What is Going On with the Postal System?

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With the advent of email, online shopping, iPhones, iPad, Amazon, and mobile devices, the market place for written communication via the postal system has clearly diminished. But what is irksome, life is about adapting to changes especially using technology so apparently the postal system didn’t keep up. USPS has a $20B budget gap which drives their plan to eliminate Saturday mail delivery to cover their shortfalls. The package delivery including mail-order medicine and express mail would continue on Saturday.

In the electronic payments world at Cash Flow Solutions, Saturday mail is important with lots of correspondence arriving from financial institutions. And yes, we actually have staff working on many Saturdays opening mail and processing financial items. It makes us more efficient on behalf of our clients, and gives us a head start on our busy Monday mornings.

I listened to the Postmaster General Patrick Donahoe’s speech on MSNBC about their  current financial instability, how five-day delivery would increase revenues of $2B annually by eliminating 45M work hours and reducing transportation costs. He openly admits that USPS has not responded well to the communication change from first class mail to e-commerce, but blamed it on their lack of flexibility due to government regulations. He disparaged postage stamps as their only source of revenue, complaining that they aren’t allowed to impose taxes on them.

Donahoe drove his desperation home noting that last year’s loss was $15.9B. At one point, in October, they had 4 days of cash on hand which gave them zero borrowing authority. He says the postal service has been reducing costs since 2006 resulting in a reduction of 193K employees through attrition and $15B in reduced costs through lower administrative expenses, elimination of mail routes, and consolidation of post offices. Unfortunately, their budget efforts weren’t enough.

Donahoe remarks that a survey showed 70% of the population supports the reduced delivery given the financial instability of the postal system. Personally, I don’t believe that statistic. There are many others that say Donahoe has greatly exaggerated the $2B a year savings generated from a five-day delivery. Fredric Orlando in a USA today editorial said – - On the merits, it’s a disastrous idea. The postmaster general proposes trading 17% of service for 2% savings – an irrational business plan.

The next statistic is what I call a WTF moment, because American citizens are getting screwed. Orlando said that 80% of the debt has nothing to do with the inefficient postal operations, but rather a ridiculous 2006 congressional mandate to pre-fund retiree health benefits, something no other agency or company is required to do. In fiscal 2012, the mandate accounted for $11.1B of a $15.9B debt. THIS is just a reminder that nothing is as it seems with the government, and that we must dig deeper to find the real culprit.

The Postal Regulatory Commission warned that the proposed 5 day delivery would impact the elderly, rural communities and small businesses which create more than two thirds of the jobs in our nation. The good news is Donahoe does not have the sole authority to make this happen, and the really good news after I wrote this, Congress put a halt on the five –day delivery

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