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Morning Bell: Is the Postal Service Doomed?

Posted By Mike Brownfield On May 3, 2012 @ 9:15 am In Economics | Comments Disabled

If you ran a business with $25 billion in losses over the last five years, $20 billion in annual losses projected in the coming years, and 80 percent of its locations losing money, do you think that your company would stay afloat? Should it be rescued with a bailout from its customers? Or should it change its business model, eliminate expenses, and innovate to be competitive in the marketplace? These are the questions facing Congress as it considers what to do about the ever-struggling United States Postal Service (USPS).

The USPS is indeed at a crisis point. Barring an intervention from Congress by May 15, USPS plans to  start closing as many as 3,700 post offices. Those numbers might sound jarring, but in reality the post office closures (not including the processing centers) only save $200 million under USPS’s estimates, and only 4,500 employees would be “affected” — though many of them would be reassigned rather than let go. It’s only a small part of what’s needed to save the USPS.

But even the small changes being proposed are kicking up a firestorm of opposition. Consider the post office in Hope, Minnesota. It sees about eight customers a day, requiring some seven minutes of service. The USPS wanted to close the facility and offer service to the 90 residents of Hope at the Ellendale post office, just 10 minutes away. Still, the closure was actively opposed, ending with an appeal to the Postal Regulatory Commission before the move was recently cleared.

Some politicians in Washington, of course, are trying to swoop in to the rescue in defense of this inefficient American institution. The Senate last week approved a measure (S. 1789) to prevent these changes until the USPS establishes new service standards for mail, effectively delaying action for six months.

Now it’s up to the House to take action, and the Senate’s plan faces fierce opposition. Representative Darrell Issa (R-CA), chairman of the House Oversight and Government Reform Committee, says [1] the measure is nothing more than politicians trying to save post offices in their back yards. “Rather than letting an objective and independent process continue on, senators would inject parochial politics into the postmaster general’s decision making,” Issa said.

Heritage’s James Gattuso explains [2] that there are three possible roads ahead for the Postal Service:

It could continue as an obsolete, politicized institution doomed to extinction. Alternatively, it could become a taxpayer-supported dinosaur existing on billions in taxpayer funding each year. Or will it be allowed to restructure and innovate, giving it a chance to find a place in today’s economy? Congress should support the third of these and give the Postal Service a chance to save itself–and taxpayers–from disaster. That means allowing the Postal Service to adopt reforms, not stopping it.

Gattuso recommends that in order to truly pull itself out of the red, the USPS needs to make substantial cuts and closings that are much more significant than those on the table today. That means shuttering larger and busier facilities. But unfortunately, the USPS cannot quickly and effectively enact changes and reforms. Even under current law, Gattuso writes, the Postal Service is barred from closing any small office simply because it is losing money. The decision is run through a review process that can take upwards of 180 days. Is it any wonder that the USPS is flailing?

Instead of throwing up barriers to reform as the Senate is doing, Gattuso says Congress should give the Postal Service more flexibility to reform itself with necessary cost-cutting measures and innovations like automated postal “kiosks” or “approved shippers” for packages to stamp sales at supermarkets and other stores.

The Postal Service does not have to be a joke of inefficiency, and it can continue its mission of serving the American people if Congress allows for necessary reforms.

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URL to article: http://blog.heritage.org/2012/05/03/morning-bell-is-the-postal-service-doomed-2/

URLs in this post:

[1] says: http://online.wsj.com/article/SB10001424052702304746604577380091233900180.html

[2] explains: http://www.heritage.org/research/reports/2012/04/post-office-closures-too-small-to-fail

[3] is immune from private litigation for his national-security recommendations.: http://www.businessweek.com/news/2012-05-02/yoo-is-entitled-to-immunity-from-padilla-lawsuit-court-rules

[4] Four students were killed and 200 were arrested: http://www.bbc.co.uk/news/world-middle-east-17937448

[5] “inexcusable” for President Obama to try to shut down the D.C. Opportunity Scholarship Program: http://www.washingtontimes.com/news/2012/may/2/romney-blasts-obama-opposing-dc-voucher-program/

[6] the most successful companies in America would save billions of dollars if they stopped offering health care coverage: http://blog.heritage.org/2012/05/02/side-effects-companies-would-save-billions-by-dropping-health-coverage/

[7] Read about it on The Foundry.: http://blog.heritage.org/2012/05/03/chens-choices-and-american-values/

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