Postal Service’s Congressional Fans Are Killing It

Top managers at the U.S. Postal Service are desperately trying to save their organization. Members of Congress who argue that the nation cannot persevere without its accustomed mail service seem to be trying just as hard to kill it.

This makes no sense at all, but then, neither does anything Congress has to say about the Postal Service.

Facing increasingly dire straits as costs rise and the volume of mail plummets, the USPS has wanted to cut mail delivery to five days a week for some time. Postmaster General Patrick Donahoe was discussing the move over a year ago. His predecessor, John E. Potter, unsuccessfully asked Congress for authority to do so back in 2009.

As my colleagues and I have discussed in this space repeatedly over the past few years, the Postal Service faces massive fiscal challenges, fueled by the rise of the Internet, the recent recession, and Congress’ requirement that the agency pre-fund its employees’ substantial pension plans. The service’s 2012 annual report shows net losses of $41 billion over the preceding six years; net losses for fiscal 2012 alone totaled $15.9 billion. First class mail revenue continues to decline (by 3.9 percent last year), despite rising postal rates. Revenue is falling faster than the Postal Service has been able to cut costs. More drastic changes are inevitable.

Last month, the USPS went so far as to announce a firm plan to end Saturday mail delivery in early August, though six-day delivery of packages would remain in place. The American public seems to broadly accept the prospect of reduced mail service, though, as you might predict, the postal unions have led resistance to the idea. The change is expected to save around $2 billion annually if implemented as planned. It won’t solve the organization’s problems, but it is a significant step in the right direction.

What has followed the announcement is a confusing mess. Congress may, or may not, have ordered the USPS to continue delivering letters on Saturday – letters that virtually nobody needs to receive on that day anymore. Lawmakers asked the Government Accountability Office to review the proposal; the GAO now maintains that the Postal Service is obliged to deliver mail six days a week, and that retaining Saturday package delivery alone would not satisfy this obligation. The House Oversight and Government Committee seems to disagree with this assessment, based on its spokesman’s reaction to a New York Times article. The USPS’ legal position is, for the moment, murky.

The essential issue, however, is clear. Congress should get out of the way and let management do what it can to put the post office on a sustainable footing. Most of the public already recognizes that Saturday delivery of our bills, catalogs, real estate solicitations and birthday cards is unnecessary. And in the tiny fraction of cases where documents must be delivered on a Saturday, mailers can pay a premium for express mail via the Postal Service or for private options like FedEx and UPS.

The USPS is in desperate financial shape. Already, the Postal Service is consolidating post office locations and shortening window hours. Continuing Saturday delivery would be a waste of time, fuel and, most importantly, money. The Postal Service is supposed to run as if it were a private business, but it cannot do so while lawmakers continue to dictate its budget and operating procedures.

We do not yet know what useful role postal services will have in the remainder of the 21st century, but delivering junk six days a week certainly isn’t going to be it.

If anything speaks to the inability of Congress to make even the most rational decision, it is how it has handled the Postal Service in recent years. Legislators ought to get out of the USPS’ way immediately, before it’s too late. If they don’t, only a very expensive taxpayer bailout will save the Postal Service, which won’t make lawmakers popular with anyone at all.

About Larry M. Elkin 559 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

3 Comments on Postal Service’s Congressional Fans Are Killing It

  1. The PMG said that ending Saturday delivery would save the USPS $2 Billion a year in labor costs. When questioned by the Senate as to whether he had considered the cost of lost revenue or not, and I quote, he said “no”. A later study by the USPS estimated that they would lose $5 Billion in revenue if they end Saturday delivery. The Government has used the social security system like a piggy bank and has driven it to the point of bankruptcy. They have overcharged the USPS for it’s Civil Service obligation to the tune of $70 billion. They have overcharged the USPS for it’s Federal Employee Retirement Systems obligation by $13 Billion. They have used this money to subsidize their obligations to other federal employees. An obligation that would have been funded by the tax payers. So the fact of the matter is that the USPS Employees have subsidizing the tax payers not the other way around. The USPS doesn’t need the help of the Feds, they just need them to get out of the way.

  2. Congress and USPS management are both running the Postal Service into the ground. It is doomed unless major changes are made.

  3. The biggest financial obstacle the post office faces is the Republican poison pill: increase funding of its retirement plan 75 years into the future. What corporation does that?

    There are a lot of things the post office could be allowed to do that would increase its revenues – but the Republicans hate the post office and won’t allow any constructive changes.

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