“Industries Fear the Ripple Effects of Proposed Postal Service Cuts” – Was the title of the article in by Ron Nixon in the New York Times yesterday. It is a good statement of some of the key issues that are being taken up starting this week in Washington. All sides are lined up to help shape the final outcome. Today ,CCN Money has picked up the story as well. It seems that all eyes are on Congress as they take up the issue of “postal reform.” All this while all the ears are on the Supreme Court as they take up the issue of ‘Obamacare.’ We certainly do live in interesting times. As the pace of change and disruption our world picks up we must expect many more battles in the future to go along with these two.
Congress has begun work on their vision for Postal Reform, if reform is what they really have in mind. All of the various constituencies are lined up on both sides of the issue. Some want more, and others want the USPS to do less. On the plus side are the wine and beer lobbies that want to be able to use the USPS to ship their products, something the USPS is prohibited from doing by law. On the negative side the insurance and banking industries are lined up to ensure that the USPS not move into their fields, as some in Congress has suggested they do to create more revenues.
Like the newspaper business which is also undergoing its own transformation, the USPS is a huge enterprise that employees nearly 600,000. Beyond that the entire direct marketing field, including mailing companies, printers and direct marketers employees over 10 times that amount. This is a big deal, and we need to get it right. As was noted in the article the field supports over $1 trillion in annual economic activity. It helped to put both of my sons through college, so it is still dear to me.
Nearly every business relies on the post office to deliver packages, advertise services and send out bills. This postal supply chain supports millions of American jobs in fields as diverse as banking, agriculture, media and manufacturing. This is an urgent issue since the USPS is losing nearly $36 million a day. As volumes of mail have decreased with former users now going to digital methods of delivery. Even the USPS has said that it does not expect to get those missing volumes back in the future.
The USPS is also saddled with a Congressional mandate to pre-fund future retirements, the only government agency to have to do so, to the tune of $5.5 billion. Relief from this mandate would cut the shortfall in half. A sign that this is a big deal is the nearly $300 million spent over the last three year by those lobbying on all sides of this issue – both the USPS employee unions and industries who work in the direct marketing field.
Postmaster General Patrick Donahoe has proposed closing half of the post offices, approximately 3700 and shutting half of the mail processing centers, 250 there. Both changes, along with stopping Saturday delivery, would also help to bring down the shortfall. In a world that has gotten to email and instant messaging for time vital business and personal communications, there would seem to be some wiggle room for printed mail – derisively called ‘snail mail.’ A big question is how fast do we need to be, especially if we want to price reduction, or at least fewer price increases. And yes, the USPS is also asking for a 50 cent first class stamp.
Postmaster General Donahoe said in prepared testimony. “If Postal Service were a private company, we would be engaged in Chapter 11 bankruptcy proceedings.” The Senate is beginning the process now, and the House will begin deliberations, probably next month. A key deadline for consideration is May 15, when a moratorium on closing postal facilities will expire.
Currently under consideration is a bill that passed a Senate committee in November that would tap the overpayment of the future retirement benefits, currently at $10.9 billion to pay down postal service debt (to the U.S. Treasury) and use up to $2 billion for incentives to get a number of long term employees to retire. The USPS has also planned to open its own health care for employees in hopes of cutting their costs, but there is pretty widespread opposition to that from Congress and the employees.
The USPS is a legacy system with a long history. Like so many of our other ‘legacy’ systems, including newspapers, they are in deep trouble with the change in the economy in our broadening digital age. Change is great for some, though it sucks for others. I live in both worlds, and yes, I still want things the way they used to be. The question is how much am I willing to pay to have that. We make those choices each day, and we are making those choices now regarding our postal system.
In the face of the current situation I have to applaud Postmaster General Donahoe and his staff, though that is a strange position for me. I prospered under the USPS, and endured a lot of petty regulations as well. They clearly understand where they are today, where the world is going, and have surfaced a plan that will help them to move forward under their current legal and financial burdens. Congress has the keys to open doors for them to endure and preserve the current levels of service many still desire. They also have the keys to the vault and say no more. I compliment the PG for a real and thoughtful plan, and I hope our elected officials will make the right choices. In the face of the coming elections later this year – this should prove to be good theater, and maybe even good politics.