End of the Postal Service?

[Jetsfan80]

http://www.nytimes.com/2011/09/05/business/in-internet-age-postal-service-struggles-to-stay-solvent-and-relevant.html?pagewanted=1&_r=2

Postal Service Is Nearing Default as Losses Mount

By STEVEN GREENHOUSE

Published: September 4, 2011

The United States Postal Service has long lived on the financial edge, but it has never been as close to the precipice as it is today: the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances.

“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, said in an interview. “If Congress doesn’t act, we will default.”

In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers — nearly one-fifth of the agency’s work force — despite a no-layoffs clause in the unions’ contracts.

The post office’s problems stem from one hard reality: it is being squeezed on both revenue and costs.

As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail.

At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on the agency’s predicament on Tuesday. So far, feuding Democrats and Republicans in Congress, still smarting from the brawl over the federal debt ceiling, have failed to agree on any solutions. It doesn’t help that many of the options for saving the postal service are politically unpalatable.

“The situation is dire,” said Thomas R. Carper, the Delaware Democrat who is chairman of the Senate subcommittee that oversees the postal service. “If we do nothing, if we don’t react in a smart, appropriate way, the postal service could literally close later this year. That’s not the kind of development we need to inject into a weak, uneven economic recovery.”

Missing the $5.5 billion payment due on Sept. 30, intended to finance retirees’ future health care, won’t cause immediate disaster. But sometime early next year, the agency will run out of money to pay its employees and gas up its trucks, officials warn, forcing it to stop delivering the roughly three billion pieces of mail it handles weekly.

The causes of the crisis are well known and immensely difficult to overcome.

Mail volume has plummeted with the rise of e-mail, electronic bill-paying and a Web that makes everything from fashion catalogs to news instantly available. The system will handle an estimated 167 billion pieces of mail this fiscal year, down 22 percent from five years ago.

It’s difficult to imagine that trend reversing, and pessimistic projections suggest that volume could plunge to 118 billion pieces by 2020. The law also prevents the post office from raising postage fees faster than inflation.

Meanwhile, the agency has had a tough time cutting its costs to match the revenue drop, with a history of labor contracts offering good health and pension benefits, underused post offices, and laws that restrict its ability to make basic business decisions, like reducing the frequency of deliveries.

Congress is considering numerous emergency proposals — most notably, allowing the post office to recover billions of dollars that management says it overpaid to its employees’ pension funds. That fix would help the agency get through the short-term crisis, but would delay the day of reckoning on bigger issues.

Postal service officials say one reason for their high costs is that they are legally required to provide universal service, making deliveries to 150 million addresses nationwide each week. They add that a major factor for the post office’s $20 billion in losses over the past four years is a 2006 law requiring the postal service to pay an average of $5.5 billion annually for 10 years to finance retiree health costs for the next 75 years.

But the agency’s leaders acknowledge that they must find a way to increase revenue, something that will prove far harder than simply slicing costs.

In some countries, post offices double as banks or sell insurance or cellphones. In the United States, the postal service is barred from entering many areas. Still, the agency is considering ideas, like gaining the right to deliver wine and beer, allowing commercial advertisements on postal trucks and in post offices, doing more “last-mile” deliveries for FedEx and U.P.S. and offering special hand-delivery services for correspondence and transactions for which e-mail is not considered secure enough.

Mr. Donahoe’s hope is to cut $20 billion of the $75 billion in annual costs by 2015. To do that, he wants to close many post offices and slash the number of sorting facilities to 200 from 500 and trim the agency’s work force by 220,000 people, from its current 653,000. (A decade ago, the agency employed nearly 900,000.)

The postal service has the legal authority to close facilities, although community opposition can make the process difficult. To placate critics and cut costs, officials say they would seek to run some postal operations out of stores like Wal-Mart or to share space with other government offices.

Cutting the work force is more difficult. The agency’s labor contracts have long guaranteed no layoffs to the vast majority of its workers, and management agreed to a new no layoff-clause in a major union contract last May.

But now, faced with what postal officials call “the equivalent of Chapter 11 bankruptcy,” the agency is asking Congress to enact legislation that would overturn the job protections and let it lay off 120,000 workers in addition to trimming 100,000 jobs through attrition.

The postal service is also asking Congress for permission to end Saturday delivery.

Given the vast range of stakeholders, getting consensus on a rescue plan will be difficult.

Senator Susan Collins of Maine, like many lawmakers from rural states, vigorously opposes ending Saturday delivery, which would trim only 2 percent from the agency’s budget. Ms. Collins, the ranking Republican on the committee overseeing the postal service, said the cutback would be tough on people in small towns who receive prescriptions and newspapers by mail.

“The postmaster general has focused on several approaches that I believe will be counterproductive,” she said. “They risk producing a death spiral where the postal service reduces service and drives away more customers.”

The post office’s powerful unions are angry and alarmed about the planned layoffs. “We’re going to fight this and we’re going to fight it hard,” said Cliff Guffey, president of the American Postal Workers Union, which represents 207,000 mail sorters and post office clerks. “It’s illegal for them to abrogate our contract.”

Senators Carper and Collins do back several of the postal service’s main ideas to avoid default, including recovering around $60 billion that some actuaries say the agency has overpaid into two pension funds. Although the Obama administration is working closely with the senators to find a solution, it has signaled discomfort with the pension proposals, questioning whether the postal service really overpaid.

Meanwhile, Representative Darrell Issa, the California Republican who is chairman of the House Oversight Committee, says the pension proposals would amount to an unjustifiable bailout that would not solve the agency’s underlying problems. He is pushing a bill that would create an emergency oversight board that could order huge cost-cutting and void the postal service’s contracts — a proposal that not just the unions, but Senators Carper and Collins oppose.

Fredric V. Rolando, president of the National Association of Letter Carriers, warned of disaster if partisanship keeps Congress from acting.

“This is about one of America’s oldest institutions,” he said. “It survived the telegraph, it survived the telephone, and we have to do everything we can to preserve it and adapt.”

[Bugg]

Why anyone would oppose shutting down Saturday delivery is beyond me. It could allow them drop labor and utility costs immediately. You could elimintae almsot all OT costs spare Christmas time. No one needs Saturday delivery. Most commericial and office customers aren't even there. And yet a dipsh*t like Susan Collins opposes a simple,sensible immediate move.

[NYJets90]

Do away with it, the private sector can handle mail delivery just fine.

[tparich]

I go out of my way to not use the post office. Worst customer service ever.

[JerryK]

I think we're better off if they can find a way to survive. I agree Saturday delivery is unnecessary.

[The Crusher]

Who is gonna bring me my summer sausage and cheese collection from Pepeeridge Farm this Christmas?

[JoeC36]

Who is gonna bring me my summer sausage and cheese collection from Pepeeridge Farm this Christmas?

If you buy me some, I'll hand deliver yours

[CTM]

Pensions... My pos motherinlaw retired at like 50 for basically a full pension for life.. This meal ticket for life has to stop with government types jobs.. they can't compete with private sector not burdended by it

[The Crusher]

Pensions... My pos motherinlaw retired at like 50 for basically a full pension for life.. This meal ticket for life has to stop with government types jobs.. they can't compete with private sector not burdended by it

Yikes, Im gonna wash my brain with Lysol cause I agree with you.

[Boozer76]

I thought they broke up a while ago. Decent band nonetheless.

[JetsFanInDenver]

Wow! We will be the first developed country without postal service. Or for that matter the first country without postal service. Way to lead!

[Barcs]

With all the technology out there like smartphones, echecks and online banking, the post office is essentially useless. I can't even remember the last time I used snail mail for anything. I have a mailbox and get nothing but junk mail. I'd honestly rather not have one. There isn't a single thing that can't be done online that is sent through mail, and honestly it's terrible for the environment. There's no reason to have it in a digital society. The post office should have been working on getting their system online over the past 10 years instead of just waiting for business to pick up and putting a band aide on it by increasing stamp prices while the rest of the world passes you by. It's no surprise. I saw this coming 10 years ago. It's an unrealistic unnecessary service.

But I won't be surprised if the government decides to waste more money and bail em out and then we're in the same situation in another 5 years.

[Jetsfan80]

With all the technology out there like smartphones, echecks and online banking, the post office is essentially useless. I can't even remember the last time I used snail mail for anything. I have a mailbox and get nothing but junk mail. I'd honestly rather not have one. There isn't a single thing that can't be done online that is sent through mail, and honestly it's terrible for the environment. There's no reason to have it in a digital society. The post office should have been working on getting their system online over the past 10 years instead of just waiting for business to pick up and putting a band aide on it by increasing stamp prices while the rest of the world passes you by. It's no surprise. I saw this coming 10 years ago. It's an unrealistic unnecessary service.

But I won't be surprised if the government decides to waste more money and bail em out and then we're in the same situation in another 5 years.

The post office can only increase stamp prices to match inflation. But other than that I agree. Its an antiquated system propped up by taxpayers who don't use it much anymore.

[RutgersJetFan]

The post office can only increase stamp prices to match inflation. But other than that I agree. Its an antiquated system propped up by taxpayers who don't use it much anymore.

This is very true. Senior citizens are going to lose their sh*t when they can't just walk to their local mailbox anymore. Couple years back I remember they tried to cut back on their local mailboxes in Baltimore and the backlash from the senior community was pretty significant.

Get ready to teach your elders how to utilize online bill paying.

[JetsFanInDenver]

The post office can only increase stamp prices to match inflation. But other than that I agree. Its an antiquated system propped up by taxpayers who don't use it much anymore.

Its an old way of doing things for sure. But there are still quite a few citizens who use and benefit from it.

[The Gun Of Bavaria]

A governmental entity bloated with malfeasance and waste, while billions in the red and terrible customer service to boot? No way.

Now get to work, you all need to help pay for Amtrak subsidies.

[Barcs]

This is very true. Senior citizens are going to lose their sh*t when they can't just walk to their local mailbox anymore. Couple years back I remember they tried to cut back on their local mailboxes in Baltimore and the backlash from the senior community was pretty significant.

Get ready to teach your elders how to utilize online bill paying.

Old people need to shut up and deal with it. That's how technology advancement in a society works. Besides, it's 10 times easier for them to do something online rather than walk all the way to a mailbox when their bodies are wearing out and if they are mentally incapable of learning to use a computer, I'm sure they have staff to help them in their retirement communities. It took forever to get my grandpa using a computer but he finally does now (with assistance).

[RutgersJetFan]

Old people need to shut up and deal with it. That's how technology advancement in a society works. Besides, it's 10 times easier for them to do something online rather than walk all the way to a mailbox when their bodies are wearing out and if they are mentally incapable of learning to use a computer, I'm sure they have staff to help them in their retirement communities. It took forever to get my grandpa using a computer but he finally does now (with assistance).

Oh I wasn't complaining, I agree. As far as I'm concerned the entire billing industry, private and public alike, should be paperless already. Spent a good amount of time in SoFla recently and witnessed firsthand how banks have to overstaff even smaller, local branches because seniors come in by the droves and still do their banking as if it's the 1950's. IMO stuff like this is more easily done in just one shot like a band-aid. Transition is for pussies.

[JerryK]

I'd feel better about ditching the Postal Service if there were more nationwide players than just UPS/Fedex and 1 or 2 others.

UPS/Fedex etc are profitable, but if USPS closed, they'd all claim they're in trouble and shipping rates would quadruple.

(not unlike the gas we've been buying the last 9yrs)

[rillo]

I like the USPS, never had a problem with them. UPS sucks IMO.

[Lil Bit Special]

80% of cost is labor.

And they gave the union a no-layoff policy in their last contract.

Keep crying about how its going out of business. i dont care until you get your costs under control. Dont bail these idiots out. There are much better ways to run the post office. Its not possible for everyone to be able to go paperless. Not everyone has a computer (yep, its true!) and not everyone can get access to a computer.

BTW... the post office does more than mail bills and invoices. Just visit any post office during lunch time or around 4pm when businesses are getting ready to close up and see what people are mailing. Closing it will have a huge impact on everyone.

[Larz]

it will never be allowed to close, it would be political suicide for both parties. it will be revamped, overhauled, but kept alive

[Patsyfan]

I think it is the product of a failed economic policy based on a fallacious understanding of economic theory. Stating things very very simply: You can't keep spending more than you take in and account for inflation to make you pay back the debt with devalued money. It is not a sustainable way to do buisness. When you grant pensions and benefits based on this policy you are headed toward insolvancy. You need to know that one day the "books will need to be balanced" and the debt paid. Especially when you are not the only agency over budget and running steep deficits. It is an interesting debate about economic theory and if a reserve currency holder like the united states can just print money into prosperity. I hope I stayed enough into the economics side of things and was on topic enough.