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David M. Walker: Time to save the postal service
February 07, 2013
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You may not know this, but the US Postal Service (USPS) raised the price of a first-class stamp this past weekend — by one penny, to 46 cents. It also introduced a “Global Forever” stamp, which can be used to send letters anywhere in the world for $1.10.

My advice: stock up on “forever” stamps. For while a one-cent increase in regular stamps might not seem like much, if the USPS doesn’t get its act together, we’re likely to see far higher prices in the future. Though there are now limits on postage increases, the related financial maths doesn’t come close to working over time.

The Postal Service is in trouble. The agency is bleeding red ink; has hit its authorised borrowing limit with the Treasury; and is unable to make its scheduled retirement funding contributions. Something has to give – and must this year.

Sound familiar? In so many respects, the USPS is a microcosm of the federal government — two entities in desperate need of fundamental transformations that will make them more focused on the future and financially sustainable.

Like the federal government overall, the USPS has dug itself a very deep hole. In fiscal 2012, the USPS experienced an operating deficit of almost $16 billion on revenue of about $65 billion. Granted, this deficit was exacerbated by the fact that the USPS was supposed to make two larger-than-usual retiree health benefits payments last year. But it didn’t pay either. Even if you subtract these additional scheduled payments, the Postal Service would have still run a deficit of more than $10 billion. Most important, without significant legislative and operational reforms, the financial situation will only get worse. These problems have been a long time coming.

I first got involved in the Postal Service’s challenges when I was the US Comptroller General, heading the Government Accountability Office (GAO). In 2001, we put the USPS on our “high risk list,” which highlights areas of government susceptible to waste, fraud, abuse or mismanagement and in need of reform.

I testified before the House Government Reform and Oversight Committee, explaining why we added it to the list. There were many reasons, including the fact that the Postal Service’s business model was designed for an era before the Internet and many other means of expedited physical delivery (FedEx, UPS, DHL). I held up my BlackBerry to demonstrate this, saying that when it came to the future of the Postal Service, “this was their competition.” Many members of Congress were perplexed by my assertion. But they understand it now.

This mounting competition is only one challenge. Others include excess infrastructure in connection with post offices and distribution centres; the costs of a six-day universal service requirement, along with huge and rapidly growing unfunded retiree healthcare obligations. The list of problems is long. Unless the business model changes, all who use the USPS will feel the impact in the form of higher prices and fewer services.

I recently agreed to serve as chairman of a special panel on the Post Office for the National Academy for Public Administration, along with four other academy fellows. We are reviewing one specific proposed reform to the USPS business model — the “last mile” concept. Developed by four authorities on the Postal Service, it would largely limit USPS activities to delivery of mail from a post office or other facility to the final location. All other services would, in essence, be outsourced. The panel is charged with considering this proposal and providing comments on it by mid-March. We also plan to offer other possible reform options and will examine various other challenges that need to be addressed, including which of those can be handled through existing executive authorities versus those that require legislation from Congress.

Regardless of our review, the truth is that the USPS, like the federal government, is on an unsustainable path. We hope our work will help spur an informed and expeditious debate in Congress on needed USPS reforms. We also hope it will also serve as an impetus for a long overdue independent assessment of the organisational structure and operational practices of the federal government as a whole. This needs to happen sooner rather than later because time is working against us. Meanwhile, I’m going to buy a lot of those forever stamps.


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