The U.S. Postal Service has proposed a new measure to cut costs: The “independent” but government-owned company would like to slow down the delivery of First Class mail, so that short-range letters no longer reach their destinations overnight. This is part of a plan that would save an estimated $3 billion a year.
Any plan to reduce costs and stave off a bailout is a good one, and we suspect that Netflix customers and junk-mail companies — the biggest users of USPS’s services, at least until they, too, replace the mail with the Internet — can live with a slight delay in their deliveries. While we would prefer a plan that ends USPS’s government-enforced monopoly on letter delivery and then privatizes the company, a dramatic restructuring — including the proposed changes to First Class delivery, as well as other severe cuts — could resolve USPS’s immediate crisis and give it a shot at longer-term viability.
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Regarding that immediate crisis: The company, which lost $5.1 billion this fiscal year alone, has reached its $15 billion debt limit. Congress has repeatedly pushed back a $5.5 billion payment the company owes to fund retiree health benefits. If USPS defaults, taxpayers will be on the hook. The company estimates it needs to reduce its annual operating costs by $20 billion by 2015 to return to profitability.
These problems will only grow worse, because the decline in mail volume precipitated by the rise of e-mail has yet to end. Between 2006 and 2010, volume dropped 20 percent. The Boston Consulting Group predicts an additional drop of 15 percent by 2015, with First Class mail in particular falling 35 percent. Whatever USPS does, it cannot assume that revenues will stabilize, much less rise, in the next five years.
Some USPS apologists have pointed out that, unlike other federal agencies, USPS is mandated to prefund its retirement benefits. It’s true that the requirement, which Congress imposed in 2006, is burdensome (without it, USPS wouldn’t have started losing money until recently) and aggressive (it requires the struggling company to make large annual payments for ten years). However, it is also prescient: USPS is almost certain to see its revenues continue to decline in the coming decades, and if it doesn’t work ahead to keep the promises it makes to its workers, it will default, and taxpayers will be left paying the bill. Congress should not see removing this requirement as an option.
Our preferred solution is to get the government out of the mail business. Congress should end the monopoly and sell USPS to the highest bidder. In the age of almost universal Internet access, there is no reason for the government to run a mail company. The USPS services that customers are willing to pay for will continue, and the rest will fall by the wayside. If possible, privatization should also give the new owner a chance to fight the company’s unions, which have negotiated unusually high salaries and benefits, on a level playing field — first in union elections, and then, if workers vote to keep their representation, at the bargaining table.
That is not particularly realistic on a political level; even Republicans in Congress do not support such a plan. A second-best option, as the Heritage Foundation’s James Gattuso has noted, is to give USPS the flexibility to make dramatic cuts. Perhaps most important will be the closing of thousands of Post Offices — as Postmaster Pat Donahoe recently explained in congressional testimony, “roughly 25,000 out of our 32,000 Post Offices operate at a loss,” and “thousands of Post Offices . . . bring in less than $20,000 in revenue in a year, but cost more than $60,000 to operate. Many of these are within just a few miles of another Post Office.” With fewer Post Offices, of course, USPS will be able to make do with fewer employees. Eliminating Saturday delivery should also be on the table, and Congress should take a serious look at overriding some aspects of the company’s union contracts, especially the absurd “no layoff” clauses.
The House’s Issa-Ross Postal Reform Act is a worthy bill that takes up some of these reforms: It rules out the possibility of a bailout, allows USPS to kill Saturday delivery, establishes a task force to recommend Post Office closings, and forces the unions to make significant concessions (including the end of “no layoff”). The Senate’s bill, amusingly titled the “21st Century Postal Service Act of 2011,” also contains many needed reforms, though it goes easier on the unions, relaxes the pension-prefunding requirement, refunds some of the money USPS has contributed to the federal retirement program, and makes the elimination of Saturday delivery a last resort.
As there is no time to waste, the two houses should work to create a bill they both can pass, and of course House Republicans should push hard for concessions from the Democratic Senate. The law needs to allow USPS to downsize its operations in proportion to the decline in mail volume. If we’re to be stuck with a government-owned mail company, at the very least it should not be run at the expense of taxpayers.
Editor’s note: This article has been amended since its original posting.
All good suggestions. USPS is a dinosaur, as its Pony Express arm became after only about a year. Trains replaced horses, and now the internet is replacing mail sorters and deliverers. Relegate the honorable past of the USPS to museums, and keep only essential services such as certified mailings of legal documents, magazines, etc. I for one wouldn't miss mail delivery at all.
Actually, the telegraph had more to do with putting Pony Express out of business than trains, as most of what was sent via this expensive service was informaton (that happened to be on paper).
Which makes the comparison (telegraph::internet) even more appropriate.
"keep only essential services such as certified mailings of legal documents"
Nothing USPS does cannot be done better by another company, right now.
Last year alone, I had two certified letters fail to reach me, out of two expected. A 100% failure rate on USPS's part.
Since then, I've GLADLY paid two- to three-times as much to send ***EVERYTHING*** via UPS or FedEx. The stress relief alone has been worth the 'expense'.
Well, instead why don't we consider creating a new, massive organization to control upwards of 15% of the US economy using the USPS as a poster child of "your Govt. at work". Let's this time focus on "healthcare" and really get things moving. Let's completely uproot a system working for 200 million people and radically alter it so it can work for 35 million - half of whom are illegally here anyway, the other half are folks that the US Federal Govt, through it's anti-business policy has caused to be thrown our of work in the private sector. Let's do this and of course exempt everyone in the Federal govt., including of course Congress, and anyone who let's say either voted for Obama or is in a union that supported Obama.
Then let's apply it in a new, unique way. We'll anoint the postal carriers as "medical practitioners", allowing them to perform quickie check-ups on their route. Then we can also convert Post Offices to dual mail and medical centers - giving shots, check-ups, simple x-rays, etc. .
But, Government agencies never, ever go away. They just fade into the background, with moderate funding, pensions still supported, and more limited funding. But they never, ever go away.
Remember when Reagan's appointee tried to slim down the USPS so it could survive - and the union push-back? It was brutal.
My own experience with the USPS convinced me long before Obamacare was forced on us that the government was the last agent I wanted to handle my medical care. The current situation with USPS proves this point. Thanks for making it again.
You're wrong about Netflix customers. Right now, on the "one DVD at a time" plan, customers who watch movies quickly and return them can still get two mailings within a calendar week. If First Class slows down to a two-day delivery, it will be almost impossible to get more than one DVD per week. Personally, I would expect a fee reduction under those conditions. Well, I should say HOPE FOR rather than EXPECT. (And if they also eliminate Saturday service, it will be absolutely impossible to get more than one DVD per week.)
I might receive a total of a dozen, significant, things in the mail each year all of which hardly matter if they are received as much as two weeks later than they normally arrive. Anything I send or receive that is significant (about twice a year) is over-nighted to insure a VERY timely delivery.
In other words, there's no urgency to any aspect of routine mail delivery anymore. When every postal service was originated there were no phones or alternative devices by which urgent messages could be relayed. The state had every reason to create postal systems to advance commerce as well as other human communications.
But now the post office's original, meaningful, functions are being stripped away by better technology. Exactly what purpose does it serve society to deliver communication that isn't remotely urgent six days a week (much less 3 days a week or one day a week)?
How does society benefit by spending billions witlessly? Only governments can get away with perpetually funding marginal activities at premium costs. To suggest such stupidity be maintained simply because other countries maintain such stupidity is utterly incomprehensible.
You don't get today's YFM award because your response is just so rich a refutation of core right wing doctrine.
1. The point is this: every other nation on earth perceives a need for the government to provide a postal service, as the Framers did. The purpose of a government-run postal service is to ensure that everyone can send and receive mail, not just people who can afford it, and not just people who live in the right places. Because delivery service to sparsely populated areas invokes entry barrier issues, it's amenable to monopoly pricing.
2. I didn't say anything about the urgency issue.
3. The USPS would be solvent if it charged $1 per letter. FedEx and UPS charge several times that.
4. Most important, you say that "[w]hen every postal service was originated there were no phones or alternative devices by which urgent messages could be relayed. The state had every reason to create postal systems to advance commerce as well as other human communications. But now the post office's original, meaningful, functions are being stripped away by better technology." I'd like you to pause for a moment and consider the consequences of that, both within and without the ambit of "commerce." Specifically, what is "commerce" today as opposed to when the postal service was originated, and what does the state need to do or not do to "advance commerce" today? And outside "commerce," what do you think about police attaching GPS devices to cars, allowing citizens the right to own antitank TOW missiles, and allowing close elections among an electorate of low-information voters to be effectively determined by widely televised night show segments of candidates playing saxophone or a barrage of ads from a labor union?
"Perceives", perhaps, but doesn't prove a need anymore than absence of any such reasoning in your reply demonstrates such a need.
The poor and those who live in remote places would still get their mail and send it under a private system but they would have to pay up for more urgent delivery and likely have no more need for routine, daily, delivery than anyone else.
What does the government have to do to support commerce today? That's plenty arguable but I think its pretty hard to argue that daily mail delivery has anywhere near the import to commerce it did ten years ago, much less decades ago when it was the only game in town, virtually. Yet we still need this level of service? To millions of customers who have no need of such service?
The rest of your ramblings on GPS devices and TOW missiles have so little coherence that I don't see any merit in commenting on them but to say that, yeah, the government can go too far or too little in places but when it is doing something pathetically nonsensical like six day delivery of 99% junk mail it doesn't take a genius to see a problem THERE.
I don't know. I do know they can and did lay off employees when business turned down, so my guess is that the enterprise isn't 'run' by the state, which is the question you asked.
The only thing surprising, is that you actually think your point has any relevance.
At one point in time every country in the world permitted slavery as well.
Everyone with a brain knows how much better package delivery is with UPS & FedEx that with the USPS. Now think how wonderful it would be if we did the same with the rest of the mail. The time has long since past for the government monopoly on first-class mail to be sent permanently to the dead-letter office where it should have been long ago.
