Business

The postman cometh not: On the imminent financial collapse of the US Postal Service

By Richard Poplak 6 September 2011

The US Postal Service is more than $9 billion in debt and counting. If it doesn’t slash its deficit, it could close shop for good. How did the mail carrier get mired in this much red ink? By RICHARD POPLAK.

On the staggeringly impressive James Farley Post Office building in New York, the following excerpt from Herodotus’ “Histories” is inscribed along the marble façade: “It is said that as many days as there are in the whole journey, so many are the men and horses that stand along the road, each horse and man at the interval of a day’s journey; and these are stayed neither by snow nor rain nor heat nor darkness from accomplishing their appointed course with all speed.”

This is a description of the courier service of ancient Persia, a system of carrying messages that was ceaseless and brutally efficient. Herodotus cited this as one of the primary reasons for the Persian Empire’s regional dominance. Information and communication were commodities, even in the days of swords and sandals.

In the context of the US Postal Service, the inscription has become a creed, which is often falsely cited as, “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds”. This was the rallying cry of the American century when a vast nation linked itself, not just by rail and interstate highway, but by a reliable mail service that operated through crisis after crisis, stalwart ballast of the “Dream”. The service’s vaunted efficiency reminded America that whatever disaster came down history’s pipe, its mail carrier would be there to deliver the news.

Or maybe not. According to Patrick R Donahue, the postmaster general, the mail service is on the verge of defaulting on a $5.5 billion payment to its employee health benefit fund. If the payment isn’t made next month, then the service has a very real chance of shutting at some point in the next year. Republican-led Congress, as we’ve learned, has no appetite for bailing out anything or anybody anymore, and will be especially resistant to buoying up an agency that counts labour costs as 80% of its budget. Indeed, the postal service is America’s last union paradise, with some of the most generous pay packages, retirement and health benefits and no-layoff clauses to be found outside of the 1970s.

By comparison, labour costs FedEx about 32% of its budget. Courier companies share other high tabs with the Postal Service, including the rising price of fuel, which has had a crippling effect on the industry. The postal service is also forbidden by law to increase the price of postage stamps higher than the rate of inflation. In other words, it has become a metaphor for modern America: an institution that can no longer afford to operate in the manner in which it was set up to operate.

This year, the service will deliver 167 billion pieces of mail (down 22% from five years ago). In 10 years, that number will drop to 118 billion. Electronic mail and the web have obviously destroyed the growth of the service, but because of ironclad union contracts, it has not been able to respond by reducing its manpower or its labour costs.  Snow nor rain nor heat nor gloom of night may not stop the postal service, but ideology certainly will. So, what happens next?

Increasing revenue, especially with the spread of the Internet, seems unlikely. Donohue has plans to sell advertising on the side of trucks, and to do last-mile deliveries for FedEx and UPS. But very simply, the service has to cut costs. With a $9.2 billion deficit looming at the end of the year, small fixes—like recovering the extra billions the service insists it has dumped into retirement funds—aren’t going to do the trick. It is also hamstrung by the fact that it is legally obliged to deliver mail to every last address in America, no matter how remote.

Thus the downsizing shall begin. Donahue hopes to slash 220,000 jobs in the next 10 years, shut post offices and get rid of more than half of all sorting facilities. The service will ask Congress to kill its no-layoff clause and allow it to cease mail delivery on Saturdays. These requests will probably pass, even though there is vigorous Republican opposition to the Saturday initiative. Less forthcoming, however, will be any bail-out funds. Donahue is on his own and he has a fight coming from the unions which will argue that it is illegal for him to scuttle a contract that was negotiated on fair terms.

Ah, the nostalgia for the postman! He who battles the elements to deliver news, fair or foul! He who belongs to a stable institution impervious to the vicissitudes of history! Sadly, those days are over. History marches on, and it seems as if Postman Pat (or Kevin Costner depending on your filmic proclivity) may be forced to sit the next round out.

We have further cost-cutting measure for Donahue’s consideration: Perhaps the postman should only ring once. DM



Read more:

Photo: REUTERS

    

Gallery
0