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Morning Bell: Is the Postal Service Doomed?

Posted By Mike Brownfield On October 5, 2011 @ 9:29 am In Economics | Comments Disabled

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Neither snow, nor rain, nor heat is supposed to stop the United States Postal Service (USPS) from delivering mail, but can it be saved from mounting debt, plummeting volume, and the not-so-slow-motion postal train wreck coming quickly down the road?

Last week, the USPS barely avoided default when Congress extended the due date for a $5.5 billion payment due to the U.S. Treasury for retiree health benefits. It lost $8.5 billion last year, and it expects to lose nearly $10 billion more in 2011. From 2006 to 2010, overall USPS mail volume dropped by 20 percent, from 213 billion pieces of mail to 170 billion, all while incurring $20 billion in losses.

The future doesn’t look so bright, either. In a new paper [2], Heritage’s James Gattuso explains [2] how e-mail and moves toward other forms of communication have led to the USPS’s decline and what the near-term future looks like for the service:

According to a 2010 study by the Boston Consulting Group, mail volume will decline an additional 15 percent by 2020, with first-class mail falling a jaw-dropping 35 percent. This means the average postal customer will receive only one first-class letter per day, down from around two today. At that level of mail, USPS will lose a staggering $15 billion per year.

Gattuso says the “USPS is failing and needs to change [2]. As currently structured, it cannot survive unless supported by tens of billions of dollars in subsidy.” To be sure, the USPS has significant problems and needs restructuring. It has already proposed several reforms, including reducing the postal workforce, closing post offices and other facilities, and discontinuing Saturday delivery of mail. Many of those reforms, Gattuso explains, would require congressional authorization to implement.

On Monday at The Heritage Foundation, Representative Darrell Issa (R-CA), a successful businessman before coming to Congress, spoke about his plan [3] to save the USPS from financial collapse. And in a special interview [4], he told Heritage about some of the reforms his plan would implement:

The real reforms for the Post Office are get efficient vehicles, get efficient distribution centers–they have way too many of them–[and] have sufficient post offices to meet the needs of the post office and the people that they’re going to serve.

You take all of those savings in efficiency, reduce the size of labor, have the new facilities, less facilities, what you need, and the Post Office can make a 2 or 3 billion dollar profit next year. We just have to do that, including the right number of workers.

The USPS has a serious problem, and Congress should act quickly to address it. But “saving” the service shouldn’t be the goal–and taxpayers shouldn’t be on the hook for preserving an obsolete industry. Technology has rapidly changed, as has the way people communicate. With the evolution of digital communications, the USPS must adjust to the new way of doing business, and Congress should make it easier for the USPS to adapt–and that means making it easier for USPS to close post offices, reduce its workforce, and trim services. The USPS doesn’t have to become extinct, but Congress needs to allow it to make the changes it needs to survive.

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Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/10/05/morning-bell-is-the-postal-service-doomed/

URLs in this post:

[1] Image: http://blog.heritage.org/wp-content/uploads/ptsphotoshot208702-B950_140.jpg

[2] In a new paper: http://www.heritage.org/Research/Reports/2011/09/Youve-Got-No-Mail-Is-the-End-Near-for-the-Postal-Service

[3] spoke about his plan: http://www.heritage.org/Events/2011/10/Darrell-Issa

[4] in a special interview: http://blog.heritage.org/2011/10/04/video-how-rep-darrell-issa-would-save-the-u-s-postal-service/

[5] attempting to rewrite portions of President Obama’s jobs bill: http://www.google.com/hostednews/ap/article/ALeqM5ggWf6CLw6NdKvDqsxErbgBRIa_Vg?docId=bb40c7f2f7ec4e87956c693e23132d36

[6] accused Republicans of obstruction: http://blog.heritage.org/2011/10/04/reid-uses-procedural-maneuver-to-block-vote-on-obamas-jobs-bill/

[7] is calling for President Obama to appoint a special counsel: http://thehill.com/homenews/house/185403-smith-wants-special-counsel-to-find-out-if-holder-lied-to-congress

[8] defrauded the federal government out of $20 million: http://www.washingtonpost.com/local/fraud-in-corps-of-engineers-contracting-charged/2011/10/04/gIQAPtb7LL_story.html?hpid=z2

[9] The Wall Street Journal reports.: http://tribune.com.pk/story/267353/us-officials-met-haqqani-network-leaders-report/

[10] See for yourself in one of our latest charts.: http://blog.heritage.org/2011/10/04/in-pictures-how-much-the-top-earners-already-pay-in-taxes/

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