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Next Bailout Candidate: The Letter Carrier

“Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds,” reads the inscription on the James Farley Post Office in New York City.

But, while weather and darkness may not halt the movement of the mail, economic realities might.

The U.S. Postal Service is supposed to run itself as a self-supporting business, but the political powers that be in Washington refuse to let it face the facts of business life — especially the fact that six-day mail delivery no longer makes economic sense.

Postmaster General John E. Potter asked Congress last year for authority to consider cutting back to five-day delivery. Though Saturday seems like the obvious candidate to be cut, Tuesday might be a more logical day to drop since the volume of mail delivered on Tuesdays is already low. It also is possible that different routes would have different delivery schedules, if only the Postal Service really could control its own financial destiny.

While postal customers might be willing to accept cutbacks, particularly if it means reducing the pressure for rate increases, the law gives Congress and the administration the last word, and they are less likely to approve. In spite of Potter’s request, President Obama’s proposed budget for fiscal 2011 requires “that 6-day delivery and rural delivery of the mail shall continue.”

The volume of mail delivered by the Postal Service has declined nearly 13 percent over the past year, dropping from 203 billion to 177 billion pieces between fiscal 2008 and fiscal 2009. As a result of the slowdown, the service had a net loss of about $3.8 billion in 2009, according to its annual report. The deficit would have exceeded $7 billion had it not been for federal legislation that lowered the Postal Service’s required payment to its retiree health benefit trust fund.

The rise in electronic communications has been depressing demand for first-class mail service for many years. As early as 1999 some were already speculating that, as customers began to pay bills online, the Postal Service might have to cut its number of delivery days.

The recession compounded the Postal Service’s problems by cutting into the demand for parcel post services. With both businesses and individuals buying less, there was less for the Postal Service to deliver. Potter told a Senate panel in August that the recession had left his agency buried under costs that would be “insurmountable” without a substantially changed business model.

Cutting down on delivery days is the most reasonable way for the post office to get its budget back in balance. “We are delivering fewer pieces of mail to a growing number of addresses,” the annual report noted. The Postal Service has estimated that doing away with one day of delivery would result in $3.5 billion in annual savings. A separate study by George Mason University gave a more conservative estimate of $1.9 billion, still a substantial down payment on the service’s financial deficit.

Boosting prices, on the other hand, would only further reduce the volume of mail, making each delivery less efficient. A large price increase would therefore be counterproductive, according to Potter.

“In considering the structural changes that can produce the level of results that are necessary, we have concluded that reducing the frequency of mail delivery from six to five days a week can provide the financial relief that is necessary to restore the fiscal health of the Postal Service,” Potter said.

So why do elected officials seem bent on hamstringing the Postal Service until it has no choice but to try to tap the Treasury for a handout? Because voters might not pay much attention if the post office joins the parade of businesses, from Fannie Mae to General Motors, that are on the public dole, but voters will assuredly notice when the mail carrier stops coming. Members of Congress, who like to be as inconspicuous as possible when left with two unpopular alternatives, will probably choose to keep the mail coming six days a week, even if that means a taxpayer-funded bailout of the Postal Service.

If this disturbs you, you can write your representatives in Congress and tell them to let the Postal Service do what it must do to survive. They probably won’t listen, but the Postal Service needs the business. Every 44-cent stamp counts.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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