Postal issues run deep

By David Lazarus Los Angeles Times

Richard Maher can’t remember the last time he wrote a personal letter to anyone — and he works for the U.S. Postal Service.

That’s how bad things have gotten for the government agency that, in the age of email, Facebook and Twitter, not to mention FedEx and United Parcel Service, announced last week that it lost $5.1 billion in the past year.

And the losses would have been more than double that amount — a record $10.6 billion — if Congress hadn’t allowed the postal service to engage in a little creative bookkeeping and shift an outstanding $5.5 billion payment for retiree health care into the current fiscal year.

Hours before that payment was due last week, Congress voted to extend the deadline (again) to Dec. 16, kicking the fiscal can a little farther down the road.

“The problem is still there,” said Maher, a postal service spokesman in Los Angeles.

“It’s a $5.5 billion obligation that the postal service can’t afford given the drop in mail volume.”

There are a number of proposals on the table to get the agency out of this fix, including eliminating weekend delivery and cutting about 150,000 workers. There are a couple of ways to keeping the postal service alive and kicking, at least for the foreseeable future.

First, it’s important to remember that the agency receives no tax money. It’s required by law to operate like any other business, raising enough revenue to cover its costs.

Federal law also says the postal service can borrow up to $3 billion a year from the Treasury Department, but its total debt can’t top $15 billion. Maher said the postal service’s debt will hit the $15 billion mark in coming months, maxing out the agency’s credit card.

Meanwhile, the volume of first-class mail is steadily shrinking as the world goes increasingly digital. Five years ago, the postal service delivered about 98 billion pieces of first-class mail. That total dropped to about 73.5 billion pieces this year.

By 2016, according to agency projections, the volume of first-class mail will decline to 53 billion. And by 2020, that volume will hit 39 billion.

As a newspaperman, I know a little something about antiquated business models. Simply put, the postal service can no longer raise the money it needs to do the job it’s required to do. Period. It just isn’t economically feasible.

A couple of years ago, after the postal service reported losing a mere $3.8 billion, I asked whether it was time to think about privatizing mail delivery. The problem with that idea quickly became apparent when both FedEx and UPS told me they weren’t interested in the job.

While both companies might be interested in cherry-picking profitable urban routes, neither wanted the obligation of schlepping mail up and down backwater rural roads.

“We believe that the government plays a role in terms of ensuring that every mailbox is reached every day,” a UPS spokesman said. “That is not a responsibility that UPS would want.”

I came to the conclusion that because the private sector was unable (or unwilling) to take on the responsibilities of universal mail coverage, there was a need for the government to remain involved, one way or another — just as such a government role appears necessary for universal healthcare coverage.

But clearly the postal service can’t keep staggering along year after year, racking up multibillion-dollar losses. So what do we do?

Higher rates are obviously in the cards. A first-class stamp will cost 45 cents as of Jan. 22. Don’t be surprised if that charge quickly grows to 50 cents, or more.

But higher fees alone won’t do the trick. That’s why the postal service has also proposed dropping Saturday delivery, closing processing centers nationwide and having the leeway to lay off tens of thousands of workers.

“We believe we can be profitable if given the flexibility to operate differently,” Maher said.