person working the counter and at least 10 "customers" in line. I'm not impressed with the efficiency.

  6. KTWO:

    I am not sure what "fully accrues" means when describing indefinite future costs. Or what it can mean.

    But I give them the benefit of the doubt, they probably are using sensible projections.

    Overall the USPS seems to operate well enough. When I was a boy the first-class stamp was either two or three cents. The air mail stamp was four cents (as I recall). And the USPS was heavily subsidized then. Today it is not subsidized but doesn't AFAIK pay taxes of any kind.

    Today new stamps cost about fifty cents (or soon will.) a inflation ratio of about twelve. Most other costs have increased by greater ratios.

  7. AnObserver:

    When I looked into the USPS in the past, my city and one other were considered by USPS to be the tip-top of accuracy - 92%. Now Warren, how long until you get your butt thrown in jail for administering your business at that "high" level of accuracy?

  8. IgotBupkis, President, United Anarchist Society:

    You know, if the WSPS was even vaguely interested in actual efficiency, then there is a clear path towards massively automating much of the mail distribution process, and, frankly, I'd bet you that -- even with "universal service" a requirement, that one or more companies could make a much better go of it than the USPS does.

    a) Bar codes. There should be a standard bar code label for all mails put into the system, with the software to produce it -- or at least a set of standard routines for defining it -- available free of charge. The end result would be that 99% of all mail sent could be handled by at most two people -- the one who put it into the automated system (i.e., the guy who took it out of the "blue box") and the one who put it into the mailbox for the end addressee. Anyone who utilized said bar codes would get a reduced price for their mail handling. The technology for reading and interpreting bar codes is ridiculously stable and functional, as anyone who has been to the supermarket can tell.

    b) Automation in general. I'd lay odds it would not be hard to create an automated robot that could, using a well-defined modular mailbox system, distribute mails while a person pretty much just acted as a shepherd for it, making sure it didn't encounter any reasonably undesirable circumstances -- a thug attempting to steal little old ladies' SS checks, a small dog attacking it and getting hurt, whatever. This would be an easy job and usually not require a lot of training, just a little sense of when to tell the robot "Hold!" and so forth -- hence be a menial job for those who need a menial job (including those who just don't want a job that they have to think about). You could even, this way, justify a service level not seen in a very long time -- perhaps morning and afternoon mail deliveries, which used to be standard. Or much more of a sort of direct-to-door service that has been largely lost in the last 30 years. The fact that the robot could/would do any real lifting involved means that the "post shepherd" could easily be physically disabled, elderly, or otherwise unable to do the typical modern postal job.

  9. IgotBupkis, Official Proofreader To The Stars:

    > Most other costs have increased by greater ratios.

    You, sir, are on drugs -- Or something -- if you actually believe that.

    The USPS is possibly the only organization in the world who has argued that, since they were handling an increased VOLUME of business, they needed to RAISE their prices. All other businesses find economies of scale...

    Not so the USPS.

    The price of most things have gone DOWN in real terms (see the archives of Carpe Diem for a wide array of examples)

    Not so the USPS.

  10. KTWO:

    IgotBupkis: maybe I should have said prices not costs. I worked as unskilled labor in high school and got about fifty cents per hour. That was the minimum wage. Today it is somewhere around $8. A secretary made less that $50 per week and a machinist about twice that.

    A new Ford cost about $1300 but a Cadillac was twice that or more. What does a new Ford cost today? In terms of utility the minimum Ford today would be about $13,000. It would be a far more reliable and useful vehicle so value has gone up but from the buyers standpoint he still got one new vehicle about 1950 and one new vehicle for ten times as much in 2010.

    Priced license plates for that vehicle? Maybe $15 then and $300 now. Bread cost ten or fifteen cents and the better movie theaters charged a quarter or an outrageous fifty cents.

    It is all relative. Then as now the price and wages in NYC were not those in Omaha. I do agree the quality of what you buy is far higher. And if you consider that then value/dollar has not changed as much as prices.

  11. Kris:

    I read through the response comments. I find it funny that the first couple criticisms you received were, "I'll take your money if you don't want it" and, "be careful or you won't get inheritance." To me these just seem to be indicators of the leechy mindset that is so popular with the Left.

  12. SB7:

    @KTWO, Depending on when you begin indexing, the price of first class postage has equalled or exceeded the CPI. (E.g. If you start the comparison at 1919 then stamps are almost twice as expensive as the rest of the goods in the index; if you start at 1980 they've matched the CPI.) At no point did they become cheaper.

    By the way, comparing things to the cost of registering a vehicle is pretty pointless, since that's another price set by government fiat in the absence of market competition.

  13. KTWO:

    SB7: I never said the price of a stamp ever became cheaper than the CPI.

    And using the cost or price of registering a vehicle is not pointless. It is what you pay for a relatively well defined article or service. So is the price of a movie ticket. The key is stability of the service or product over time which makes it hard to compare things that change such as TVs or PCs.

    The CPI, as you know, is plagued by changes in products. Even a dozen eggs differs from the dozen eggs sold in 1950. The eggs are slightly larger and always better packed. They are probably fresher because of prompt refrigeration at optimal temperature.

    Historically the price of a stamp has been subject to an artificial step function. When the stamp was one cent and increased to two the price increase was 100%. Today a one cent rise would be about 2%. Yet both increases were the same, one cent.

    In the private sector increases in very low prices are often smoothed by bundling. Thus wooden pencils might cost three cents and then be repriced to three pencils for a dime. i.e. the seller has smoothed the increase by selling a bundle of three pencils.

    But the seller has also done something else. He has kept the price of a pencil indefinite. The buyer does not tell himself that now I have a three and one-third cent pencil. Instead he tells himself he has the pencil he needed and two in reserve.

    The USPS, for one reason or another, did not bundle to smooth price increases. So people were always aware of the price of the stamp. They did not regard one as and an object of indefinite value.

    In recent years the USPS started selling rolls of "forever" stamps. You bought a roll of 100 for perhaps $41. That is bundling. Maybe 100 will cost $43 soon and then $46. But people will forget what each stamp cost and begin to think of them something they buy at the market just like paper towels.

    Quick, tell me what one paper towel costs.

    So despite objections I can stand by my original words. The overt cost, more properly "price", of using the USPS has went up about 1200% over fifty years. But so have many other prices. Some more, some much less. The biggest factor in the increases has been productivity with manufactured goods rising more slowly.

    Services have a mixed record and government prices such as those of license plates are set by fiat. I don't dispute how they are set. But they are a price to the consumer and I was writing about prices so it was not pointless.

  14. smurfy:

    I have to admit to not having any business contacts or relatives living in B.F.E., but is there really any location in the US that I can't send a fed ex or ups parcel too? I've lived in snowy mountainous regions and you typically drive into town to get your mail from a PO box or at best have a cluster box somewhere in the neighborhood. Fed Ex and UPS would drop it off on my porch (though if they were allowed to put it in my PO box, their rates would be even more competitive.) I think people maintain this image that the USPS visits every house everyday. Further, why is this idea of universal coverage so popular? doesn't pretty much everybody hate bills and junk mail? I'd prefer they only stopped at my door on the occasions when my Aunt Matilda cared enough to send a card.

  15. SB7:

    KTWO, I agree the CPI is flawed because of the changing contents of the "basket," but it's about as good of a comparison across time as we have. (Or at least as I have ready access to.) You picked out a handful of things that have increased more quickly than the price of stamps. I could cherry pick a handful of things that have increased in price less than stamps. Bringing the CPI into it was a way of trying to avoid that cherry picking.

    I stand by my assertion that registering a car is not a good comparison. Yes, the service you are buying — government permission to operate a piece of property — is well defined. But it's price is set by dictat, not my competition. There's no relation between the price you pay and the value of the service you're getting.

    If my DMV started charging me twice as much to re-register my car and the price of everything else I buy stays the same, then by your compare-price-to-car-registration-fee metric, most of my expenses would appear to be much less, relatively, than they were yesterday.