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

25 comments

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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