Struggling U.S. Postal Service

Struggling U.S. Postal Service Credit: TMS Illustration/Keven Kreneck

Snail mail is about to get slower. Next-day delivery of first-class mail will soon go the way of the pony express, as postal officials scramble to avoid being stayed from their appointed rounds by a river of red ink. It's become an annual rite of passage for the U.S. Postal Service.

Online bill paying, social networking, the slow economy -- all mean that the volume of mail is dwindling, especially lucrative first-class mail. So the USPS ended the 2011 fiscal year with a $5.1-billion deficit, the sixth consecutive year it has lost money. Regular next-day delivery is one casualty. But slowing down in a world that's speeding up is no formula for long-term success. Congress should give the postal service the flexibility it needs to change as quickly as the business environment it has to navigate.

If you're counting on the post office to deliver your holiday packages and cards, there's no reason to panic. Officials can borrow to cover the shortfall, so you're not going to wake up any day soon to an empty mailbox. But it's clear that business as usual won't do.

The postal service is an awkward hybrid: neither a private business nor a federal agency. Created 236 years ago as a government agency, it was transformed in 1971 to a not-for-profit, and in 2006 to a for-profit business. It charges for its goods and services, competes for customers, and its revenues go up and down depending on the economy and business trends.

It doesn't receive a dime of tax revenue. But government-imposed management constraints force it to operate like a federal agency. That means it has to follow cumbersome procedures to change prices or the days it delivers, or to seek a better deal on health insurance or close unprofitable post offices.

That last item is a good example of the problem. The USPS has 32,000 post offices, a larger domestic retail network than McDonald's, Starbucks and Wal-Mart combined. Roughly 25,000 of them -- 78 percent -- lose money. Half of the transactions at a typical post office are stamp purchases. But that, and almost everything else you can do at a post office, can be done online at Yet closing a post office requires navigating a gantlet of public hearings and a minefield of opposition from members of Congress who reflexively insist, not in my district.


The postal service shouldn't abandon its unique mission to deliver to every one of the nation's 150 million households and businesses. And the public and Congress should have a voice in its service decisions. But it needs a workable business model.

Postmaster General Patrick Donahoe wants to cut $20 billion of the service's $75-billion annual costs by 2015. On the table is closing 3,700 post offices, although details of which ones won't come before January. His plan also includes shrinking the 653,000-person workforce -- already down 128,000 since 2009 -- by an additional 100,000 via attrition, and closing 252 of 487 mail processing centers. It's shuttering those centers, expected to begin in March, that will mark the end of next-day delivery.

But his proposals that promise the biggest savings -- ending Saturday mail delivery and relief from the requirement to prefund retiree health insurance -- need congressional approval.


Congress should allow mail delivery to go from six days a week to five for a savings of $3 billion a year. And it should restructure the $5.5-billion-a-year obligation to prefund health care for future retirees -- something neither the federal government nor private businesses is required to do. Prefunding the benefit is prudent, so the requirement shouldn't be abandoned. But some breathing room is in order.

Cost cutting is crucial for the postal service, but it isn't enough. It has to find ways to increase revenue. For instance its flat rate package shipping -- "if it fits it ships" -- is a big success. It needs more of that kind of innovation.

The postal service also should be allowed to enter new lines of business beyond products related to the mail -- like selling boxes and tape -- that it's limited to today. Postal services of some other nations sell cellphones and insurance and banking services.

The U.S. Postal Service can't afford to be both a day late and billions of dollars short.

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