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Editorial: Post office must find new ways to cut costs

Fri., Aug. 28, 2009

When e-mail caught on, U.S. Postal Service offerings came to be known as snail mail. But delivery wasn’t the only thing that was slow; so was the feds’ reaction to modern realities. Because of that, the Postal Service will be $7 billion in the red when the 2009 fiscal year ends on Sept. 30. The same deficit is forecast for 2010.

The service is supposed to be self-sustaining, but the rapid adoption of e-mail has resulted in a dropoff in demand. Use of snail mail had plummeted by 20 percent since 2000. In the third quarter of this year alone, there was a 14.3 percent decline in business from the previous year. Birthday cards, personal letters, tax returns and billing have all been transformed by the digital age. The Postal Service is hardly alone in suffering from the effects of high technology. Newspapers and other industries have suffered financially, too, but those businesses have the ability to change and adapt. The Postal Service, meanwhile, is saddled with no-layoff contracts, gold-plated benefits packages and mandates that future pension benefits be financed upfront.

As a result, about 80 percent of revenues go toward compensation, compared with less than 50 percent at competitors such as FedEx and UPS, according to the Wall Street Journal. The Postal Service has lost money every fiscal year since 2005-2006. The continual rise in stamp prices has outpaced inflation, but it hasn’t been enough to offset the drop in demand.

Simply put, the nation no longer needs the traditional Postal Service. Arguments that it will bounce back when the economy improves understate the effects of slackening demand and the fixed costs of labor and facilities.

Belatedly, the Postal Service has announced buyouts aimed at reducing the work force of more than 600,000 workers by up to 30,000, for a savings of about $500 million a year. It’s a small step in the right direction, but the service will need to do much more to sustain itself. Congress has been called upon for bailouts, but it ought to impose bold moves that would return the service to sustainability.

For one thing, the feds must insist that layoffs be a part of the next contracts. Also, a benefits package that is the envy of other government workers must be pared. For another, Congress needs to loosen its control and let postal executives try creative approaches to bolstering the bottom line. If that means shuttering offices and ending Saturday service, so be it.

While rain, sleet and snow may not have stopped the delivery of mail, the rise of the digital age has made that mission less important. The country faces massive deficits already and can ill afford to bail out such an inefficient and dated operation.