Postmaster Delivers His Challenge to Congress
Sometimes to get the attention of Congress, you need to hit it right in the constituents. And that's what the U.S. Postal Service did today in announcing it would stop mail delivery on Saturdays.
Starting in August, the plan is, customers will continue to get packages and priority mail at home on Saturdays, and post offices will stay open, but no letters will go out. Postmaster General Patrick R. Donahoe says it will save $2 billion a year and allow the elimination of 22,000 jobs.
Most Americans will likely be just fine with waiting till Monday for their letters from loved ones. But Congress is under the sway of those who won't: A tepid reform bill passed by the Senate (but not the House) last year would have put off a Saturday change for two years. Unfortunately, Congress would need to sign off on a change of this scale.
Still, it's good to see Donahoe take on the postal-workers unions, which wrongly blame pension-funding requirements for all the service's ills, and Congress, whose efforts to micromanage change have ended up tying his hands. But the Saturday switch needs to be part of a much larger overhaul at Ben Franklin's old shop.
The USPS announced an annual loss of $15.9 billion in November, defaulted on billions in retiree health benefits and hit the cap on its ability to borrow from taxpayers. This is mainly because, in the age of e-mail, volume has cratered by 30 percent in a decade, particularly in first-class mail, traditionally the cash cow. (What the Internet taketh away it also giveth: The USPS says package delivery has increased by 14 percent since 2010, thanks in no small part to e-commerce.)
The service also struggles with a mandate to set aside $5.5 billion in pre-funding for retiree health benefits each year, something the unions are quick to point out isn’t required of other government agencies or businesses. True, but the USPS isn't either an agency or a business -- with its private structure, quasi-federal employees (who are not required to pay into the civil service retirement system), monopoly on letter delivery and ability to borrow from Congress, it is a unique hybrid with peculiar rights and responsibilities. In any case, Congress and the service can negotiate a fix to the pre-funding problem -- as they did in the Senate bill last year -- but that won't end the crisis.
Getting into the black will require far more radical measures, including closing thousands of distribution centers and less-used post offices (or merging them with convenience markets and coffee bars), trimming the workforce by at least 100,000 jobs, having workers contribute more toward their health benefits and ending no-layoff-clause contracts.
Today's announcement shows that Donahoe is willing to buck Congress. But we'll have to wait on his comprehensive reform plan -- due in a month -- to see if he can deliver a real turnaround plan. The alternative, as my colleague Peter Orszag has pointed out, is true privatization.
(Tobin Harshaw writes editorials for Bloomberg View. Follow him on Twitter.)