Congress Forces Post Office to Lose Money (And Reduce Service?)

The U.S. Postal Service is losing a lot of money. It is true. Some think it has to do with an ineffective, noncompetitive business model. But no so much, not really. It has more to do with a lot less 1st-class mail being sent (because of e-mail), excess infrastructure and capacity (from times when it was needed), and the role of Congress in creating onerous rules that force the Post Office to lose money! That, apparently, is also true. And then there is the plan to downsize to the point of materially reducing postal service to less populated areas. Hmm. From nbcnews.com:

Neither rain, nor heat, nor gloom of night -- nor, apparently, a $5.5 billion default -- will keep the U.S. Postal Service from moving the mail. The agency confirmed Wednesday that it has defaulted on a payment, mandated by Congress, to a health benefit trust fund managed by the Treasury. The agency said it will miss a similar payment due Sept. 30.  

The default will have "no material effect" on its operations, according to a Postal Service spokesman. "We will continue to deliver the mail, pay our employees and suppliers and meet our other financial obligations," the spokesman said. 

The default is a milestone in the long-running political dance between Congress and Postal Service managers over how to finance the delivery of mail to 151 million addresses, nearly 40 percent of the world's "snail mail" volume. Though its Capitol Hill critics complain that Postal Service should be made to operate "more like a business," Congress has created a set of rules that all but guarantee billion-dollar losses. 

---"$5.5 billion Postal Service default won't stop the mail," by John W. Schoen, nbcnews.com (8.1.2012

But how can this be? What kind of Congressional rules are we talking about here? Well, it has largely to do with a requirement that the Postal Service pre-fund retiree health benefits when private businesses are subject to no such requirement. But why should the Postal Service be required to provide retiree health benefits at all? Most private businesses no longer offer such benefits. That's the province of Medicare, or whatever reformed or alternative government medical coverage may replace it. nbcnews.com:

Those losses are almost entirely the result of the now-defaulted "pre-funding" requirement [of Congress] for retiree health insurance and other accounting charges, according to Ron Bloom, an investment adviser at Lazard who has advised the Postal Service on restructuring. "No other company in America, public or private, has that obligation," he said. "The Postal Service is losing about $75 million a month from delivering the mail. That's a problem, but a different problem than the billions we hear about. If we raise the price of a stamp by half a penny, they would be breaking even." 

The Postal Service faces other constraints. It is banned from setting up retail outlets, for example, that could generate profits to help subsidize delivery costs. Worse, it is barred by Congress from charging the full cost of providing the service it is required to deliver. "On the one side, (Congress) says, 'We want to you deliver a letter from the corner of Alaska to the far corner of Hawaii and we want to you do it for 45 cents,' which has nothing to do with the price of what it takes to get there," said Bloom. "On the other hand, (Congress) says, 'We want to you break even.'" 

Beyond the crushing burden of prefunding benefits, the Postal Service is grappling with a long-term decline in the volume of first-class mail -- 4 to 5 percent year -- as more communication shifts to the Internet. It's not unlike a transition in the 1970s, when the decline of railroads forced the Postal Service to develop a new infrastructure of sorting facilities, part of the reason Congress chose to establish the service as an independently funded agency, according to Robert John, a Columbia Journalism School professor who has written about the history of the service. 

"They built these large sorting centers that made it possible to distribute first-class mail in a day or two," he said. "That's one of the ways they could save money. They could no longer use all the facilities that they built out. Do we, as a matter of policy, need to get catalogs, advertising -- so-called junk mail -- in one day? Could we get it in three days? But then what about Social Security checks?"

But there is more to the story than that. The U.S. Postal Service is mandated by the U.S. Constitution--and the Congress has oversight responsibility for it. The availability, access and reliability of an interstate postal service was that important to the founding fathers; it was one of the first defined and required public goods.

Why is that important? Well, there is a plan to "right size" the Postal Service so that it will be profitable, but it apparently requires materially reducing postal service in less populated areas. Of course, at the time of the drafting of the U.S. Constitution, there were more sparsely populated and rural areas than anything else. But, within available means, they were to be served as well. And so we shouldn't be surprised that Congressmen representing those rural areas today have objected to a contraction of mail delivery services to their constituents. And so the stalemate stands. More from nbcnews.com:    

More recently, Congress has sidelined the Postal Service's efforts to cut costs. The agency this year unveiled a five-year plan to reach profitability that, in addition to closing low-volume facilities, would cut Saturday delivery and eliminate the requirement to prefund employee benefits. [So far, so good.] In April, the Senate approved an $11 billion cash infusion to avert a default, but delayed many of the proposed cuts for at least a year. The House is deadlocked on a bill calling for deeper cuts, in part due to opposition from lawmakers from rural districts where the cuts would hit hardest. 

Congress has come to the financial rescue repeatedly in the past, said John, and he thinks it's likely that lawmakers will do so again. The political fallout from inconveniencing millions of voters in sparsely populated areas will likely override philosophical opposition to what the agency's critics see as a "bailout." "I would think that congressmen, who for principled reasons are opposed to government intervention and who happen to represent rural districts, are going to be like a Christian Scientist with appendicitis when it comes to privatizing the post office."

And that's because postal service in the U.S. has been protected by the Constitution as a public good, by definition providing access to affordable service for all equally. All Americans have become accustomed to it, expect it and need it. To "privatize" its approach so that a "profit model" dictates contraction and constriction of its service charter and/or areas served, could significantly deny service to many--millions, apparently--who enjoyed it in the past, including many businesses. And if the elected representatives of those threatened service areas are unsuccessful in holding back the ideological "privatizers" in Congress, perhaps there is a Constitutional case to be made on behalf of those no longer well served.

It is yet another example of how little so many Americans--including so many elected conservative ideologues--really understand about the essential place and purpose of public goods that must be administered by government for the strength and welfare of society, and the benefit of individuals equally: the military, education, health care (as so many more now appreciate), and yes, the postal services, too. Cost-effective service, yes; unequal service or service denied, no.