How to Fix the Postal Service?

Photo: Davonteee

This week, Bloomberg BusinessWeek put the financial woes of the U.S. Postal Service on its cover with a story titled “The End of Mail.” The dire plight of the USPS isn’t exactly news — it’s been losing money since 2006, including nearly $20 billion since 2007. But the cliff the agency has been driving toward is fast approaching. The agency is now almost $15 billion in debt. Unless the government steps in, it will default on $5.5 billion of retiree health-care costs in September. By October it will reach its legal debt limit, and by the end of the year, the USPS will be out of cash — insolvent and unable to operate.

So what to do? How do you fix a federal agency that, if private, would rank as the 29th largest company on the Fortune 500 list? It can’t just go away, can it? Consider a few stats from the BusinessWeek story:

  • Total mail volume decreased 20 percent from 2006 to 2010.
  • With 571,566 full-time workers, the USPS is the country’s second-largest civilian employer after Wal-Mart.
  • It operates 31,871 post offices, more than the combined domestic retail outlets of Wal-Mart, Starbucks and McDonald’s.
  • 80 percent of the USPS budget goes to salaries and benefits.

Whatever the fix, saving the post office is going to take a dramatic overhaul, likely a combination of layoffs, closing locations and possibly changing its pricing model. Here are some solutions that are on the table, and one that isn’t really, but might be worth asking:

 

[poll id=”6″]


Donnie

I don't know about other people, but it is rare that I get a piece of mail that is actually important (maybe one item per week, not counting netflix). If the post office was allowed to set the price of stamps to a market rate I bet that would cut out a lot of the junk mail that I constantly receive.

SMN

That helps you, not the USPS. They are in the junk mail business. The USPS should be looking at ways to maximize the junk mail we receive.

By the same token, perhaps the USPS should also offer anti-junk mail subscriptions. I'm sure there are people like you who hate it and would pay to make it go away.

Wizard Prang

I disagree. Giving junkmailers a discount results in more crap in our mailbox that we don't want. With a big enough discount, junk mail becomes spam.

If you scrap the bulk-mail rates and make everyone pay full price, some junkmailers will quit sending crap. This is a good things. Others will become more careful about what they send out. This is also a good thing. Businesses will encouraged their customers to go paperless. Also a good thing.

Bottom line: Junkmailers don't subsidize us, we subsidize them.

Tom Church

Stopping Saturday delivery might make people wait days for their mail on long weekends. Instead, maybe they should stop Wednesday deliveries.

MRB

I'm guessing if they raise the postage rate, various direct marketing firms will be outrages - "these rates will put us out of business! It'll hurt the economy!" - of course what is implied there is that their profit margin is less than the difference between the postage rate that USPS provides and the market for that postage. So basically, whatever profits that that industry generates are essentially taken directly from USPS.

cnote

I didn't see the option that I think would be a huge boon to the Post Office, and every other business: decouple healthcare from employment.

Suzy

I live in Canada and our postal service is currently on strike. I barely even noticed, as all of my correspondence, bills and even Netflix is now done on-line. Cutting out a day of service will save money, but won't save the postal service. Getting an established union to go non-union - even if it saves their jobs and the whole postal service - will be a hard sell (ask the car industry). I say lets go paperless once and for all and let it die!

matt

Absolving of health care liabilities is just cruel and doesn't solve any long term problems so in other words your ending health care to end it

Wizard Prang

Please make sense

Dave

I think it would be a good idea to let the USPS die and leave mail delivery in the hands of private firms like UPS and FedEx.

Arithmomaniac

I was expecting you to go into the economics...
By the way, when you only want one choice, use radio buttons, not checkboxes.

anon

there is another option - improve the quality of service.

the amount of letters? yes, these will continue to decrease, but there is still a market demand for the shipping of products a demand that will likely continue to increase as more purchases are made online instead of in person.

no business is going to do business with the USPS with the way they currently operate.
personal experiences from the last year:
- a lost passport sent to the wrong city, lost in an airport, recovered 4 months later - no refund.
- blatant incompetence in local package pickup facility - multiple people looking for a package at the same time and taking 10-15 minutes to locate it.
- frequent waits of more than 20 minutes for simple transactions. (long lines in general)
- stores closed after 5pm
- confusing multitude of options for seemingly simple shipping needs - i want to get this there by this day. i don't care what its called - priority overnight guaranteed shipping with optional tracking.
- at least one non-delivered package
- frequent bending and tearing of mail
- inefficient setup of local post office - mobile mail bins placed in the walkways so all employees had to detour around them.
- single window to help customers when they had 7+ employees working the window at the same time and 10+ customers in line (lines on both side of the window to complete transactions)

for gods sake check out yelp for any post office - i challenge you to find one with a 5 star rating.

http://www.google.com/finance?client=ob&q=NYSE:FDX FedEx share price is trading at above 90, and has consistently gone up since the 70s. The profitability of shipping things is not the issue its the inefficient way the post office is currently operating - at least in my town.

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Tucker

Agree on stopping Wednesday delivery, not Saturday. What needs to happen is a method of privatizing marginal branches and getting them moved into convenience stores and gas stations that are already in those communities and with subsidies or reduced services could provide essential functions at a lower cost than the existing branches.

Celia Ampel

I am a journalism student at the University of Missouri, and last semester I did a large project on the Postal Service's economic woes. What I found was that without the $5.5 billion yearly payment to pre-fund retiree health care, the service would be posting a profit. Even if Congress gave the Postal Service only a three-year reprieve from making the payment to account for the recession, the service would make a profit. Ending Saturday delivery would save about $3.1 billion in costs, but that figure is only attractive if one doesn't consider the lost revenue and the opportunity companies like FedEx and UPS would have to take business from the Postal Service.

Furthermore, what most people don't realize is that the Postal Service has been overpaying a government pension fund for 40 years. The GAO recently calculated the overpayment as being somewhere between $55 billion and $75 billion. This money could be moved over to the retiree health care fund to help the Postal Service stay afloat, but Congress seems reluctant to do so all at once, possibly because of the stigma of doing anything that might look like a bailout.

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Micah

I want to vote for 3 options. Choosing only one option is false--no single option listed above will save the USPS. Here's my vote:

Close tens of thousands of post office locations, transition to non-union work-force
Stop Saturday delivery
Raise the price of stamps to reflect the distance a parcel travels

Dan

What about eliminating the discount for business mail? This would also save tons of wasted paper!

Dan Craig

I'd vote in the poll, but I think those options are just too narrow-minded. The Postal Service needs to realize it is in the business of moving information, not just letters and mail. It doesn't have the infrastructure, but perhaps it should get into the ISP market. It also has a fleet of vehicles that cover more road on a daily basis than any other organization. Imagine placing a street view camera on the top of each truck and licensing the data to Google for near-realtime street view.

There might be other, simpler options of premium services they could offer. If the price is right, I might be willing to pay to not receive junk mail.

Or, as Donnie suggested, raising the price of stamps. I so rarely send letters any more that I wouldn't be terribly hurt of the price of a stamp went up to a dollar or more.

L

Its sad how the information gets presented at this stage in the game of telephone. The USPS is not a government entity (although with all the god awful regulation imposed, I understand your confusion). Next, the $5.5 billion of retiree health-care "costs" is not a true "cost" but rather an obligation to PREFUND an account.

The solution? First and foremost, let the Postal Service run like a business its suppose to be.

Second, why do we require the USPS to PREFUND the retiree health-care cost? No other entity (government or private) has that burden. Not only does the USPS have this burden, but they have overpaid to the tune of ~$60 billion dollars.

Finally, "80 percent of the USPS budget goes to salaries and benefits". Yet, government, politics, and unions prevent them from cutting back employees or closing facilities even when mail volume has dropped "20 percent from 2006 to 2010". Imagine if Walmart's business dropped 20%. Do you think we'd see a few stores close and a few less greeters?

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Steve

Why not cut services in half - everyone gets mail 3 days a week. A-routes can get Mon/Wen/Fri mail and B-routes can get Tue/Thur/Sat. Slowly will allow USPS to cut down locations and staff.

Mayuresh

I look at it this way:

The Postal Service is/was a cheap way for poor citizens to communicate with their friends/ relatives in far off places in the country when other modes of communication were either not available or were prohibitively expensive. I suggest we still need to retain some of this capability till mobile phone services become cheaper. 10c/min is not cheap, it should be more like 3c/min or lower - it is cheaper in many countries

The second aspect is commercial postage usually used by businesses like mail order companies, etc. These need to be priced at market rates - it is unfair to expect the taxpayer to subsidise these businesses. Raise the price of stamps for these to reflect the distance a letter/catalogue/parcel travels.

One solution I would recommend is the one implemented in India - only post cards with hand written messages are subsidised, all the rest are market-priced. Indicative prices for IND are:
Hand-written Postcards: 0.4 cents
Printed Postcards: 6 cents
Inland Letters: 6 cents
Envelope containing a letter: 10 cents

Adjusting for PPP, etc. I would say, for the US, we could have
Hand-written Postcards: 5 cents
Printed Postcards: 75 cents per
Inland Letters: 75 cents
Envelope containing a letter: $1
Parcel prices could be increased to reflect market costs not only by weight but also by distance traveled

Let us not subsidise anything other than a hand-written post card

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