The Worst Job In America

Postmaster General Patrick Donahoe might have the worst job in America.

He is supposed to keep the vast U.S. Postal Service from going broke, while 535 members of Congress limit his options and their constituents take their business elsewhere.

Donohoe is doing the best he can under the circumstances. Last week the Postal Service filed a notice with the Postal Regulatory Commission requesting approval to close more than half of its 461 mail processing facilities. This will effectively end next-day delivery for some first-class mail. Reuters reported that postal officials hope to save about $3 billion annually by shrinking their network.

The Postal Service also wants to reduce delivery from six days a week to five, close 3,700 post offices nationwide and make deep cuts in the agency’s workforce. But these are the sorts of changes that require congressional approval, which is unlikely to come until the Postal Service has its back against the financial wall – and maybe not even then.

Donahoe told The New York Times that lawmakers have been unwilling to grant his request, or to entertain alternative plans. He said, “What I need Congress to do is act now to help me on the things they can help me on.”

For now, Donahoe’s only ally might be the regulatory commission. If the commission approves his proposal, the changes will go into effect next spring. First class mail will be delivered within two to three days, instead of one to three. Priority and Express Mail will not be affected.

The Postal Service cannot continue as it has. The Times reported that the agency lost $5.1 billion last year. Next month’s increase to 45 cents for a first-class stamp will not come close to making up that gap. Donahoe’s proposals may seem extreme to some, but the situation warrants extreme measures. The agency, which does not receive federal subsidies, is supposed to be run as a standalone business. Genuine businesses, though, do not need permission from Congress before they can close little-used, money-losing facilities.

Congress, however, has never been willing to relinquish its veto over Postal Service management decisions. The most stubborn lawmakers are those who represent rural states and districts, who complain that private delivery services and the internet cannot meet the needs of their isolated constituents, and that small towns that lose their post offices might as well be declared ghost towns. Yet those rural lawmakers see no reason why their constituents should pay the true costs of the level of postal service to which they feel entitled.

So Congress continues to demand results from Donahoe while it refuses to let him take the cost-cutting steps that any sensible manager would make. It would hardly be the end of the world to have mail delivered only five days a week. Slower service would mainly hurt publishers of daily newspapers and DVD-by-mail services like Netflix (NFLX), not private citizens who vote.

What will happen if Donahoe is prevented from doing what he needs to do? Well, the Postal Service could go out of business. Presumably the powers that be will not let that happen, which means a federal bailout is probably in the Postal Service’s future, as I observed in this space nearly two years ago. It may take a healthy dose of taxpayer money – at a time of general budget austerity – to generate enough public concern about postal costs to force Congress to allow the Postal Service to put itself back on firm financial footing. To preserve his own sanity, however, Donahoe will have probably handed his thankless job over to someone else long before then.

Nothing much is likely to happen in the near future, while the Postal Service continues to muddle through more multi-billion-dollar annual losses. The agency can raise the cost of stamps, postpone payments to its employee pension plan, and close sorting facilities well out of the public eye. But these steps will just paper over the problem while Congress continues to make the Postmaster General’s job a waking nightmare.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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