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Sorting out the Postal Service

If the Postal Service is to survive without congressional largesse, it must be granted more autonomy, and then it must seize the opportunity to rethink itself.

September 17, 2011

Part public agency, part privately funded business, the U.S. Postal Service doesn't fully operate like either one. And therein lies a central problem that threatens mail delivery more than rain, sleet or any other weather condition. No longer subsidized by the federal government, the Postal Service nevertheless is micromanaged by Congress, which regulates its prices and how many days a week it must make deliveries. At the same time, Postal Service managers come running to Congress for relief when their own bad decisions have landed the service in trouble.

The Postal Service has been heading toward insolvency for years, largely because people increasingly use computers to communicate and pay bills, and partly because of unsustainable labor agreements. But neither politicians nor postal managers have acted as though there was any rush to address the problem. Now that the service faces a $5.5-billion bill for retiree health benefits, due at the end of this month, it's planning drastic cutbacks and seeking relief on a variety of fronts.

Federal law bars the service from embarking on new enterprises, such as adding banking services, and prevents postage prices from rising faster than inflation, an unrealistic restriction for an operation so dependent on gasoline. In addition, Congress has been unwilling to allow the Postal Service to save money by reducing delivery to five days a week. In other words, postal managers have been forbidden to take the usual steps — raising prices and/or reducing costs — required to balance the books. This week, Postmaster General Patrick Donahoe proposed halving the number of mail processing centers, which would slow first-class mail delivery by a day. In other words, customers would still get their mail six days a week, but not in a timely manner. What's the point?

To figure out a saner relationship with the Postal Service, Congress first must define its mission. If universal, six-days-a-week postal delivery is seen as a necessity for this country despite the ever-lower mail volume, then it is a public service that might have to be subsidized, though the federal government can ill afford it. If the Postal Service is supposed to survive on its own, Congress must give it more true independence. That means allowing postal managers to decide how many days a week to deliver, to set the rates and to look for innovative ventures such as Internet services that might redefine its mission for the next century. Congress hasn't permitted mail delivery to drop to five days a week, one of the changes sought by the Postal Service, but given the backup of private delivery services and the Internet, even less than five might be a more realistic number.

Lawmakers should review carefully the Postal Service request that it be allowed to recover money that it says was overpaid into retiree pension benefits. The service claims, perhaps rightly, that attrition has resulted in a smaller workforce, reducing future pension expenses. Postal officials also say that a 2006 law requiring $5.5-billion annual payments to retiree health accounts for a decade adds untenable costs to the operation. This might be true. But Congress must be sure that these accounts are adequately funded so that the federal government is not called on in future years to make up the difference.

Then again, not all of the Postal Service's woes have been caused by Congress. Labor costs consume about 80% of the Postal Service budget; the number is about 66% for the private United Parcel Service. And that has been caused in part by provisions in labor contracts that ban layoffs. In addition, all employees who perform the same job must be paid the same salary, regardless of regional differences in the cost of living. A decent wage in Southern California is more like a princely sum in many areas of the Midwest. The Postal Service negotiated these costly contracts; now it seeks permission from Congress to break its contracts by laying off employees.

If the Postal Service is to survive without congressional largesse, it must be granted more autonomy, and then it must seize the opportunity to rethink itself. It can't just cut its way to success, and if its rates rise too high — though right now, a first-class stamp is an extraordinary bargain — it will lose yet more business. As much as it needs freedom from congressional nannying, that also means taking responsibility for its own mistakes.

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