New York Times Editorial: Saving the Post Office

New York Times Editorial: Saving the Post Office
Copyright by New York Times
Published: March 9, 2010
http://www.nytimes.com/2010/03/10/opinion/10wed1.html?th&emc=th


Many Americans rely on six-days-a-week mail delivery and expect to have a post office just around the corner. But if the United States Postal Service is going to survive the transition to the Internet age — without requiring billions of dollars of federal subsidies — Congress must allow it to cut some services, close some offices and make other sensible changes.

Since 1970, the Postal Service has been required to pay its own costs. Still, Congress has insisted on the right to make many policy decisions. The Postal Service made a profit until 2006. Since then, declining mail volumes — as more Americans use e-mail and pay their bills online — and the demands of its retiree health benefit system have dragged it deeper and deeper into the red. Last year, it delivered 17 percent fewer pieces of mail than in 2006 and reported losses of $1.4 billion, this year it expects to lose $7 billion. Postmaster General John Potter warns that unless the service takes major steps to bring its costs into line, it will lose $238 billion over the next 10 years. To avoid insolvency — or falling back into the taxpayers’ lap — he is asking Congress for the flexibility to implement an ambitious plan to reconfigure services and cut costs.

Not every idea is sound, and Congress should retain oversight to ensure that all Americans still have reliable mail delivery. But Congress should grant the service most of the authority it requests.

Mr. Potter estimates that ending mail delivery on Saturday — when the volume is 17 percent lower than on weekdays — would save $40 billion over the next decade. He wants to close some yet-to-be-announced number of post offices and replace them with cheaper alternatives, such as automated kiosks and postal windows at supermarkets and other retailers. He is also asking for more flexibility to raise the rates of some services to meet changes in demand and costs.

These seem reasonable compromises considering the magnitude of the challenge. They have to be done the right way. Post offices should not be closed in rural areas and other hard-to-reach places that do not have alternatives. The Postal Service also must work with other government agencies to ensure that people who receive crucial mail — such as Social Security checks — on Saturday, receive it on Friday rather than on Monday.

The service says these proposed changes, dramatic as they are, would still fill only part of the gap. Mr. Potter believes it can find other savings and new profits by expanding product offerings — like new direct-mail products for small businesses — and cutting labor costs, including by hiring more part-time workers and reducing full-time employees through attrition. Some 300,000 postal workers are expected to retire over the next decade — about half the Postal Service’s entire staff.

Some of the proposed changes are flawed. Mr. Potter is hoping to save another $50 billion over the next decade by stopping contributions to a fund to pay for future retiree health benefits, covering them instead on a pay-as-you-go basis. As many workers have discovered, unfinanced promises of future benefits have a troubling tendency to become worthless in times of economic stress.

Still, the service might be allowed to reduce its annual contribution. Right now, by law, it has to make contributions consistent with a 7 percent annual rate of inflation for health care costs, while Medicare uses a rate of 5 percent to 6 percent to project future benefits.

Even with the Internet, Americans will need mail services for packages, legal documents and, yes, letters for years to come. In some areas of the country, the Postal Service is the only service available. And all Americans should not have to rely solely on private businesses for anything as fundamental as mail delivery.

That means that Congress has a straightforward choice: It can give the Postal Service some more flexibility to run like a business. Or it can start subsidizing it to the tune of $10 billion-plus a year. We vote for flexibility.






Washington Post Editorial: Congress is running out of time to save the Postal Service
Copyright by The Washington Post
Wednesday, March 10, 2010
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/09/AR2010030903337.html


ON THE INTERNET, friends can communicate across continents via live video hook-ups for free. Companies can exchange 100-page documents in nanoseconds. Meanwhile, at the U.S. Postal Service, 600,000 employees spend their days stamping and sorting large pieces of paper and carrying them by plane, train and truck to every home and office from Guam to Georgetown -- as federal law requires. This quaint business model was bound to be stressed by recession, and it has been. Mail volume fell from an all-time high of 213 billion pieces in 2006 to 177 billion in 2009, with more declines to come. The Postal Service is on course to lose more than $7 billion this year, despite substantial recent cost-cutting, and it could lose more than $238 billion by 2020. Approaching the limits of its federal credit line, the USPS must change drastically or go bust.

Given that our own business also involves large pieces of paper, truck deliveries and Internet transitions, we could hardly be entirely unsympathetic to the challenge facing Postmaster General John E. Potter. He has acknowledged the scope of that challenge, and last week he proposed new product lines, efficiency improvements and workforce attrition to generate $115 billion in revenue or savings between now and 2020. But that's not even half the projected losses. To really transform, the Postal Service needs congressional action. Some 26,000 of the Postal Service's 32,000 post offices lose money. Many of them should be closed and converted to kiosks or merged with big-box retail stores. But federal law forbids closing post offices just because they operate at a deficit. That needs to change. So does the rule mandating service six days a week, though the USPS will have to find creative ways to serve those mailers for whom Saturday delivery is still a must.

Mr. Potter is less justified in seeking an end to annual prepayments of Postal Service retirees' health benefits, which Congress first required in 2006. Having reached $5 billion a year, these payments are no doubt a drain on USPS cash flow. But they also protect taxpayers against the risk of someday assuming these unfunded liabilities. At most, Congress should stretch out the payments to help the Postal Service through the short term. Abolishing them would give up what little leverage lawmakers have to force change on the Postal Service.

There is only so much that can be accomplished without tackling the item that accounts for 80 percent of the Postal Service's expenses: labor costs. To be sure, 50 percent of postal workers come up for retirement in the next decade, and that will help cut costs. But attrition has its limits. Management and labor must aggressively tackle uncompetitive wages, benefits and work rules -- including no-layoff clauses that cover most personnel. Here, too, Congress can help, by ordering labor arbitrators to take the Postal Service's financial health into account during the collective-bargaining process that begins later this year.

Given the state of technology, privatization is probably the only long-term solution for the USPS. But it is so saddled with legacy costs that no investor would touch it. If Congress gives management the tools it needs to meet the crisis, and if management uses them effectively -- two big ifs, we admit -- the Postal Service will have a chance to get its house in order and one day attract private capital, as European postal services have done. Otherwise, it may wind up as a burden on taxpayers, like another iconic business with an aging workforce, high legacy costs and an outdated product line: General Motors.