When Postmaster General John Potter told U.S. News back in September that the best way to get the U.S. Postal Service back on its feet was to cut back service to five days, it seemed like a distant and not-too-pressing eventuality. But with the USPS on track to lose more than $7 billion next year and hundreds of billions more in the coming decade, Potter and the management team launched a reform campaign this week. It's designed to win support in Congress and among the public for shuttering post offices, raising postal rates, cutting home delivery service to five days a week, and shrinking staff.
The financial hole is so deep that a single strategy for balancing the books would be woefully inadequate, experts say. As a result, the USPS is pushing to make numerous cuts at the same time. A UPS review found that "revenue and mail volume projections point to a continuing and dramatic losses in the billions. If the Postal Service takes no action, it could face a $238 billion shortfall by the year 2020." The USPS lost $3.8 billion last year alone as mail volume fell 13 percent.
In addition to rising healthcare and retirement costs for employees, the prime driver of the cost overruns has been a the shift to electronic mail, a trend that has been evident for more than a decade. Five years ago, the postal service handled more than 200 billion pieces of mail, but the figure is projected to fall to about 150 billion pieces by 2020, the steepest volume decline on record.
Critics have long charged that the post office has been unwilling to face the realities that mail volume will not return to past levels and that the shift to electronic mail represents an existential threat to its business model. Potter rejected that criticism. "No one's at fault," he said Tuesday to a group of congressional and postal union officials. "Historically, you could set your watch by the volume of mail we received on a given day."
Shuttering post offices is a delicate business, perhaps because the mail service is one of the most trusted government institutions with voters. Congressional representatives in particular are loathe to see them vanish from their districts. Indeed, Congress scuttled a proposal last year to close thousands of low-performing post offices to reduce costs.
On Tuesday, Potter said that any closures will be balanced by expanded online and kiosk offerings in places like supermarkets, pharmacies, and other retailers. As to cutting Saturday delivery, "if 70 percent of the American population tells us in surveys that they can live with five-day delivery, we have to do it," Potter said. He said that any price increases, meanwhile, would not come before January 2011 and that they would be less than double-digit hikes.