Opinion

The Great Debate

Time to save the postal service

By David M. Walker
February 5, 2013

You may not know this, but the U.S. Postal Service (USPS) raised the price of a first-class stamp this past weekend—by one penny, to 46 cents. It also introduced a “Global Forever” stamp, which can be used to send letters anywhere in the world for $1.10.

My advice: Stock up on “forever” stamps. For while a one-cent increase in regular stamps might not seem like much, if the USPS doesn’t get its act together, we’re likely to see far higher prices in the future. Though there are now limits on postage increases, the related financial math doesn’t come close to working over time.

The Postal Service is in trouble. The agency is bleeding red ink; has hit its authorized borrowing limit with the Treasury; and is unable to make its scheduled retirement funding contributions. Something has to give ‑ and must this year.

Sound familiar? In so many respects, the USPS is a microcosm of the federal government — two entities in desperate need of fundamental transformations that will make them more focused on the future and financially sustainable.

Like the federal government overall, the USPS has dug itself a very deep hole. In fiscal 2012, the USPS experienced an operating deficit of almost $16 billion on revenue of about $65 billion. Granted, this deficit was exacerbated by the fact that the USPS was supposed to make two larger-than-usual retiree health benefits payments last year. But it didn’t pay either. Even if you subtract these additional scheduled payments, the Postal Service would have still run a deficit of more than $10 billion. Most important, without significant legislative and operational reforms, the financial situation will only get worse.

These problems have been a long time coming. I first got involved in the Postal Service’s challenges when I was the U.S. Comptroller General, heading the Government Accountability Office (GAO). In 2001, we put the USPS on our “high risk list,” which highlights areas of government susceptible to waste, fraud, abuse or mismanagement and in need of reform.

I testified before the House Government Reform and Oversight Committee, explaining why we added it to the list. There were many reasons, including the fact that the Postal Service’s business model was designed for an era before the Internet and many other means of expedited physical delivery (FedEx, UPS, DHL).

I held up my BlackBerry to demonstrate this, saying that when it came to the future of the Postal Service, “this was their competition.” Many members of Congress were perplexed by my assertion. But they understand it now.

This mounting competition is only one challenge. Others include excess infrastructure in connection with post offices and distribution centers; the costs of a six-day universal service requirement, along with huge and rapidly growing unfunded retiree healthcare obligations.

The list of problems is long. Unless the business model changes, all who use the USPS will feel the impact in the form of higher prices and fewer services.

I recently agreed to serve as chairman of a special panel on the Post Office for the National Academy for Public Administration, along with four other academy fellows. We are reviewing one specific proposed reform to the USPS business model—the “last mile” concept. Developed by four authorities on the Postal Service, it would largely limit USPS activities to delivery of mail from a post office or other facility to the final location. All other services would, in essence, be outsourced.

The panel is charged with considering this proposal and providing comments on it by mid-March. We also plan to offer other possible reform options and will examine various other challenges that need to be addressed, including which of those can be handled through existing executive authorities versus those that require legislation from Congress.

Regardless of our review, the truth is that the USPS, like the federal government, is on an unsustainable path. We hope our work will help spur an informed and expeditious debate in Congress on needed USPS reforms.

We also hope it will also serve as an impetus for a long=overdue independent assessment of the organizational structure and operational practices of the federal government as a whole. This needs to happen sooner rather than later because time is working against us.

Meanwhile, I’m going to buy a lot of those forever stamps.

PHOTO (Top): A United States Postal Service mailbox is seen in Manhasset, New York August 1, 2012. REUTERS/Shannon Stapleton

PHOTO (Insert): The emblem of United Parcel Service (UPS), November 1, 2010. REUTERS/Ina Fassbender

Comments
25 comments so far | RSS Comments RSS

Save the USPS again? Sure – stock up on “forever” stamps and then the rate for sending parcels will go up. Wouldn’t be so bad if you got good service – but when it takes a week – 7 working days – to get a letter from Las Vegas, NV to Fort Mohave, AZ when the drive-time if 1 1/2 hours, that is NOT good service. Or receive a box that is crushed and mangled in transit – or lost.

Posted by AZreb | Report as abusive
 

Postal employees retire at 80% of pay after 30 years of service; regardless of age. No wonder they’re broke!

Posted by Handbook | Report as abusive
 

It would be a shame to see the USPS dissolve. Packages are received a day or two faster than any other carrier – hands down. If I get Fed Ex as a carrier for a package – and I am unable to be home to get (which frequently happens) the closest shipping center is an hour subway ride for me in a nasty part of town. Private company service is usually atrocious and unhelpful. I usually try to use USPS exclusively when I can – and avoid companies that sell and mail through other providers.

Posted by Kuji | Report as abusive
 

Unless they go completely private don’t expect the government to save that sinking ship or anything else they get their slimy mitts on.

Posted by sjfella | Report as abusive
 

“In 2001, we put the USPS on our “high risk list,” which highlights areas of government susceptible to waste, fraud, abuse or mismanagement and in need of reform.”

So a dozen years “down the road” nothing has changed. That’s what “we, the people” get from our “union” government and a “union” post office, facts blithely ignored in this commentary.

EVERYONE hopes for “…a long-overdue independent assessment of the organizational structure and operational practices of the federal government as a whole.” Hope springs eternal.

EVERYONE knows “This needs to happen sooner rather than later because time is working against us.” And yet the “usual suspects” know they can safely stay in office as long as they keep “we, the people” at each other’s throats squabbling like hens over chicken feed by stirring the usual piddling issues.

Posted by OneOfTheSheep | Report as abusive
 

David is correct the Post Office is on a unsustainable path, however it isn’t for the reasons he suggests. Congress enacted a law in 2006 which requires them to prepay retiree health benefits for next 75 years within the next 10 years. The losses which have been reported are mostly from not being able to meet this requirement. There are operational losses which have to be addressed, however privatization is not a solution.
Davids organization wishes to take over mail processing and leave last mile delivery to USPS carriers. There will be huge job losses. This is another case of Wall Street greed. The USPS has real estate property valued at well over 100 billion. It could be the greatest real estate sell off in our countries history and the profits will be flowing into corporate America.

Posted by Andy125 | Report as abusive
 

Neither the comments or the article itself, provides the reader clear factual honest dialog. The service provided by the US Postal Service is slowly being destroyed each day. Either by the Board of Governors, Congress or management dancing around the two. The cuts in staffing have created a hostile work environment for employees and customers who oftentimes confront supervisors who are tasked with the impossible. This of course will continue until all the profits shift to private interprise. This is not necessary, unless it’s part of the plan the media spins every single day. THERE IS NO OTHER INTITY, AGENCY OR COMPANY THAT IS REQUIRED TO PREFUND PENSION BENEFITS, MUCH LESS FOR 25 YEARS IN ADVANCE.
CONGRESS crested this monster when in 06′ they passed legislation which they have since used to rape the US Postal Service to the tune of over 100 BILLION DOLLARS!
THE JOKE IS ON THE AMERICA PEOPLE and they won’t understand until the private sector has charged them to deliver their birthday cards and gifts.

Posted by Reogurl | Report as abusive
 

why? open the mail service to competition. a complete mail service should feature email hosting, as well as, snail mail functions, and package delivery. The USPS has abused its privileges for a very long time.

Posted by rikfre | Report as abusive
 

I know David Walker to be a very educated and infomed person. Therefore I can only conclude from his writing he is being disingenuous or has alterior motives. Nothing written about how the US Postal Service has to maintain 2 Law Enforcement agencies and enforce thousands of Government regulations though countless investigations without reimbursement from the Government. Nothing in Mr. Walkers writing about the USPS having approx 37 Vice Presidents and a bloated and redundant management structure that ensures incompetance and inefficiency. Nothing in Mr. Walkers letter to address during his tenure as Comptroller General (before and after) the US Congress forcing added costs unto the USPS to collect the money from the USPS while making them raise postage. This is called a stamp tax. lol The US Congress has become nothing more than a legalized organized crime operation. The imposed approx 10 years ago a requirement for the USPS to pay Congress multi-billions per year to pre fund Health Care and Retirement pensions up to 75 years in advance. No other company or government agency in America is required to do this and if they were they too would be broke. If this requirement is good then why doesn’t Congress require all Government agencies to be prefunded for health care and pensions? I could go on and on about the “real” facts that Mr. Walker and so many others omit from their writings and positions. Mr. Walker gives the “special panel on the Post Office for the National Academy for Public Administration” a plug but omits that the “last leg” he speaks of is the Letter Carriers. Mr. Walker skillfully omits that a former Officer of the National Letter Carriers Union is also affiliated with the panel and the intent is to leave the Letter Carriers unionized while contracting out all others. Sounds like a “sweet heart” deal. If contracting out is so good Mr. Walker then why not the whole of the pie?

Posted by BarryPainter | Report as abusive
 

Oh come on. You know what’s going on. Privitization.
The USPS was not designed to make a profit thus the low rates. Up until 2006 the USPS was able to break even. In 2006 the Postal Accountability Act was passed which requires the USPS to prefund retiree health care benefits for the next 75 years and do so in 10 years. Really! Prefund for people not even born yet! The funds now have in excess of $44 billion, enough to sustain retirees for generations to come.
The USPS pension funds are estimated to be overfunded by $75 billion dollars. Again enough to cover workers for years to come.
The problem is this money goes into the U.S. treasury. The USPS has requested some of this money back to help with operation cost but so far they have been denied.
So, this whole crisis is manufactured by people who want a piece of the postal pie.
There are 8 million people that work in the mailing industry. The demise of the postal service would have a huge effect on the economy.
If you all hate the postal service don’t use it. Pay $15.00 or whatever to mail a letter with UPS or FedEX. By the way 30% of their packages are delivered by the USPS.
Finally, most USPS employees will retire under FERS and will not come close to receiving 80% of their pay. And if you are required to pay into a retirment system you should expect something when you retire. What about all those employees who paid into the system and do not finish their years of service. Where does all that money go?
People try educating yourselves. savethepostoffice.com

Posted by raineday33 | Report as abusive
 

@AZreb…Here’s 46-cents. Can YOU get it from NV to AZ for less? @Handdbook…WRONG!! PO cicilservice retirees cnnot retire @ 80% until achieving 41 YEARS and NINE MONTHS of completed service—Check your facts, before you mouth off. And, this Reuters story doesn’t deal with half of the U.S. Postal Service story/position. Keep current with all postal info./articles via postalnews.com or nalc.org.

Posted by longtimecarrier | Report as abusive
 

Handbook…if you had a brain, you’d be dangerous. Civil service employees receive an average of 1.8% per year of service, with penalties for early retirement. FERS receives nowhere close to 80 % in any scenario. Be informed when you post. My grandmother once said, ” if you’re stupid, let as few people know as possible”

Posted by pnz1113 | Report as abusive
 

To Handbook-

No, postal workers cannot retire with 80% of their pay at 30 years. One has to have 41 years, 11 months service to qualify for 80%. Your information is wrong. And that is ONLY for those covered under the old Civil Service Retirement System, which was abolished in 1984 in favor of the Federal Employees Retirement system. I retired under FERS with 28 years service, including my military time. My retirement pay is just at $16,000.00 a year, hardly outrageous, and certainly not 80% of my pay. Please check the facts. Thanks.

Posted by wildwilllie | Report as abusive
 

I think what the scary part of this article is that the author, the head of the GOA, has his facts wrong. The USPS defaulted on 2 payments for the retiree benefits and in fact lost 3.1 billion dollars. Not 10 billion.

The USPS is required to prefund their retirement fund 75 years in advance. They are required to fund a retirement for future employees who are not even born yet.

Does the USPS need some tweeks? Yes it does. Until the federal government realiizes that the PO is not the golden egg that it was at one time and that they can’t continue to pilfer funds from them with impunity, nothing is going to change. The USPS is not at fault, congress is. Tell them to fix their mess!

Posted by Trick13 | Report as abusive
 

Most Americans don’t realize that the USPS is better and cheaper than post offices in other countries. What they need to do is to increase the price of first-class mail. Among other things, when DVDs go out of style, and Netflix moves to 95% streaming services, the USPS won’t be able to subsidize the rest of its business with Netflix revenue.

Posted by Bob9999 | Report as abusive
 

I was wondering how it was possible that the USPS could be in such a hole but recently was given an indication. I went away for 2 months and asked my local PO to hold my box mail as it would be overflowing by the time I returned. No problem except that when I came back my box was closed for nonpayment and all mail returned to senders. Why wasn’t I warned of this possibility beforehand? Why didn’t they take into account that mail was being held for an absent box owner and allow for their return to take care of business? The clerk acknowledged the inherent idiocy of this policy but stated she could do nothing as the system was “automatic”. Also, to rub salt in the wound had to pay a $20 fine called a handling fee to get my box reopened. Any successful modern business acknowledges customer care as paramount to its viability. The USPS has flunked out with a callous disregard for the people that pay its bills.

Posted by buddy4 | Report as abusive
 

There’s one big problem with this ‘article’. It’s a lie. I use that word as Mr. Walker promulgates talking points he must know to be false given the positions he’s held. The Postal Service is not in trouble. Their only red ink is that which was created by the passage of PAEA by Congress in 2006. The federal government has used this to divert billions of postal monies into the US Treasury to use as its own bailout. How can it be considered borrowing when it’s the Postal Service’s own money, Mr. Walker?
The USPS isn’t remotely like the federal government. They don’t receive any tax monies and haven’t for over 30 years. They haven’t dug any hole, but are being buried in a mountain of red tape created solely by Congressional legislation to place them in exactly the situation they find themselves in now. The government has required them to fully fund their retiree healthcare (PSRHB) for 75 years, through 2081, over the span of a decade. The federal government doesn’t prefund its retiree healthcare at all.
The deficit he speaks of is entirely fictional. Over 83% of it is due to the prefunding of PSRHB. The $40+ billion currently in the fund is enough to pay for all past, present and future retirees currently working for the USPS. It will be fully funded within 20 years via interest accrual alone. They also fund civil service and federal employee retirement systems (CSRS and FERS) at over 100%. The Fortune 500 gold standard is 80%. The federal government currently funds its retirement systems at about 30%. Minus these legislative handicaps, the USPS would’ve remained in the black throughout the entire recession.
I will concede the postal service being at high risk due to ineffective, inarticulate and incompetent management up to and including the PMG who started off his postal career as a clerk in Pittsburg 35 years ago and now brings home more than the President of the United States in salary and compensation. The internet is a red herring and UPS and FedEx could not exist without very lucrative, multi-billion dollar contracts with the USPS, which process their combined annual volume twice a week.
Six day universal service is part of the charter of the USPS. The only ‘excess’ infrastructure is that necessary to maintain existing 1st class service standards. Postal Service corporate management has already begun to modify, euphemism for degrade, 1st class service standards insofar as mass facility closures and massive workforce reductions have necessitated doing so. They’ve already closed over 200 processing facilities in the last 6 years and eliminated over 40% of their workforce, 350,000+ good paying jobs lost, since 2000. Mr. Walker fails to mention this as does most of the rest of lame stream media which would most assuredly be crying foul if this were ANY other entity.
The last-mile concept, which they already provide for many UPS and FedEx parcels, is the least profitable for the USPS. What Mr. Walker proposes is to destroy an American institution which has existed since before the Constitution was penned and was mandated by the same to serve you. He wants to take your postal service, which processes over 40% of the world’s mail more efficiently and inexpensively than any other major post, and parcel out the most profitable parts of it in an ill-advised and wholly unnecessary attempt to privatize it.
What do Mr. Walker, Rep. Issa, Rep. Ross, PMG Donahoe and their like have to gain from this? The USPS supports a mailing industry which pumps over $1 trillion into the economy annually and supports over 10 million jobs. That’s an awfully attractive pie, cooling on the window sill, waiting to be plundered. It’s your postal service. Let them know that it’s NOT ok to pull it out from under you. Thank you.

Posted by murzak | Report as abusive
 

Postal employees can retire with 80% pay at 40 years, 8 months of revice IF they are a CSRS (Civil Service Retirement System) employee. The last CSRS employees were hired in 1984. The newer retirement system, FERS (Federal Employees Retirement System)pays between 33% and 40%.

Posted by leftleftleft | Report as abusive
 

What a great business model they have going here. Times are tough. Business is down. Revenues are down. What is the solution? Raise your prices and cut your services. That is what the USPS is doing.

This is a standard government agency reaction to this kind of problem. In other parts of the government if they start running out of money they simply raise taxes. They actually have the power to tell us that we need to pay more.

The USPS, however, is a business that competes against other companies. When their business goes south they should be doing what every other company does. They should attempt to become more competitive. They would do this by cutting costs so they can LOWER their prices or IMPROVE their service.

Every time they raise their prices they simply drive more customers away. Instead of making more money, they make less. Now that they are doing away with Saturday delivery there will be one less reason to use the USPS.

Yes, they need to do something. But, they are going about this bass ackwards.

Posted by Dragos111 | Report as abusive
 

Murzak is an example of a hopeless longing for the past – a post office in every village a mile apart, staffed by artificially highly paid low skill employees with gold-plated benefits. Not pre-fund excessive retiree benefits? – that must be done in the private sector – so this either is the federal government or it’s not. This is a bloated public agency – not “private” (who represents it when it is sued? – the US Attorney- just like any other government agency). With all of its built-in advantages, it is telling that it is not even a shadow of a competitor with FedEx and UPS.

Posted by SayHey | Report as abusive
 

Argumentum ad hominem, Sayhey.

Murzak gave arguments and counterpoints without resorting to it. Personally, I wish more commenters used as much intelligence and eloquence on the internet.

I can’t speak with much knowledge on this subject but I see plainly that there is more going on in the eventual dismantling of the USPS than just fiscal responsibility.

For one, what is going to happen to the pension fund that’s so overfunded when the last pensioner dies? That’s a lot of money up for grabs without employees to pay.

Just something to think about and maybe consider that there is more motives involved here behind the curtain regarding the fate of the USPS.

Posted by SciFiGuy | Report as abusive
 

As a commercial user we see other areas of concern with USPS that have not been discussed in this article or elsewhere.

We ship nearly 80% of our small packages by FedEx even though USPS is less expensive because of 2 main problems with USPS, namely tracking and accountability that play out in 4 specific problems we have found. The USPS tracking system is not accurate and there is no assurance that packages will be scanned and progress posted while en route. It is completely normal for a package to ship from our location in Michigan by Priority Mail to a client in California and never once have any tracking information available online until the package is delivered even though it passed through several DNC / routing locations along the way. The problem is even more pronounced when dealing with packages that are shipped by services such as Media Mail, Parcel Post (now Parcel Select) and even First Class package service. Their system is also limited information to the public while the service personnel at the local Post office can often see further entries not available through the phone system or the online tracking system. By contrast a package we ship by FedEx will be scanned at every stop along the route and the information from every scan is available online.

The second problem with USPS is that they do not guarantee a delivery date for any domestic service except EMS. By contract FedEx gives us a guaranteed delivery date for every package we ship regardless of the service used and if the package is not delivered by the guaranteed date the shipping cost is refunded in full.

The third issue we have found and closely related to the previous problem is delivery time. We can mail 2 identical packages from our location in west Michigan by Priority Mail on Monday – one going to a client in Detroit, Michigan 200 miles away and the other package to a client in California 2400 miles away yet both packages will be delivered on Thursday. those same packages if shipped by FedEx- the Detroit package would be delivered in 1 business day (Tuesday) and CA would be 5 business days.

The final problem is lost and damage packages. In the last year alone USPS has lost or broken the packaging and had contents spill out on no less than 14 of our packages – the only communication we get from USPS is a note letting us know we have dead mail and any recovered contents will be sent to the Mail Recovery Center – in the dozens of lost/dead mail packages we have had over the years we have never once been notified that our package was located – it is an unending process of filing forms with no results. Compare this with FedEx who in the last 9 years has never once lost a package we shipped and although we have an occasional damaged piece the FedEx process allows for prompt reimbursement and they take full responsibility for the damage when we have packed it properly – USPS will never take responsibility and filing a claim for a damaged package with USPS is a murderously painful and slow process.

For us the choice is largely based on the shipping and client experience – because FedEx will take responsibility for our packages once they have picked them up until delivered and their communication process is direct we choose FedEx over USPS most of the time – our only exception to using USPS is for those with a PO box or those outside the continental US. If USPS wants to gain back our business they need to show integrity and take responsibility for the packages we pay them to deliver and which they have accepted.

Posted by timbertown | Report as abusive
 

It’s this simple. The Constitution gives Congress power to establish postal services. But doesn’t allow Congress to create a monopoly mail delivery bureau, but that’s what USPS is. The post office is the only entity legally able to deliver mail currently. The Founders gave Congress power to establish a post office, but they also agreed private companies could compete against the post office. What we’re seeing now is USPS refusing to compete, succumbing to technology and free market forces just as any company would. The difference is USPS is really just government, so it doesn’t have to compete nor excel in order to be funded; Congress simply allocates it more tax money, but the deficits are no less real. The solution is to allow private market entities such as FedEx, UPS, and DHS to also deliver normal mail and compete against the post office. If USPS cannot compete it ought to be closed. If post office employees are the hardest working mail delivery personnel they’ll have no problem procuring jobs at the aforementioned private companies taking over mail routes. Further, federal taxes could be cut since USPS would dissolve, and citizens could keep more of their earnings, in turn paying lower mail delivery prices when actually needed to competing mail companies.

Posted by Federal-Farmer | Report as abusive
 

SciFiGuy – an ad hominem argument is aimed at someone’s character – no such argument appears in the post. To suggest that a position is rooted in the past, not the present, is not an ad hominem argument.

Posted by SayHey | Report as abusive
 

I do not know anything about the USPS operations but I have always been impressed with theire service. It’s amazing that they can deliver an envelope from my house, hundreds of mile to another house within a couple of days for less than $0.46.

I have no doubt there are many operational/expense/political issues that need to be addressed, but I am perplexed by this most recent stamp price increase….only $0.01? Why not increase price by say $0.08/pc? Would the general public be that deterred from purchasing stamps?

Posted by jeffmisc | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •