The United States Postal Service is limping along
This editorial first appeared in the Nov. 20 edition of The Orange County Register.
Forgive us if we don’t think it’s cause for celebration that the U.S. Postal Service on Friday, Nov. 15 reported a $5 billion net loss for its 2013 fiscal year – “a significant improvement over last year,” as our friends at the New York Times generously characterized it.
No, a $5 billion net loss isn’t as horrific as the record $15.9 billion loss the USPS posted in 2012. But it’s still pretty darn terrible. And it marks the seventh straight fiscal year that the postal service has finished in the red.
“We’ve achieved some excellent results for the year in terms of innovations, revenue gains and cost reductions,” Postmaster General Patrick Donahoe said, “but without major legislative changes we cannot overcome the limitations of our inflexible business model.”
We agree with Mr. Donahoe that Congress should scrap the postal service business model, which might have worked in the time of Benjamin Franklin, the nation’s first postmaster general, but is hopelessly out-of-date in the age of email correspondence, electronic bill paying, direct deposit, online tax payments and next-day package delivery.
These innovations, ably provided by the private sector, have proven category killers to the postal service.
Indeed, first-class mail volume has declined 30 percent since 2007. Mail-in bill payments are down an estimated 25 percent over the same span.
Nearly 90 percent of Social Security recipients get their monthly payments through direct deposit rather than by snail mail. Some 80 percent of tax returns are filed online. And more than 90 percent of large shippers use UPS or FedEx.
It’s because practically all of the postal service’s one-time profit centers have either been mostly overtaken by technology or mostly taken over by more efficient, cost-effective private-sector competitors that it has lost $45 billion since 2007.
Meanwhile, the postal service is staggering under the weight of its massive pension and health care obligations to past and present employees. So much so that, in August, it actually defaulted on a $5.6 billion payment into a health benefits fund for its future retirees, the third such default in as many years.
While Postal Service leadership over the years bears much responsibility for its financial woes, Congress bears at least partial responsibility for standing in the way of much-needed reform.
James Gattuso, a senior research fellow at the Heritage Foundation, points out that, even though the postal service is hemorrhaging red ink, lawmakers have not permitted such cost-cutting measures as consolidation of postal facilities and reduction of delivery days.
Indeed, the postal service estimates that the smallest 4,500 post offices each serve, on average, fewer than five customers per day, while taking in a daily average of $52. Meanwhile, Saturday delivery costs the postal service $2 billion a year.
Mr. Gattuso urges a batch of postal reforms with which we agree. They include lifting restrictions on closure of USPS processing centers and post offices, lifting restrictions on delivery times and schedules, and lifting service-level mandates (like door-to-door service).
Enactment of those reforms will hardly solve all of the postal service’s woes. But it’s a good place to start.