Obama’s Proposals Might Not Save USPS

Sep 21, 2011 8:53 PM  By

President Obama is trying to lend a helping hand to the cash-strapped U.S. Postal Service. But his proposals revealed this week aren’t nearly enough to save the USPS, according to industry experts.

Obama is pushing for five-day delivery by eliminating Saturday mail. He also wants to allow the Postal Service to sell items other than stamps and shipping supplies at post offices nationwide, according to his deficit reduction proposals.

Congress would ask the White House to return $7 billion that the USPS paid into a federal retirement fund to help pay for other retirement and healthcare costs. Obama’s proposals include allowing the USPS to raise stamp prices beyond the rate of inflation to better match the cost of delivery.

The USPS, which expects to lose $10 billion when its fiscal year ends Sept. 30, could save more than $20 billion in the next few years, according to Obama’s proposals. Obama and Democrats are asking Congress to give the USPS 90 additional days to make its annual retirement and healthcare payments. (If the Postal Service can’t make its annual $5.5 billion payment for retiree health benefits on Sept. 30, it will default on its financial obligation.)

Sen. Susan Collins (R-ME), the ranking Republican on the Homeland Security and Governmental Affairs Committee who in February introduced postal reform legislation, believes that “the administration’s proposals will not prevent the Postal Service from becoming insolvent.”

Collins noted in a statement that there is no response to Postmaster General Patrick Donahoe’s request that Congress approve 120,000 staff layoffs by 2015 and amend the legislation by which postal workers receive retirement and healthcare benefits. “There is little attempt to address the workforce issues that drive 80% of USPS’s expenses,” Collins said.

What’s more, “Returning the Federal Employee Retirement System surplus over two years, rather than in a one-time refund of the entire overpayment owed to the USPS, constitutes a demand from the President that postal customers give the federal bureaucracy a no-interest loan over the next two years,” Collins added. “That’s unfair, and only increases the burden on the Postal Service.”

Cuts in delivery and service standards are not the way to keep customers and gain new revenue, Collins said. “The Postal Service cannot address a loss in mail volume and revenue by taking steps that will accelerate volume loss and lower revenues. Cutting service and raising prices will only make matters worse and accelerate the Postal Service’s death spiral.”

For his part, PMG Donahoe thanked the President for acknowledging the value of the USPS and the need for reform to ensure the Postal Service’s future viability. “We are looking forward to reviewing the plan in more detail, and we are continuing to work with the White House and the Joint Select Committee on Deficit Reduction on specific proposals that involve the Postal Service,” Donahoe’s statement concluded

Others believe more details are necessary. “We’re pleased that the President is now engaged and is on record on the importance of the Postal Service to the American public and economy,” says Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association.

“Although we do not have the specific language of his proposals, we are encouraged that he understands that immediate solutions are needed for the short term, Cerasale says. “The shackles on Postal management that impedes its ability to act freely as a business facing reduced demand must be removed.”

Obama’s proposals don’t go far enough, however, says Don Landis, vice president of postal affairs for catalog printer Arandell Corp. And this will lead to a battle in Congress “just like they are doing over jobs creation and the federal deficit.”

But at least Congress is talking about the USPS crisis, Landis noted. “It seems the mailing industry was the only one talking about the looming crisis for the past two years.”