USPS vs. Amtrak
For years now, the United States Postal Service has been the poster boy for government waste, but that organization may now be getting a run from another favorite target of government inefficiency: Amtrak.

In recent weeks, both entities have reported unprecedented levels of losses, with a $5.2 billion shortfall last quarter for the post office, and a $834 million loss on food and beverage services during the last decade for Amtrak.

So who wins the title for the most wasteful government agency? Let's take a closer look at our contestants.

USPS: We Deliver for You (at Less Than Cost)

Only a handful of American companies manage to make $5.2 billion in a quarter. But the post office found a way to lose that much as the agency has gotten squeezed by the transition to electronic communication and the need to fund health benefits for future retirees.

Even worse, the Postal Service defaulted on a $5.5 billion payment to the fund this month -- which had already been deferred from last year -- and is expected to default on another $5.6 billion payment due in September. By October, it could be completely out of cash.

It may be easy to blame the post office for these huge losses, but Congress seems to be the true culprit here. The USPS has repeatedly asked legislators to ease controls so it can implement necessary adjustments, such as cutting Saturday delivery, offering additional services, and reclaiming $11 billion it overpaid to a pension fund. In May, the Senate passed a bill to revamp the agency, but the House failed to act on it. Earlier in August, Congress left Washington for a five-week recess, leaving the matter still waiting on the table.

Amtrak: The Great Train Robbery

While the post office is a clear victim of a disruptive innovation, the food and beverage losses at Amtrak are a little more puzzling. Here's an agency that's been given a monopoly on passenger train travel with a captive audience for its gastronomic offerings. Yet it loses bags of cash each run -- an astounding $834 million over the last decade on its dining services -- its as if Butch Cassidy was still around robbing trains.

The railroad blames the deficit on waste, employee theft, and poor management -- shocking given that food services are generally the kind of high-margin add-on that help businesses thrive, especially when a captive audience is concerned -- as anyone who's been to movie or baseball game knows. Restaurants, for example, regularly take in margins as big as 600% on sodas.

Sadly, the dining service has never broken even since Congress first mandated Amtrak's solvency in 1981. At a recent hearing, Republicans pushed for food services to be privatized while Democrats demurred. One Amtrak employee said the losses were exaggerated because of accounting inconsistencies.

And the Winner Is...

The post office may be leaps and bounds ahead of Amtrak in terms of the size of its losses, but most of those factors are out of its control. Congress has prevented it from making moves that would boost its bottom line, such as opening within supermarkets or other retail establishments, or adding financial services. And unlike Federal Express (FDX) or United Parcel Service (UPS), the post office doesn't have the luxury of raising prices to match its actual expenses. Legislation mandates that its rate increases are pegged to inflation.

Amtrak's problems, on the other hand, seem almost totally self-made. Amazingly, per-unit costs are 70% above selling prices. A $2 soda costs taxpayers $3.40, with labor costs making up nearly 40% of expenses. At Chipotle (CMG), by contrast, labor costs were just 23.1% in its most recent quarter. And Amtrak's $85 million deficit last year came on just $121 million in revenue, giving it a profit margin of about negative 70%.

Add in the fact that the railroad has been experiencing these losses for a generation and that the agency has been promising improvements since 2005, and at least as I see it, Amtrak becomes the clear winner in this showdown for most wasteful government business.



Motley Fool contributor Jeremy Bowman owns shares of Chipotle. The Motley Fool owns shares of Chipotle. Motley Fool newsletter services have recommended buying shares of FedEx and Chipotle.


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126 Comments

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tmktwo@gmail.com

let amtrak deliver the mail!

September 28 2012 at 10:20 PM Report abuse rate up rate down Reply
dolfin1943

anything congress has a hand in losses money. Kick all of those folks out of office and start anew...

September 28 2012 at 1:05 PM Report abuse rate up rate down Reply
Mike G

Is this writer on LSD or overly tired or overused by his editor or boss?
Why would this reputable service allow such crap??

Anyone whom has done a lick of factchecking or homework would know about the PO. To say what he has said in regards to AMTRAK only informs me about an agenda. There is virtually NO national railroad anywhere in the world that is not without some degree of public support. NONE. Every political and economic system has tried the Great Privatize Maxim --- yet none work. Why? that issue is for another time another forum.
Regardless, is our national(??) air flight/servicing/support system totally privatized? I dare say not? Are out national roads and highways, totally privatized?? Check it out Mr.Bowman, please

August 24 2012 at 9:38 AM Report abuse rate up rate down Reply
lschck

whats killing the post office is the huge pay their employees get. postal clerks make as much as some doctors, but in the private sector these same jobs pay min. wage, just no balance anywhere. it,s a lose, lose situation. when a company doesn,t need to worry about making profit or being accountable they get to lax.Doesn,t say much for the director of the post office, is he earning his 400,000 a year? this is the problem in local and state governments these huge undeserving salaries.And antrak, ther,re just in for the free ride and big top level salaries paid by the taxpayers.The whole problem is, we are top heavy, fix that and we will be ok.

August 21 2012 at 10:34 AM Report abuse rate up rate down Reply
hpntwk

If you idiots did research,you would find the postal service was self sufficent until CONGRESS decided they wanted to bankrupt it and have it go out of business

August 21 2012 at 10:09 AM Report abuse +1 rate up rate down Reply
hoofnwoofr

A "$2.00" soda costs taxpayers $3.40? How is that possible? It's a $0.17 soda to start with. How in God's name can it cost taxpayers $3.40 when I, the Amtrak commuter, am paying 10-15 times what the wholesale price is? Not only for sodas but also small bottles of water ($2.25 each) and $2.50 for a small bag of M&Ms or chips. What the hell is going on?

August 21 2012 at 9:28 AM Report abuse rate up rate down Reply
hows03

the biggest waste, congress.

August 21 2012 at 9:11 AM Report abuse +1 rate up rate down Reply
mrkoe

Neither one is wasteful..... Tax dollars are supposed to be used for public services that improve or enhance our lives. That said, I do still believe in handling those services as a business and to make sure that we, the public whose money it is, get the best services for those dollars. Personally, I have had far better experiences with the Post Office than I've ever had with FedEx and I wish train services would be expanded in high density population areas.

August 21 2012 at 9:09 AM Report abuse +1 rate up rate down Reply
1 reply to mrkoe's comment
hpntwk

TAX DOLLARS ARE NOT USED TO FUND THE POSTAL SERVICE They were supported by the postage stamp until CONGRESS went in and RAPED them

August 21 2012 at 10:11 AM Report abuse +1 rate up rate down Reply
jump4life

1. The post office is being robbed of profits by congress directing funds into other programs which is causing a false reports of the post office loosing money.
2. YOU SHOULDN'T MAKE A PROFIT ON EVERYTHING! Some things are for the public good. Who ever talks about roads, bridges, and schools making a profit? We should apply this same logic to the post office and Amtrak. Heck I would like it expanded into health insurance to get rid of the unnecessary, profit hungry, middlemen who don't do anything to make healthcare better, out of the equation.

August 21 2012 at 8:54 AM Report abuse rate up rate down Reply
thriceshy

And someday I'll proof before I post and catch that "it's" instead of "its." Dang.

August 21 2012 at 8:46 AM Report abuse rate up rate down Reply