Is the USPS Headed the Same Way as the Hostess Twinkie?

Written by Mark Weinstein, President

Recently, news has been reporting the potential demise of Hostess Brands and the possible extinction of iconic American brands and childhood favorites such as Twinkies, CupCakes, Ding Dongs and Ho Hos.

 

Maybe missed during all the pre-election hoopla was the announcement that another iconic American brand, extremely important to many of our integrated marketing livelihoods, the United States Postal Service, is getting one step closer to insolvency.  According to some sources, the crunch time could kick in sometime between next April through the end of September 2013.

What should we do?

Here’s the problem.

The cash-strapped U.S. Postal Service has reached its $15 billion debt limit as capped by Congress and is barred from borrowing more from the U.S. Treasury.

To run its business, the Postal Service can only borrow money from the U.S. Treasury, as opposed to private banks. Congress has barred the Treasury from lending it more than $15 billion at one time.

The Postal Service has been borrowing billions of dollars from taxpayers in recent years to make up shortfalls.

The highly controversial, and in hindsight somewhat bizarre, Postal Accountability and Enforcement Act of 2006, includes the absurd mandate that the USPS fund its pension plan for the next 70 years in a 10-year period.  In addition, the law required the postal service to make annual payments of about $5.5 billion for 10 years to pay for future retiree health benefits.

Since USPS operations are funded by postage revenues and not tax dollars, the dramatic drop in regular mail because of the rise of electronic bill pay, greeting cards, financial statements, magazine delivery and other instant communications has also had significant impact.

In the meantime, the Postal Service has been cutting costs. It has slashed post office hours, encouraged 8,000 mail handlers and postmasters to retire by the end of the year, and plans to close more than 200 postal plants over the next few years.

Starting January 27, the service will hike the price of a first-class stamp, by one cent to 46 cents. Postcard postage will rise one cent as well, to 33 cents.  And, standard class letter rate is rising 2.72%.

What should we do?

According to Sally Davidow, spokeswoman for the American Postal Workers Union, the mailing industry is vital to our economy and accounts for 7 percent of US GDP.  It still is the only service that reaches every address in the U.S.  And, there are many jobs dependent upon a well-functioning postal service.

For many years there has been talk about privatization of USPS.  Postal revenues can be sufficient even with a continued decline in mail volume to offset expenses and turn a profit.  The problem is labor inefficiency and Postal Accountability and Enforcement Act of 2006.  We need a smaller more efficient postal service without the absurd guarantees of the 2006 Act.

For example, labor is 53% of its expenses for UPS, 32% for FedEx compared with 80% with the USPS.

An overhaul is now in order.  The time is now to encourage our Congressional leaders to do more than “kick the can down the road” and slow down the rate to inevitable insolvency with relatively small fixes.  It’s time to privatize the Postal Service. It won’t be easy. Congress needs to start by repealing the statute granting the USPS exclusive access to Americans’ mailboxes.  This would lead to Americans having their choice of mail delivery providers, just like when the AT&T monopoly was disbanded and several carriers offered telephone service.

Privatization is a trend that has been building momentum in government at all levels from education, transportation, and telecommunications to local parking facilities.

Whether you are involved in mailing millions of letters via standard class, or simply want to make sure your package from Amazon arrives quickly and at a fair price, we need a vital postal service.  Privatization seems to be the answer.