After six long months of posturing about postal reform, repeated misleading statements by Postmaster General Donahoe about losing $25 million a day; a default on a $5.6 billion payment; the modification of service standards; and the closing and consolidation of post offices throughout the country, Congress adjourned for summer vacation without enacting a single legislative remedy to address the self-described postal calamity. If things are so dire, one would have expected that relief would have been forthcoming and there were plenty of opportunities. The Senate passed flawed legislation that could have been used as a foundation to address previous Congressional mistakes in the passing of the 2006 PAEA and there were floods of politically driven editorials exposing what should be done and the cause of perceived financial difficulties. I am sure that every American now knows that taxpayer funds are not used to finance mail services, but despite this enlightening news as Congress departed Washington not a single legislative remedy has been enacted. Either the dire observations were overblown or Congress was derelict in its duties. I suggest that both observations are credible.
Postmaster general Donahoe, Senator Carper and Congressman Issa each magnified the challenges facing the Postal Service but could not draft a legislative solution that seriously addressed the long term interest of its viability. The remedies suggested ranged from a drastic realignment of the postal network, the virtual elimination of collective bargaining and political oversight with none of the solutions directly addressing the primary need of long term funding of postal services. The House legislation was long on cutting cost but derelict on the issue of major importance, the generation of new sources of revenue.
The romantics point to the historic use of postal services in binding the nation together, but electronic communications now perform that function and the need of the future Postal Service will change to link the unconnected and to average the cost of written communications that those who live in isolated communities do not bear the actual cost of transporting messages. Look in your mail box over the coming week and count the number of single piece first class items that you receive. Multiply your personal experience times 190 million residences and you get a picture of the mail mix and you can appreciate that the volume left from the residue of the internet, Facebook, and Twitter will not be sufficient to maintain a national network over time and the legal limit on rate adjustments beyond the CPI will guarantee that long term cost will exceed revenue.
As electronic communications continue to siphon off single piece first class mail, the only alternatives to replace the revenue used to fund the network and service is to restructure the rates that Standard mail shoulders a greater percentage of cost or expand the use of the network to spread the actual cost of delivering commercial mail over a wider range of services. The increase of rates has serious drawbacks because there is a tipping point where increases will affect volume so there is rational justification to continue to subsidize Standard mail because it spurs economic activity. But door to door delivery of junk mail does not generate sufficient revenue to pay the transportation; processing and delivery cost and maintain a national network. Delivery by UPS or Fed Ex or some new private sector entity cannot serve as an alternative, and without a government supported service that absorbs the actual cost in other services the entire direct mail community will be diverted to the existing alternatives of television, radio and the print media. The impact on the American economy would be dramatic as the entire postal community constitutes eight percent of American economic activity. Industries far and wide would be directly affected including postal, the paper industry, ink, small businesses, transportation, clothing, truck and car manufacturing, real estate and on and on. The 450,000 well-paying jobs would not be replaced with equally compensated employment so tax revenue would be reduced.
Congress missed an opportunity that was overblown and misdirected from the beginning. Any serious effort to address the long term issues facing the Postal Service begins with addressing the federal budgetary problem of crediting the USPS’ liability to fund future health care cost on the federal books. Of equal importance is the adjustment of payments to the retirement fund and refunding the overpayment. These corrections will buy time, but for the long term single piece first class mail will not be of sufficient volume to support financing 70% of the cost of a national network that is sufficiently staffed to provide reasonable services. Pressure will continue on postal employee wages, which is not a long term solution. Reducing wages to the minimum federal standard would not close the gap between the lost revenue from declining first class single pieces and the cost of operating a national network.
Rate adjustments above the CPI could buy an additional period of solvency but this alternative has limits of affecting the cost advantage of direct mail. Looking ahead 10, 20 and 30 years the only viable alternative to a financially healthy Postal Service over time is the expansion of the mandate. Additional streams of revenue must be generated and there are multiple options, although many would be resisted by private entities that already provide service. But that is the role of Congress, to provide for the universal interest of the country.
Despite the hoopla there is no immediate danger of revenue being insufficient to pay operational costs in the immediate future and the APWU and NRLCA contracts will provide some breathing room in the years to come as attrition replaces existing employees, yet these savings will be insufficient to close the gap over time and were a gross mistake by union officials for the purpose of “saving” the Postal Service because employee wage cuts are but one small piece of a combination of events that must be addressed. The tradeoff is wage cuts or rate increases; wage cuts or modification of discounts; wage cuts or return of retirement overpayment. Wage cuts or modification of health fund liability and most importantly, wage cuts or Congressional action to expand the USPS mandate. Well the wages have been cut and the future financial dilema is unabated. In the specific language adopted by Congress in the passage of the PRA, the statute required that the legislature fashion the funding of postal services omitting any mention that employee wages should be adjusted accordingly. In every national arbitration, prior to the Starke decision, distinguished arbitrators confirmed this responsibility; however given the opportunity Congress did not seriously address the long term future of the Postal Service and affordable written communications throughout the country. They fiddled and postured but failed and went home.