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While American businesses continue to be buffeted by economic headwinds, the U.S. Postal Service faces an even grimmer set of challenges.
On Tuesday the Postal Service announced losses totaling $5.1 billion for 2011. At its current pace, without bold reforms, America’s postal system could run out of money and shut down within the next year.
The greatest challenge facing the USPS is that it’s an overbuilt system designed for the demands of the 20th century. But with cost-cutting and streamlining to bring its resources into balance with demand — the same tough measures taken by thousands of American businesses during this economic downturn — it can be strengthened to meet this century’s unique demands.
As a first step, Congress and the Postal Service must work together to enable the USPS to truly restructure. Despite a downturn in mail, the Postal Service still has 35,000 retail outlets nationwide — outnumbering all U.S. Starbucks, McDonald’s and Wal-Marts combined. It simply doesn’t need all these facilities or its now-outsized mail processing system.
The federal government must also return money to which the Postal Service is entitled. For years, the USPS has overpaid into the federal government’s pension funds. While there is some disagreement on the exact amount, all official analyses have concluded that the Postal Service has overpaid into one fund by $6 billion. Were this money returned, it could be used to underwrite incentives for early retirements that would further help the USPS match its costs to its revenues.
Congress must reschedule the $5.5 billion payment it requires the USPS to make annually to prefund its retiree health benefits. Few other public or private sector entities prefund retiree health care at all, and without this payment the USPS would actually be slightly in the black.
Fortunately, there are bills in both chambers of Congress that would enact these reforms, albeit with very different approaches; but others and the administration have called for postage hikes to close the postal financial gap. This is counterproductive for both the Postal Service and the mailing industry that depends on it.
Printed mail offers many benefits, but companies have more choices than ever in reaching customers. If postage rates increase, many companies will slash the role of mail in their communications mix while others will be forced to shut down. This has happened before. After postage rates increased by as much as 40 percent in 2007, the number of American catalog companies declined from 19,000 to the 9,000 businesses operating today. Those are lost jobs, lost sales and for the USPS, lost customers.
While the advent of email and the Internet have certainly changed the role of the mail, the USPS remains the backbone of an industry that employs 8 million workers and makes up 7 percent of our nation’s gross domestic product. It continues to play an integral role in our economy, supporting everything from online commerce to cost-effective advertising. With 160 billion pieces in the mail this year, the end of the Postal Service would mean the end of an important part of our economy.
RR Donnelley is one of the largest printers and communications companies in the United States. The success of our business and its more than 35,000 American workers is directly tied to the viability of the Postal Service, as are many others.