USPS sees $8.5 billion loss, warns Congress it'll be broke by 2011

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/12/AR2010111205939.html

by percept • 16 years ago

55 97 16 years ago

muerdeme• 16 years ago

I suspect the board of governors got sick of dealing with the escalating costs of labor (fixed in arbitration with unions) and had to figure out a way to really get Congress' attention once and for all. They are warning about impending bankruptcy without even trying some of the drastic measures they had toyed with, i.e. no Saturday delivery. Those measures only would have delayed the inevitable, but this still smells to me like the leaders are sick of Congress passing the buck.

cosmicray2• 16 years ago

If the USPS dropped Saturday, it will have little effect on the back office side of business. Pretty much the mail volume will remain unchanged. The same number of printed bills will be handled, the same number of greeting cards, the same number of standard mail (what used to be called 3rd class or bulk/junk), and pretty much the same number of packages.

Due to the human interface issues, USPS will still have to maintain some semblance of Saturday retail window hours. In the small town where I live, retail hours have already been trimmed somewhat.

Removing Saturday delivery will save in manpower, and reimbursements for milage. To the best of my knowledge, rural carriers only work 5 days a week. So the 6th day (regardless of which day it is) is filled in via a substitute carrier. Those subs could see a drastic drop in hours of work.

But back to my original comment about back office operations... If you dumped Saturday, all the mail that would have been sorted on Saturday morning, will still be sitting there on Monday morning, waiting to be handled.

There may be savings here, but don't expect it to remove 1/6th the operating costs of the USPS.

HectorRamos• 16 years ago

USPS works 24/7 actually (my girlfriend works in one of their regional sorting facilities).

Mail is sorted throughout the whole week, if anything we might see less hours being worked by the sorters on Thursday and Friday when the Saturday deliveries are sorted out.

Keep in mind only Saturday delivery is being suggested to be dropped out, that's the end-of-the-line. You still have to sort at all kinds of upper levels (does this piece go to a zipcode within this state, or one of our territories, USVI, etc? And so on, until they get to the local USPS PO, which is the one which would handle the local Saturday delivery).

(Not that this disputes anything you said, just pointing out that mail will probably still be sorted the same way its being done right now)

fleitz• 16 years ago

"Congress has an obligation to ensure that effective solutions are implemented and taxpayers don't get stuck paying for a bailout," I wonder where Issa was when bailing out the banks for $2 trillion.

watchandwait2• 16 years ago

Issa voted against TARP

http://clerk.house.gov/evs/2008/roll681.xml

jbooth4• 16 years ago

Only because it was clear enough people were voting for it that he could pretend to stick to his principles. You think if it came down to him, he'd actually vote for total financial collapse?

jeromec6• 16 years ago

The bank bailouts appear to be widely unpopular. I can only guess this is because people don't truly grasp what was happening, or what the alternative would have been. My congressman was one who initially voted against TARP, and I communicated to him that he needed to change his vote. Like most politicians he is not an expert in economics or finance, and he didn't take kindly to what was essentially the Bush administration "telling us the sky was falling, and putting a gun to our heads." But the sky was falling. The economy was in a free fall with millions of jobs being lost monthly, the stock market tanking, and credit markets -- a crucial cog in our economy -- freezing up. If congress had not acted the financial system would have collapsed. We would now be in a real depression. Imagine how bad people say the economy is now, and multiply that by about 100. I'm talking millions unemployed, homeless, tent cities, crime, and a feeling of hopelessness pretty much everywhere. That would have been the alternative to not bailing out the banks. In that context I don't think many would oppose the bailouts.

Now, was the system set up incorrectly where we could end up in such a mess? Yes. But that wasn't the fault of any one politician or group of politicians at any one time. The problems leading up to the crisis built up in different ways over time. The financial reform President Obama has pushed through addresses some of these issues, for example, by allowing the government the power to break apart and unwind large "too big to fail" type entities without bailing them out with taxpayer funds. When you look at it this way, Congress and both the outgoing and incoming administrations did do what was best for the country, even if unpopular on the surface. This doesn't even get into the fact that a lot of that initial money has been, and continues to be paid back, and in some cases even turns a profit.

jonpaul• 16 years ago

I think there's a bit of FUD in your statements. I also believe that those who supported the bailout are the same who stood to lose the most i.e. the wealthy. I believe that the bailouts will only further encourage the same behavior and prolong the inevitable.

megaman821• 16 years ago

I don't think the government should have sat back and done nothing but the bailouts were not the right solution. I would have much preferred that they assisted in managing the bankruptcies than preventing/delaying them by throwing money at them. They should be breaking up all those mega-corps like Freddie Mac, Fannie Mae, and AIG, instead the same companies that got us into this mess are still around and as big as ever.

lionhearted3• 16 years ago

I'm not sure I buy the catastrophic collapse argument - it's an easy one to make. "Oh man, things would have been a lot worse if we hadn't done all that stuff we did."

Well, maybe.

But let's just say it's true for now. Even if that's the case, those organizations could have been liquidated and their assets sold off, perhaps with the key pieces under some sort of guarantee from the Federal Reserve or Treasury or "Bureau of Stabilizing Home Interest and Trust" or whatever feel-good label/acronym these messes are typically labeled.

The organizations that made bad bets should've been liquidated, even if you believe the catastrophe scenario (which I'm skeptical of personally).

ahi2• 16 years ago

The taxpayer could have gotten a lot more for our money. The bailed out banks' should have been nationalized, recapitalized then sold off.

phillijw• 16 years ago

USPS has become irrelevant

kiba• 16 years ago

Quick! Let start a subversive private mail company, like Lysander Spooner's American Letter Mail Company. His company literally compete with the USPS for business until it was shut down by the governmenet's lawyering.

He succeeded in driving down the cost of government mail.

stcredzero• 16 years ago

Instead, UPS and FedEx have taken the high-margin segment, leaving the low margin stuff for the USPS. Also, much of what Lysander Spooner's company was great for is now covered by email and other Internet apps. (IIRC, an attraction was that intra-city mail was delivered quickly.)

jberryman• 16 years ago

WASTE

glhaynes4• 16 years ago

My immediate gut-reaction toward this kind of statement is negative: do we really want to have private companies in charge of all mail in the US? And no doubt there are some people who rely on it and wouldn't get acceptable service (due to remoteness, etc) from a private company. Etc.

BUT: the vast majority of the mail I get through the postal service is junk mail that I don't want. The remainder is almost entirely stuff that I'd prefer to get electronically and, if the USPS were to disappear, I feel confident I would.

So I'd like to hear arguments for the continuing subsidy and existence of the USPS, but I wouldn't personally cry any tears if it were abolished tomorrow.

cosmicray2• 16 years ago

> BUT: the vast majority of the mail I get through the postal service is junk mail that I don't want. The remainder is almost entirely stuff that I'd prefer to get electronically and, if the USPS were to disappear, I feel confident I would.

The answer to that has to do with economic issues. Once upon a time (and I have not seen the numbers in years) 3rd class mail (what you can junk, and is now officially called Standard) actually carried its own way, and supported the cost-basis for First Class mail.

The reason(s) were varied, but had to do with the number of times a piece of mail had to be handled/sorted. Properly prepared Standard mail, had to be individually handled less than 2 times. Much of it was handled once (by the letter carrier). Standard mail arrives at the USPS dropoff already is pre-sorted by carrier route, and potentially by carrier order of travel. The mailers get a reduced rate, but not as much as it actually saves the USPS.

Getting rid of Standard Mail would actually increase cost of First Class. Standard Mail is advertising, and if they didn't advertise to you one way, they would just do it another.

My beef is less with Standard Mail, and more with political mail.

> So I'd like to hear arguments for the continuing subsidy and existence of the USPS, but I wouldn't personally cry any tears if it were abolished tomorrow.

USPS delivers (in one way or the other) to every point of presence in the USA. UPS, FedEx and DHL can not match that (although they do try to come close).

USPS also provides a variety of services that none of the others do.

jellicle• 16 years ago

There is no subsidy of USPS, and hasn't been for probably longer than you've been alive.

woodrow• 16 years ago

USPS provides first class mail service to all Americans for the same cost (whether that letter is addressed to down the street or across the country) and provides mail service to almost everywhere people live in the United States, whether it be a small rural town or New York City.

So in part, it's a matter of equity -- that everyone in this country has equal access to postal services and the benefits they provide (which are admittedly cross-subsidized). This same rationale goes into telephone universal service funds and has been discussed in the context of the national broadband plan too.

None of the USPS' private competitors do (or I can imagine would do) this.

waterlesscloud• 16 years ago

Raise the rates on bulk mail. There's so much of it that it's clearly priced too low.

eli• 16 years ago

I was under the impression that bulk rates subsidize artificially low first class rates.

glhaynes4• 16 years ago

So let's let them subsidize first class rates further!

bluedevil2k• 16 years ago

If you think about the USPS as an independent corporation, it would be crazy to think about these results: a government approved monopoly, massive tax-shields (no business income tax, no property tax on post offices). Then, you contrast that with their one big weakness - they can't set their own prices. Congress sets the postage rates. Talk about an incredibly inefficient way to run a business - seems a great counterpoint to anyone who thinks government should be more involved with business.

Here's a quick and drastic solution to the USPS problem. 1) Give them the ability to set their own prices. They have competition in the form of UPS and FedEx for large packages delivered to your door. Chances are those prices wouldn't change. The rate for a stamp would potentially double. Is that a bad thing? Seriously, what percentage of the stuff you get in the mail is actually useful? 10%? 5%? Yes, there are some businesses who depend on cheap mail, but in effect the US taxpayer is subsidizing their business then. It's no different than the US bailing out the car companies in that regard. This price increase would probably decrease mail volume considerably. 2) Reduce delivery to 3 days a week. Would anyone complain about this? How many people even check their mail every single day without fail? Again, this may hurt mail-based businesses, but they are already existing in an artificial business environment skewed by government subsidies. Going from 6 days to 3 wouldn't cut costs 50%, but I think 20-25% cut in costs is reasonable to expect, considering the volume decrease.

These two things would quickly make the USPS profitable. As everyone here has pointed out, it's not 1980 any more. There's better way to transmit information from one person to another.

madaxe• 16 years ago

Very well put - and it'd have the additional bonus of increasing interest in non-physical informational transit (i.e. the internet) for urgent documents (and perhaps even help instantiate a shift away from things such as paper contracts), further aiding growth in the tech sector.

The future of the postal industry lies in the transit of physical goods - if they want to survive, they need to become very efficient at moving parcels and packages, and forget about the fiddly business of letters and bulk mail.

baddox• 16 years ago

I don't think the junk mail that takes up the majority of your inbox costs the price of a stamp to send. Surely bulk mail like that is much, much cheaper.

duncanbojangles• 16 years ago

"2) Reduce delivery to 3 days a week. Would anyone complain about this? How many people even check their mail every single day without fail?"

I check the mail every day, religiously. Going to the mail box, waiting for the street to be clear of traffic, peering in, and returning with the mail brings me immense satisfaction. All this, even though I very rarely get mail addressed to me. I wouldn't complain, I understand the need for cuts, but the loss of my routine would sadden me greatly.

jonhendry• 16 years ago

Just pretend you're still getting mail delivered every day.

jacoblyles3• 16 years ago

I'm surprised there is still so much agreement that we need a public monopoly postal service. The creation of FedEx and UPS to compete with the USPS in package delivery was the best thing to ever happen to package delivery.

Judson2• 16 years ago

I think you missed one of the more obvious ways to fix the problem. Allow them to set their own rates, and allow other companies access (Permits, Licenses, whatever) to put letters in your mailbox.

The USPS has no incentive to figure out how to deliver mail better when it is the only game in town.

ahi2• 16 years ago

The USPS has managed to improve service while dealing with a postage rate increasing less than the rate of inflation.

philwelch• 16 years ago

Reduce delivery to 3 days a week. Would anyone complain about this?

Netflix addicts. I might only receive a Netflix 2-3 days a week, but making sure those days line up with 3 days of delivery per week would drop throughput to maybe once a week.

Netflix is seriously the only killer app left for the mail system. Everything else I get is either spam or bad news--before Netflix I only checked once a week.

commandar2• 16 years ago

It's not just operational inefficiencies that are slowly strangling the USPS. There are also factors like Congress' bizarre mandate that the USPS fully prefund their retirement and health benefits programs[1], which is something not required of any other federal entity nor something done by private enterprises. That's a huge portion of the USPS's revenue stream poorly tied up.

[1] http://www.washingtonpost.com/wp-dyn/content/article/2010/06...

grandalf7• 16 years ago

Why is that bizarre? It sounds like a very practical way to avoid the sorts of issues that have befallen so many other pension plans. It most certainly should be done by public and private orgs, since we can't trust the mechanisms intended to free the cash b/c they are corrupt (this is one reason GM was bailed out... it looks better than everyone realizing the PBGC was bankrupted by one firm's demise).

rwl5• 16 years ago

"If you think about the USPS as an independent corporation, it would be crazy to think about these results..."

I agree. But why should we think of it that way?

The Postal Service was originally conceived as an essential piece of national infrastructure. Why should we think of it as an "independent" entity that needs to turn a profit? Does the highway system turn a profit? How about the Federal Reserve, or the National Institutes of Health?

What's important is that the USPS continue to have enough funding to provide its service in an accessible, timely, and reliable manner. That is what makes it a critical piece of infrastructure. Like it or not, it is still essential to be able to communicate with hard copies.

(Why? For one thing, we don't, as citizens, all have an official electronic mail box. Physical mail also bears information about its transport -- where it went, whether anyone else read it along the way, whether it was delivered and read -- in a way that most electronic communication doesn't. We don't have a unified way of finding out how to communicate with someone online, and the means we do have are all owned by private corporations that cannot be relied on to provide that information in perpetuity. And so on.)

I agree that, for many things, there are ways to communicate that have advantages the Postal Service doesn't offer. But I cannot imagine having to sacrifice what makes that service valuable in the name of making it profitable, or always having to rely on alternative services, especially for critical or official communication. We're going to need a public post office for some time yet. And as communication continues to move online, the need for a reliable, public system for delivering that communication will grow even further.

gojomo• 16 years ago

For one thing, we don't, as citizens, all have an official electronic mail box.

A $8.5 billion subsidy to cover this last year's losses could have bought 20 million Americans iPads/netbooks.

If we're going to subsidize universal service, let's do it in a modern fashion. And let's focus on those people and regions that would get left out otherwise. There's no need to federalize things everywhere -- including in cities where competing alternatives would be eager to operate -- to cover a few edge cases for poor and rural delivery.

kbutler• 16 years ago

Does the Federal Reserve turn a profit?

Yes.

$45 billion in 2009: http://www.washingtonpost.com/wp-dyn/content/article/2010/01...

Earnings beyond the cost of operations are returned to the US Treasury:

http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm#6

grandalf7• 16 years ago

It's essential for anyone to be able to send direct mail to a Rural Route address for $0.20?

If anyone mildly sophisticated wanted to tamper with postal mail it would be trivial to do so. Most important mail these days is sent via Fedex, DHL, and UPS.

webgambit2• 16 years ago

> 2) Reduce delivery to 3 days a week. Would anyone complain about this? How many people even check their mail every single day without fail?

If my own sphere of influence, I only know 1 person who _doesn't_ check their mail daily.

grandalf7• 16 years ago

I get such little useful content from my mailbox that I only empty it when it's become completely full (about once every 10 days).

I'd be totally happy with weekly mail delivery, which would cut costs substantially.

Most of what is in the box is direct mail advertising that I've tried very hard to opt out of and which goes directly into the garbage. What remains is duplicate copies of bills I get online and tons of junk from Wells Fargo, etc.

I think the USPS has become more of an advertising distribution service than something of value to the typical person.

And, USPS doesn't attempt repeated delivery of parcels, so 80% of the time I'm not home to receive it and have to drive to the post office and stand in line to collect it.

Daily mail delivery would make sense if you could count on things being delivered with day level precision, but in my experience all mail that isn't coming from the same city or adjacent cities is wildly unpredictable.

ams6110• 16 years ago

I process my paper mail once a month, when I pay bills. I do empty the box more often than that but I just put it in a pile, discarding obvious junk immediately but opening nothing. I find this to be the most efficient approach.

grandalf7• 16 years ago

That's my approach too. Most of it never gets opened, but once in a while I'm fooled by an official looking envelope.

ck2• 16 years ago

I've read that many employees retire early with full benefits and then get their buddies to hire them back as contractors for even higher pay while getting benefits. Your delivery person may be making over $100k with full benefits.

Their executives are even more corrupt:

http://www.washingtonpost.com/wp-dyn/content/article/2010/09...

http://www.washingtontimes.com/news/2009/feb/17/in-hard-time...

Maybe they need an "auto-industry" style reset.

(and bulk rate definitely needs a 50% increase)

jared314• 16 years ago

Earth Class Mail had a good idea. Why not imitate that?

rick888• 16 years ago

wow, a government run program out of money? What a surprise (:-O <= this is my shocked face). The problem is that they aren't running it like a corporation, because they feel they have a monopoly.

As an example, a few summers ago, the USPS internet gateway went down. It took them over a month to get it back up and running properly. For over a month, anyone running a website could not get correct rates (If it could connect to the servers at all).

If this was a private company, they would have lost a ton of customers.

tocomment• 16 years ago

Start delivering mail only two or three days a week. That's all anyone reall needs. If nothing else cut out Satirday at least. And charge whatever you need to. It's not like mail is some kind of necisoty that needs to be kept cheap.

Sent from first generation iPhone sorry for the typos.

racecar789• 16 years ago

Mail needs to be delivered daily (preferably seven days a week). Economic transaction efficiency depends on the mail. Many invoices, payments, legal documents etc are still sent through the mail (even though they should be electronic).

X-Istence• 16 years ago

The banks don't process any of my payments on the weekends, so bills and invoices don't matter if they arrive on the weekends.

Saturday and Sunday thus are not required.

As for legal documents, those are all based on the standard work week as well, so that argument falls as well.

As such there is no reason for mail to be delivered on Saturday or Sunday. At the company I work at we get mail on Saturday, we don't get to read it until Monday anyway.

chrisbolt• 16 years ago

The USPS could offer a way of electronically delivering mail to them which could be sent over the internet then printed (by the USPS) at the nearest sorting center. Who says things that need to be on paper have to start out that way?

tumult• 16 years ago

There is a man whose job is to each day enter my property and deposit garbage into a receptacle, which I am then legally obliged to dispose of.

He is the mail man.

jacoblyles3• 16 years ago

I contend that the USPS is the world's largest legal spam operation.

simonsarris• 16 years ago

I don't see why its okay to be so derisive of the USPS. By your token, http is the internet's largest spam operation

drallison2• 16 years ago

A modest proposal: perhaps the USPS should reassert the constitutional postal monopoly and recover the highly profitable urgent letter and package business from FedEx and UPS.

mindcrime• 16 years ago

A less modest, but more practical proposal: remove the USPS's monopoly protection and make it compete on the market alongside private carriers. Let the best business(es) win.

drallison2• 16 years ago

What do you believe would happen it FedEx and UPS (and who ever else wanted) needed to provide regular first class mail delivery and other letter services to every postal address in the United States for, say, $0.44/ounce in return for a license to deliver urgent mail and packages?

jwhitlark• 16 years ago

Years ago, the USPS proposed to give everyone that had an address an email account, for receipt and payment of bills. Then they priced it at the cost of two first class stamps. The program died, and we lost what might have been a vaulable piece of new infrastructure.

iamgoat• 16 years ago

Time to retry this program. Every year that passes is a better opportunity for the postal service. More people are online and many businesses have paperless statement options. Less important letter mail is being delivered.

I would pay not to have to check my physical mailbox but once a month.

Next up, get rid of yellow pages.

mkramlich• 16 years ago

solution: some permutation of raising prices or reducing costs. next story :)

utefan001• 16 years ago

My friend who is a USPS contractor says management wants to cut costs by eliminating Saturday delivery, but the politicians don't have the balls to approve it. They are only worried about getting re-elected.

util• 16 years ago

Does the dip in NFLX around noon EST correspond to this? http://www.google.com/finance?client=ob&q=NASDAQ:NFLX

brianobush• 16 years ago

considering I haven't checked my (physical) mailbox for two days now, I wonder the effectiveness and necessity of the service. I know many people that do depend on their services, but I think the USPS will become a thing of the past eventually.

chrisbennet• 16 years ago

I think the USPS is importance lies in that they serve a section of the market that wouldn't be served otherwise.

Their charter probably requires that they deliver mail to rural areas i.e. unprofitable ones.

If you really wanted them to be competitive you would allow them to ditch their "unprofitable" routes (sorry Alaska) and fund their retirements like Fedex and UPS.

As an aside, it does seem that they are "ad supported" to a certain extent.

USPS sees $8.5 billion loss, warns Congress it'll be broke by 2011

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