U.S. Postal Service’s Chronic Woes

Philadelphia Daily News

The Postal Service recently announced it would seek to raise stamp prices to 46 cents in 2011. The agency claims the 4.5-percent rate hike is necessary to help cover the nearly quarter-trillion-dollar shortfall it faces over the next 10 years.

USPS may enjoy a short-term bump in revenue thanks to the increase, as consumers begrudgingly shell out an extra 40 cents for a book of stamps. But continued price hikes will only accelerate the decline in mail volume that the agency has been battling for years. Coming up with the hundreds of billions in savings necessary to save the service – and avoid a taxpayer bailout – will therefore require Congress to approve major changes to the agency’s business model.

Paramount among the changes Congress must consider is closing excess postal facilities. If the Postal Service is to survive, it must align its massive facilities network with the declining mail volumes that characterize today’s postal marketplace.

The Postal Service maintains some 36,000 outlets nationwide – more than McDonald’s, Walmart and Starbucks combined. These outlets include main post offices as well as smaller branches and stations that overlap geographically with the main units.

Historically, Congress has responded to the pleas of postal unions and rebuffed USPS efforts to shut underutilized post offices and sorting plants. But with the Postal Service facing its fourth consecutive year of multibillion-dollar losses, such undue congressional interference is no longer feasible.

Under current law, the process for closing a post office is daunting. From 2005 to 2008, the service closed just 96 branches and stations. Most recently, when USPS announced in 2009 that it was considering the closure of 3,105 locations, Congress quickly whittled that to fewer than 200.

Although the Postal Service has nominal authority over closures, Congress ultimately decides which facilities will stay and which go. Lawmakers have also introduced legislation that would raise the bar for closures by expanding comment periods, requiring impact studies and encouraging customers to appeal.

Members of Congress may believe they’re protecting their constituents’ interests by obstructing the closure of offices in their district, but as the USPS points out in its Action Plan for the Future, “postal consumers are ultimately required to absorb the costs of political decisions that keep redundant facilities open.”

Consumers are on board with efforts to streamline the postal network. At present, they can conduct post office business online or at more than 71,000 grocery stores, retail outlets and self-serve kiosks. And the availability of such facilities is growing.

Further, nearly 80 percent of Americans have said that they aren’t concerned about closing post offices if they can access postal services at retail locations.

As the possibility of a massive taxpayer bailout of the Postal Service looms, Congress must be part of the solution rather than part of the problem.

Two ways of doing so? First, each state’s congressional delegation could identify just two post offices per congressional district that could be closed. Maintaining such equity would help protect the decision-making process from political pressure.

Of course, this effort wouldn’t achieve much if Congress opted to close only the tiniest post offices and facilities. Lawmakers must acknowledge the severity of the service’s financial troubles and propose closures that will actually deliver real savings.

Congress could also consider letting post offices offer basic government services like driver’s license renewals. Contracting such work to USPS could help it cover the costs of maintaining its expansive network.

Congress may not be wild about the prospect of closing post offices, but the alternative is far worse – a multibillion-dollar taxpayer bailout. Lawmakers must acknowledge USPS’ perilous financial state and support efforts to help bring the agency’s massive facilities network into line with reality.

Robert R. Schrum is a Research Fellow at the Lexington Institute.