Wednesday, December 7, 2011

Who Killed the Postal Service?

The Postal Service just announced roughly $3 billion in service cuts that will slow down the delivery of first-class mail for the first time in 40 years. Starting in April, it plans to shutter more than half of its 461 mail processing centers, stretching out the time it will take to ship everything from Netflix DVDs to magazines. One-day delivery of stamped envelopes will all but certainly become a thing of the past.

The announcement is just the latest sign of a sad and increasingly dire fact: the Postal Service is in shambles. This past fiscal year, it lost a mere $5.1 billion. In 2012, it's facing a record $14.1 billion shortfall and possible bankruptcy. In order to turn a profit, Postmaster General Patrick Donahoe says the agency needs to cut $20 billion from its annual budget by 2015. That's almost a third of its yearly costs.

How did it come to this?

The culprits include the Internet, labor expenses, and, as with pretty much every problem our country faces now, Congress.

The Postal Service as we know it today was created in 1970. The Postal Service Reorganization Act was intended to transform the mail system from a dysfunctional dumping ground for political patronage into a self-sustaining, independent agency. It was told, in other words, to act like a business.

Steps taken during the Bush administration are the reason why the once successful U.S. Postal Service is currently in financial trouble. Sam Seder takes a look at the Right Wing cause to privatize the mail and destroy a U.S. institution.

But the politicians never really let it. The Postal Service doesn't receive any taxpayer dollars, funding itself entirely through customer revenue. But it still has to deal with Congress as a micromanager.

The Postal Service's current woes are due in large part to Congressional meddling. In 2006, Congress passed a new law requiring the agency to pay about $5.5 billion a year into a trust fund for future retiree pensions.

When revenues were rising, the idea might have seemed reasonable. But the timing was exquisitely bad. Now that the agency is in the red, the pension burden has helped to force drastic measures like the ones we've heard about today.

The Postal Service is begging Congress to let it recoup some of those prepayments, as well as give it more flexibility to manage its business. But, surprise surprise, gridlock could doom its efforts. Separate bills have passed House and Senate committees that would try to help the Postal Service avoid bankruptcy. But the two pieces of legislation have significant differences. For instance, the House version would let the post office end Saturday deliveries immediately. The Senate version forces the Postal Service to wait two years and try alternative cost-saving measures first. It's unclear if the two chambers will reach a compromise.

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