Going postal

In an Aug. 8 essay in the New York Times, columnist Joe Nocera explains that the U.S. Postal Service lost $2.4 billion in the previous fiscal quarter and is likely to lose $7 billion in fiscal 2009. The service generates about $68 billion a year in revenue.

So what’s the problem? Nocera explains:
“What can he (USPS CEO John Potter) do to fix the situation? Surprisingly little. His employees have clauses in their union contracts that forbid layoffs. Nor can he renegotiate their gold-plated benefits, the way, say, the auto companies did when their backs were against the wall. Political pressure makes it nearly impossible to shut down any of his company’s 34,000 facilities, no matter how outmoded or little used. He can borrow money, but under the law, he can add only $3 billion in debt a year — an amount that isn’t going to come close to covering his losses.”

Nocera’s comment about closing post office branches hits close to home. Immediately after chastising the federal government for spending too much, Fort Smith Mayor Ray Baker during the Aug. 4 board meeting chastised the federal government for wanting to save money by suggesting the closure of three post office buildings in Fort Smith.

Following are some other points Nocera made in this essay.
• Since 1970, the postal services has been “expected to operate as a business, turning a profit and so on, and yet it is still subject to Congressional oversight and all sorts of legal constraints.”

• In 2006, the “demand for mail service peaked, with 210 billion pieces delivered.”

• “The Postal Service lost more than $5 billion in 2007, and another $2.4 billion in 2008. And, of course, it is on track to lose that whopping $7 billion in the current fiscal year.”

• “The amount of mail being sent is dropping like a stone — it will be down to 175 billion pieces in 2009.”

“Mr. Potter has reduced the Postal Service’s head count to 650,000, from 800,000, almost entirely through attrition. He has cut costs every way he can think of. And still the losses mount.”

• “As the Internet continues to erode the use of snail mail, does the Postal Service’s business model still make sense? Do we even still need the government to deliver the mail anymore? To me, the answer is obvious: no.”

• “Maybe the Postal Service should turn itself into a giant outsourcer, handling some tasks but handing out others, for a fee, to more efficient companies. Maybe the government should allow companies to bid on lucrative urban delivery — with the proviso that they also deliver to rural areas. Maybe some areas should get mail deliveries less frequently than others. Maybe there should be radically different pricing structures. Maybe it should even lose its monopoly on first-class mail. I mean, why not?”