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  • USPS Loses Another $2.2 Billion: What Congress Can Do

    Is the end near for the U.S. Postal Service (USPS)? Things have been pretty glum over the past few years, as the government-owned organization has reported loss after loss. The latest hit? A whopping $2.2 billion for the second quarter. That follows a loss in fiscal year 2010 of some $8.5 billion.

    And if there is a light at the end of the tunnel for USPS, it’s an oncoming train, as it projects that by September it will run out of cash and default on a payment owed to the U.S. Treasury for retiree benefits.

    You don’t have to go far to see the reason USPS is in trouble. It’s the computer or mobile device you are looking at right now. Simply put, the post office is on the wrong side of the information revolution. As broadband and other digital technologies become increasingly available, mail is used less and less. E-mail, online bill payment, and even digital greeting cards are taking the place of paper and stamps. The trend is clear: First-class mail volume has shrunk 20 percent since its peak in 2006, and the fall shows no sign of stopping.

    This doesn’t necessarily mean that mail service will go the way of the buggy. There may very well be a use for hand-delivered paper going forward. And package delivery is up in today’s Amazon.com-fueled economy. But there’s no doubt the nature and scope of mail delivery will change dramatically.

    The question is whether USPS can keep up with those changes. And, while the phrase “post office” has long been a metaphor for “appalling inefficiency,” USPS management has done a credible job in reducing costs and improving productivity over the past few years. But much more is necessary.

    In several key areas, however, USPS lacks the ability to make the changes that are needed. It is, for instance, prohibited by law from closing individual post offices simply because they are losing money. Congress is also keeping USPS from dropping Saturday delivery, although that step would save close to $2 billion a year.

    At the same time, USPS should also be stripped of its special marketplace privileges, including its monopoly on First-class mail. If someone is willing and able to make a profit in this shrinking market, they should be encouraged, not jailed for it.

    The future of USPS and mail delivery is not bright. As digital technology continues to advance, USPS will continue to struggle to find a place for itself. Congress, however, is making that struggle even harder by hobbling USPS’s ability to cut costs and by banning competition. Mail service may lose its race for survival, but it should be allowed make a run.

    Posted in Ongoing Priorities [slideshow_deploy]

    27 Responses to USPS Loses Another $2.2 Billion: What Congress Can Do

    1. George Colgrove VA says:

      Privatize it and let the market decide. It is obvious the current USPS is not working and it is too expensive. I am an avid stamp collector and would hate to see my hobby dry up, but with the country passed the point of being in permanent debt, we no longer can afford the government in its current construct. Time to consider alternatives. If it means no more USPS – so be it.

    2. Jax Tico says:

      Sell the post office system to an entity that knows how to earn a profit. UPS, DHL, and FEDEX do a much better job anyway. It's so simple it's stupid. What the hell are our representatives so afraid of? The union. You're fired! Now they can't do anything! Geez

    3. Stirling, Pennsylvan says:

      As long as the USPS is playing with "Other People's Money," like most of the failed institutions of our government, they will keep on going.. even at huge losses. I'm sure a "Bailout" will probably be in order as any "Union" will not be forced to deal with financial reality during this administrations reign. Maybe in 2012 the next president will actually get to "cut the fat" from our bloated government and return failed programs to the private sector, which would generate jobs and tax revenue.

    4. Brian in Dallas, Tex says:

      I wish they'd quit talking about closing on Saturdays. Some of us live in communities where we get our mail but work in others; if we have to conduct business at our local post office, that only option is Saturday unless we take off. How about cutting some lame day like Tuesday or something?

    5. Robert Lozano CA says:

      It's actually about time, the problem is that govt. will not let it die. That is until it can subsidize the rural internet and put a computer in everyones home, at the tax payers expense. Oh, and they need to create a dept. to help educate those communities who would otherwise cut off all communication to the known world. That's exactly what we need right now.

    6. Ray Downen, Joplin, says:

      One reason for the USPS losing money is that it's unionized. Salaries and payments to previous employees are why they're losing money.

      • Peter D. says:

        Come on people, the USPS did NOT start losing money hand over fist until, FedEX and UPS lobbied wrote and lobbied the "Postal Accountablility Act" enacted in 2006. I'm NOT a USPS employee or related to anyone who is..I read and learn what our elected officials do to scam every penny they can from the government, lobbyists and the American people. This is not to say that the USPS is efficient in any way, they are not, but be sure that it's the Postal Accountability Act that is killing off a successful 236 year old entity…Not unions or even a shrinking customer base, and I'm very surprised that anyone writing an article about the problems facing the USPS wouldn't include this. I'd like to know why!

    7. Bob Fender, Miss. says:

      How many people actually need mail delivered 6 days per week? Monday, Wednesday, Friday would be more than adequate for me.

    8. Mike Brosch, Cave Cr says:

      I had an uncle who worked at the PO. He bragged about how they could milk the system so as to make a ton of money in overtime, and what great benefits he had.

      Of course lifting all those letters caused his back to go out so he had to retire young with 100% disability. Poor guy spent the next 30 years trying to get his health back by hunting, fishing and water skiing.

    9. Harry Cullman,AL says:

      Lrt the USPS sink or swiit's own on. If FedEx or somebody else wants it, let them pay for it and have it. Good riddance. Anothe millstone around our neck removed.

      • Peter D. says:

        Harry, Obviously you don't know or understand the USPS. It wasn't a millstone around our neck until FedEx and UPS wrote and lobbied for the Postal Accountability Act back in 2006. The USPS WAS on a 3 year stamp cycle of profit/break even/lose money…They raise stamp prices. The ONLY cost the the U.S. tax payers prior to the P.A.A. was the cost of mail in ballots for our armed service members and gov. employees overseas. In essennce what the P.A.A. forces the USPS to do is "pre-pay" benefits out 75 years for employees it doesn't even have yet, and they must do it in 10 years at a cost of over 8 billion dollars per year.
        This is what the P.A.A. mandates. They have no say in the matter. Look it up..it's fact!

    10. H E Flockhart NEBRAS says:

      It's like anything the government tries to run. It becomes ineffient, bloated, overpriced. over staffed, corrupted, and in many cases, not needed.

    11. Peggy, OH says:

      To George, I disagree that USPS is too expensive. First-class postage is lowest in the world, and prices for package services are usually lower than FedEx and UPS.

      To Jax, the reason FedEx and UPS show profits is because they cherry-pick the profitable areas to serve. In the outlying rural areas, they hand off the packages to, guess who? That's right, USPS!! Oh, and FedEx and UPS apply fuel surcharges whenever they feel the need to do so; USPS is prohibited from charging fuel surcharges.

      To Stirling, the USPS does not run on "other people's money". It runs on the revenue generated from the sales of stamps and other products, not tax dollars. However, Congress still ties their hands and takes everything it can get to fund other agencies and programs. If Congress would revise the pre-funding requirement, the USPS could easily be solvent again.

      To Bob, it's been proven that cutting Saturday delivery would not garner the savings that USPS is hoping for. Additionally, don't you think it would be a bad idea to do away with an advantage that they have over FedEx and UPS, Saturday delivery for no extra charge? Seems that gives them a leg up on the competition, and they should build on that.

    12. GLORIA HILL, SOUTH D says:

      I have heard for years that the post office is privately owned. Who owns it? Although it says united states postal service, I don't believe this is a branch of our government. I think we should have people bid (low bid wins) to deliver our mail. Don't let obama do the same thing he did with our car companies….Let the post office *fail* and get someone else who will save us money and do a better job!

    13. ben franklin says:

      Yeah, the Post Office has been "bailing out" the congress of the united states for 40 years with overpayments to the Civil Service Retirment System and the Federal Employee Retirement System and now the Postal Accountability and Enhancement Act of 2006. The total is $142,000,000,000.00. Stop trying to micromanage the agency. If not for the PAEA 2006 they would be in the black for the last 4 years.

    14. Pingback: The Truth Behind Oil Subsidies | The Foundry

    15. Bobbie says:

      The failures of government should be open to the market. I agree. Privatize.

    16. Lee, Florida says:

      Comparing the USPS to FedEx, UPS or any other carrier is ridiculous. Those entities deliver parcels and the occasional flat. Further, the postal service is THE ONLY GOVERNMENT SERVICE THAT IS SELF SUSTAINING. Tax dollars DO NOT support the USPS and have not since the Postal Reform Act of 1979. They are in bad shape for many reasons, some of which are due to gov't regulations that apply ONLY to the USPS and not any other gov't service.

      Is there waste? Sure, at the top, like most companies.

      You may not care about 6 day delivery, but many do, including small businesses.

      Perhaps you should know the whole story before offering an opinion.

    17. Big Mike says:

      Open it up to the private market, huh? That will mean only the customers who literally live within a stone's throw of the urban areas will get service. Everyone else, tough cookies. It's called skimming the cream off the top. Lift the monopoly? That means let every Tom, Dick and Harry in your mailbox and there goes anything outgoing you put in there. Cut one day of delivery? So you eliminate 17% of your business to save 5% of your losses. Sure, makes sense. So when cutting one day of service doesn't correct the problem, what next? Cut another day? Then another? Remember folks, approximately 35 million households still don't have computers and/or internet. What do you tell them? Too bad?

    18. Bobbie says:

      It's too bad you'd run a business like that, Big Mike. The private sector business caters to their customers needs and security in the name of competition.. And monopoly? What do you think the U.S. postal service is?

    19. Mike Brosch, Cave Cr says:

      I was kiddin about my uncle SORRY!

    20. Ray, Kentucky says:

      To Peggy, in Ohio-

      Lets do away with the postal union and its gold-plated benefits package, get rid of Saturday delivery, close money-losing offices, yes, and even close those in precious rural areas where I live.

      The USPS, like the rest of govenrment bureaucracies, does not have an efficient business model, pays too much to rural mail carriers, pays too much for mail-carrying contracts for moving mail between post offices and mail processing centers. The "if it fits, it ships" model is meerly intended to undercut UPS, Fedex, DHL and any other companies that move packages, and doing it at a price that does not cover the actual costs for the USPS. All business related communications that now move throught the post office will adjust to new delivery schedules, consumers will adapt to payment deadline delays (some may even mail payments before they are late). American citizens will adapt to whatever it takes to make the system work. We always have and we always will, in spite of all the hopey-change mentality that now exists.

    21. Mario, Livingston, N says:

      The USPS can do better, but privatization is not the solution. Think about it. If you "eliminate" the "professional" craft employee and substitute them with part timers, they will save tons of money! But that will only work until the first snow storm come along and the part timers stay home "sick." Postal employees for the most part are very hard working. Sure, there are some slackers in the service but hey, what business donen't have them?

      A big problem the USPS has is route structure. Some routes are delivered faster, safer, and better using other methods than the "cookie cutter" system allows. Work methods are developed by people who have never moved mail and it always seems that new methods put more of a burden on your Carrier.

      The Carriers and Clerks want to do a good job and give a fair days work for a fair days pay, but money is always the issue isn't it. It's not about service anymore and honestly, some things are just done better by government, like the Post Office which by the way is one of the few jobs listed in the US Constitution.

    22. Len, Virginia says:

      First – No, I do not work for the USPS, but I am in awe of their ability to deliver mail to every address in the US. It is uplifting to see so many people considering the USPS issue, heck, for any issue.

      The largest challange the USPS is trying to address is the way the retirement program is funded. Seems simple doesn't it? However, about 2 years ago, Congress decided to make the USPS pre-fund retirement of their employees. This is something no other organization is required to do. Additionally, the USPS has already OVER contributed to this fund (not to individuals) to the tune of about $50B+ (yes, that is Billions), but the US Office of Personnel Management won't let them access the overpayment to the fund. The article below comes from the USPS website, but you can find all sorts of information about this on the web.

      Bottom line is that Congressional mandates that have no basis in reality is the major issue. Despite a decreasing income from first class mail (which, by the way, is not the major source of income for USPS), the USPS is operating with incredible efficiency – especially for a quasi – government organization.

      "Retiree Health Benefits Prefunding and Civil Service Retirement System Overfunding

      The Postal Accountability and Enhancement Act of 2006 (Postal Act of 2006) requires the Postal Service to make payments of more than $5 billion annually through 2016 to prefund future retiree health benefits (RHB). Without changes to this prefunding requirement, the Postal Service currently projects it will have insufficient funds to make the required payment in September 2011, or subsequent required payments. Additional details are contained in the Annual Report.

      Given its current financial situation, the Postal Service proposes to discontinue prefunding retiree health benefits. In 2010, independent analysts found that pension payments to the Civil Service Retirement System (CSRS) Fund have resulted in overpayments of $50 billion to $75 billion, which could be applied to the RHB Fund. The Postal Service could begin paying current retiree premiums from the RHB Fund.

      The next step would be for Congress to provide direction to the Office of Personnel Management (OPM) to revise the methodology used to calculate the Postal Service’s share of CSRS overpayments.The Senate bill introduced in September by Senator Carper would modify the OPM methodology used to calculate CSRS obligations and transfer the surplus to the RHB fund."

    23. PEJ says:

      Kudos to Len, Gloria, and other informed folks. The USPS is already partly privatized. Many Privately Owned business partners, printers, and mail presort houses sort mail in advance of giving it to the USPS and are compensated by Presort Discounts. That is privatization in some form.
      Congress tells the USPS to be profitable like a business, but doesn't let them act like a business. Comparing them to other carriers isn't apples to apples. UPS and FedEx dynamically adjust their "Fuel Surcharge" weekly or Monthly in lieu of and in addition to raising rates. This includes many new services where the USPS delivers the "last Mile" that is not profitable for these carriers.
      However, the USPS cannot raise the cost of a stamp without Congressional approval, months in advance, even if the price of fuel exceeds $5 per gallon. How is any business supposed to compete with these restraints when UPS and Fedex just tack it onto every invoice every week? Could any of you make a profit under these circumstances?

      Take off the congressional handcuffs and let them fail or succeed on their own. Today's management with Donahoe seems like they have the solution by shutting down non-cost effective branches and replacing them with "Village Post Offices"- which are basically contracted service providers like hardware stores and gift shops. Let them try. They surely must be able to do better than the union pandering congress is doing now.

    24. Pat says:

      Using other people's money to create your own wealth doesn't confer a feudal privilege, or one that could support elitism – since it is not your own money being risked.

      America has been very negligent in conferring upon companies the title of risk taker, or job creator, by virtue of the fact that it is not their own money they risk, but millions of shareholders who believe they may create the wealth by which they will benefit.

      Our norms are badly out of sync as to leaving the door open to corporate theft, and far too many have accommodated the banks and the companies about what constitutes business success, and what constitutes theft, and white collar crime. No one invests in crime except the underworld.

      Most of America prefers moderate risk, and the yields of vigilant and competent management. How did things go so wrong if those controls were not toally removed to give the impression that theft was acceptable – in spite of Madoff, Enron, World Com, and now Corzine?

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