WASHINGTON -- George W. Bush had been in the Oval Office for six weeks when noxious leftovers from the previous administration belatedly landed on his desk. The nine governors of the U.S. Postal Service, seven of them appointed by Bill Clinton, on March 2 sent the new president this warning: "We are facing a Fiscal Year 2001 deficit likely to exceed $2 billion and a financial crisis that cannot be averted by management alone."
Prior to the change in administrations, there had been no hint of such a dire financial state for the government service used by most Americans. Indeed, the Postal Service last November was projecting a $150 million surplus for this year, thanks to a new rate increase that pushed a first-class stamp's cost to 34 cents. Now, the postal governors want yet another rate hike -- or else, cutbacks in service.
Rep. Dan Burton of Indiana, whose House Government Reform Committee oversees the Postal Service, is calling for basic reform of a bloated, dysfunctional agency in thrall to powerful labor unions. "The ability of the Postal Service to continue to fulfill its statutory mission is in jeopardy," Burton wrote President Bush last week. The president ultimately must consider whether to seek a privatized service for the 21st Century.
Since a 1970 act abolished the old Post Office Department, its successor agency is supposed to be self-supporting. But its present debt totals $12.9 billion, and an estimated $3 billion loss this year will push it over the $15 billion statutory debt limit (with an estimated loss of another $3.5 billion the next year). While the Postal Service is asking for a new rate increase to a 37 or 38-cent stamp and unlimited authority for future rate increases, it is threatening to recoup $3 billion this year by ending Saturday deliveries.
Burton has contended that the Postal Service's "first response to every financial shortfall appears to be to raise rates." Competition from the Internet and faxes does reduce postal revenue, but bigger problems are political: labor unions that maintain a fat payroll of over 900,000 and congressional insistence on keeping small post offices open (out of 40,000, about 26,000 lose money).
The Postal Service's claim to the president that "management alone" cannot cure its financial ills is contradicted by the General Accounting Office (GAO), the non-partisan congressional watchdog. Its report issued in January notes that postal productivity has increased only 11 percent over the past three decades. The GAO bluntly calls for a reduction in employees and an end to "decades of adversarial labor-management relations."
At a recent meeting of the Burton committee, freshman Rep. Butch Otter of Idaho asserted that "a lack of accountability and oversight has given the United States Postal Service free reign to stray from its core mission of delivering the mail." While it earns $50 billion annually from its letter mail monopoly, the service has sought additional revenue by trying to sell telephone cards, videos, T-shirts, neckties, baseball caps, stationery, greeting cards and advertising on mail trucks. The net result of such ventures last year: a loss of $85 million.
Otter last week wrote Postmaster General William Henderson about a Price Waterhouse Coopers report revealing that $1.5 billion is lost each year in processing "undeliverable as addressed" mail but adding that modern technology can save $1 billion. The Postal Service has resisted confrontation with labor unions that would result from such technology.
Burton is pressing for a postal reform bill that would attempt to impose price caps to control postal rates while offering incentives for greater efficiency. He also would like to move toward privatization by creating a private corporation to manage the service and giving postal employees a chance to own shares of the business.
That could prove a daunting project for President Bush, but the alternative of postal business as usual may be even worse. The answer may well be putting former Indianapolis Mayor Steve Goldsmith in charge of the Postal Service as successor to the retiring Henderson. He was brilliantly innovative and courageous in taking Indianapolis further toward privatization than any other city. Goldsmith might be the man to save Bush from going postal.