US Congress Needs To Deal With the Postal Cliff

Art Sackler, of industry group Coalition for a 21st Century Postal Service, says US lawmakers worried about the economy urgently need to resolve problems with the Postal Service. The US Postal Service recently announced a rare bit of good news: holiday package shipping is expected to increase by 20% over last year. But, as USPS itself acknowledged, that gain is not enough to offset the continued loss in its lucrative First Class business.

This one piece of good data should not obscure the fact that the Postal Service is foundering, and that Congress must pass postal reform legislation.

The Postal Service is so close to the edge of liquidity, that any further unexpected decline in volume or other unwelcome surprise could jeopardise its ability to continue delivering the mail.

Those involved in the mailing industry know all too well the problems facing the Postal Service. The agency is too big and expensive for its current mail volumes, and must be streamlined. It is encumbered by no longer sustainable labour contracts, and a collective bargaining process badly in need of modernising; and it has been forced by law to overpay – dramatically – into government pension and retiree health care funds.

But those involved in the mailing industry also understand how important mail remains to the economy. The recently announced increase in package shipments is just one example of how online businesses have come to rely on the mail.

While mail volumes have declined in recent years, the mailing industry today accounts for 7% of our nation’s GDP. The Postal Service is a $1 trillion cog in the wheel of commerce, delivering statements, publications, prescriptions, promotions, packages, and much more. It also remains the most effective and affordable means of advertising for many small businesses.

Altogether, more than 8m private sector workers have jobs that depend on the mail, including the paper, printing and technology industries that supply mailers. And, with 160bn pieces of mail still in the system, try running the economy without it.

The industry has long understood the importance of the mail and the challenges confronting USPS. Since August, the Postal Service has twice defaulted on payments it owes the federal government totaling some $11bn, and reached its $15bn borrowing limit from the US Treasury.

The agency announced not long ago that it lost $15.9bn in FY 2012.

This should be more than enough to spur Congress to act on comprehensive postal reform. Yet, while the Senate passed a postal reform package last April, the House has not scheduled a vote on this critical issue.

The longer Congress waits to deal with this issue, the worse things will get for the Postal Service.

Not only does congressional inaction dig USPS deeper into a financial hole, it also erodes the confidence of postal customers, who in turn will shift more of their business away from the mail. It also increases the likelihood of disruptions in mail service, which could have an enormous impact on the global mail flow.

Lame duck

Congress is returning to Washington over the holidays for a “lame duck” session to address the looming “fiscal cliff,” but it should also use that time to pull the Postal Service back from the precipice. House leadership should work with their Senate counterparts to push through a reform package acceptable to both bodies and to President Obama, before Christmas.

Although there are a number of issues to be addressed, any reform package should include at least three main components:

• First, it should allow USPS more room to streamline. Service to every American everywhere must be maintained, but Congress should build more flexibility into the system, so that USPS can downsize where it makes sense, and reduce its personnel expenses that remain stubbornly at 80% of its overall costs.
• Second, Congress should help USPS get some money back from the Treasury. Postal overpayments into the Federal Employees Retirement System (FERS) now total nearly $13bn, depending on underlying assumptions. That money should be returned and used to fund early-retirement incentives for postal workers, pay back debt, and more. In addition, Congress should reform the excessive retiree health care prepayments that the Postal Service must make. These payments, higher than any other industry makes, should be amortised over 40 years instead of 10; that would cut USPS annual payments in half, but still fully prefund and not leave taxpayers holding the bag.
• Finally, the collective bargaining process between USPS and its unions must be reexamined. Under current policies, if USPS and a union cannot reach an agreement, they go to arbitration. Yet arbitrators are not required to consider the Postal Service’s overall fiscal condition when reaching a decision. This must change, both for the sake of USPS and businesses that depend on it.

It is disappointing that the House has not yet addressed postal reform, but there is still time. It is critical that discussions under way between the two Houses get to a compromise package before the “lame duck” session expires at the end of the month.

With USPS on a ledge overlooking a fiscal abyss, neither failure nor delay is an option. After all, it is not just the mailing industry that is at stake, but a key lubricant of the entire American economy.

Art Sackler is co-ordinator of the Coalition for a 21st Century Postal Service, a Washington DC-based lobby group for the mailing industry. After 30 years in legislative and regulatory practice in DC, he recently formed a new specialist postal regulatory practice in the US capital with law firm Ford & Huff, working with former USPS general counsel Hal Hughes and fellow postal policy specialist Bob Brinkmann.