Opinion: Postal Service needs to make tough decisions to cut its losses

Editorial – April 17, 2015
The U.S. Postal Service’s woes have been mostly out of the spotlight for a while, but they haven’t gone away. The agency’s most recent financial statement shows it is $15 billion in debt and still losing money. It lost $5.5 billion in 2014.

PAEA_cartoon2Apologists for the service often point to a congressional mandate requiring the agency to prefund retirement benefits as a source of its problems. Without that requirement, the agency would have a much better bottom line. However, it still would have mounting obligations to its current and future retirees. As a CNBC report on the myths of this obligation points out, Congress imposed the obligation in order to put the Postal Service on a more sound long-term fiscal footing.

The agency’s real problems stem from a rapidly changing market for first-class mail, which has been disrupted by modern technology. Writing recently for Newsweek, Kevin Kosar said only 5 percent or less of all modern mail is personal correspondence. People generally expect to find bills or advertising in their mailbox, and a growing number of people pay their bills online, instead.

As Kosar put it, the Postal Service today is primarily “a broadcast medium for businesses.” A huge investment is required to cart these ads around and deliver them door-to-door, and many people then throw them out unopened.

And yet the Postal Service cannot disappear. It has a particularly important duty to carry mail and parcels to rural areas where delivery is not cost-effective for private carriers. Governments rely on it for jury summonses and tax documents. Some states, including Utah, increasingly rely on it to allow people to cast ballots by mail.

These duties, however, do not preclude Congress from allowing changes that are necessary in order to reduce the agency’s expenses. Chief among these is the proposal to end first-class mail delivery on Saturdays (parcel service would continue). It may be necessary to discontinue service on some other days of the week, as well. Many postal centers should be shuttered.

Unfortunately, Congress has a say in these proposed reforms, and it has elected to do nothing. Many rural lawmakers believe their districts would be harmed, and too many smaller communities still view the existence of a local post office, with its canceling stamp, as a symbol of their own importance.

In addition, reductions such as these inevitably would cost jobs.

Others have suggested the Postal Service should begin offering banking services, such as low-cost loans to low-income people as an alternative to the high-interest loans offered by payday lenders.

That idea is packed with idealism but short on realism. Such loans carry huge risk, which is one reason private lenders have high interest rates. The agency could find itself in even worse shape under such a plan.

But as many companies have learned in industries that have been disrupted by modern technology, the failure to make changes today does not postpone the eventual day of reckoning that comes from falling revenues.

The same Congress that is reluctant to approve dramatic reforms today likely will be equally reluctant to approve a massive bailout when the agency’s losses become too large to handle. Lawmakers should let the Postal Service contract and reduce days of service. With email and Internet video communications becoming ubiquitous, it’s time to acknowledge that the world has changed.

via In our opinion: Disrupted by email and the Internet, the U.S. Postal Service needs to make tough decisions to cut its losses | Deseret News.

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