Feb. 14 (Bloomberg) -- President Barack Obama’s call for the U.S. Postal Service to end Saturday mail delivery and raise rates will drive away customers while not addressing needed cost reductions, some business users and U.S. lawmakers said.
Obama, as part of his spending plan released yesterday, proposed to let the Postal Service reduce delivery from six to five days a week by January 2013 and to return $10.9 billion it overpaid into a federal retirement account. The proposal was made to and not acted upon by Congress’s deficit-reducing supercommittee last year.
“Eliminating Saturday delivery should be the last resort, not the first choice,” Senator Susan Collins, a Maine Republican, said through a spokeswoman. “It would force businesses ranging from newspapers to home-delivery of medicine to explore non-postal delivery options. Once these customers leave the mail system, they won’t be coming back, and the Postal Service’s revenues would suffer another blow.”
A bill with sponsors including Collins and Tom Carper, a Delaware Democrat, would prevent cutting a day of mail delivery for at least two years. Obama’s proposal is in a bill sponsored by Darrell Issa, a California Republican. Issa also wants to require a financial-control board if the service defaults on obligations to the U.S. government and create a commission to speed up post office closings.
Both bills have been passed by committees.
Billions in Losses
The Postal Service has said ending a day of delivery each week would save $3.1 billion annually. The service has said it expects to lose $14.1 billion in the year ending Sept. 30, and according to Obama’s budget, it may lose $13.6 billion in its 2013 fiscal year.
Ending Saturday delivery would harm customers mailing pharmaceuticals and time-sensitive newspapers and magazines, said Gene Del Polito, president of the Association for Postal Commerce. The Alexandria, Virginia-based group’s members include Medco Health Solutions Inc., Time Warner Inc. and Conde Nast Publications Ltd.
“Businesses abhor uncertainty,” Del Polito said in a telephone interview. “So they will do what they can to try to create for themselves a predictable cocoon in which to operate. And in this case the predictable cocoon does not include mail. And that exacerbates Congress’s challenges.”
Rate increases will also push business customers away, said Art Sackler, coordinator for the Coalition for a 21st Century Postal Service, whose members include FedEx Corp. and Bank of America Corp.
“Raising postal rates won’t save the Postal Service; it will only hasten its demise,” Sackler said in an e-mail. “Higher rates will force companies away from using the mail, and push them into finding other ways to reach their customers.”
The Postal Service has proposed each of the changes Obama advanced as well as reducing its workforce by firing as many as 220,000 employees and closing post offices and mail-processing plants.
Obama’s budget didn’t address the facility closings or job cuts.
“It’s a political hot potato for them,” Del Polito said. “They don’t want to tick off a key Democratic constituency going into a national election.”
The Postal Service reported a $3.3 billion loss in the quarter ended Dec. 31, which is typically its strongest because of holiday-season mailing of packages and cards.
Most of the quarterly loss came from a U.S. law requiring the service to pay in advance for future retirees’ health-benefits costs. Obama proposed changing that payment schedule to account for fewer employees.
The package of postal changes would provide $25 billion of cash over the next two years and would result in $25 billion of savings over 11 years, Obama said in the budget plan.
The president’s proposal includes some provisions of the Senate proposal, Carper said in a statement. “We can’t let the Postal Service fail on our watch,” he said.
Issa, while praising the proposal to end Saturday delivery, said Obama’s package won’t make the service solvent. “Infusing the agency with cash and hiking postage rates without requiring USPS to reduce costs and realign itself to meet America’s changing use of mail is just buying a very small amount of time with a very big check,” he said in a statement through his spokesman, Ali Ahmad.
The House bill is H.R. 2309. The Senate bill is S. 1789.
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