USPS Closings To Lead To Tens Of Thousands Of Job Cuts

http://www.huffingtonpost.com/2012/02/23/us-postal-service-closings_n_1297325.html

Feb 23 (Reuters) - The U.S. Postal Service announced plans on Thursday to close or consolidate 223 mail processing centers and eliminate up to 35,000 jobs as part of its strategy to cut costs by reducing its network of facilities.

The Postal Service has been losing billions of dollars each year as email chips away at mail volumes and as it faces massive annual payments to the federal government.

Postal officials said in September they would study more than 250 of the 461 processing sites for possible consolidation with other facilities as part of a series of cost-cutting steps. They also announced plans to end next-day delivery to cut back on overnight work.

Postmaster General Patrick Donahoe has said the agency needs to reduce $20 billion in annual costs by 2015. Moving processing away from the 223 centers would reduce operating costs by $2.6 billion annually, according to the Postal Service's website.

That includes eliminating as many as 30,000 full-time jobs and 5,000 non-career positions, USPS spokesman Sue Brennan said. The agency has gotten rid of about 140,000 jobs in the last five years, mainly through attrition, but still had about 650,000 workers at the end of 2011, according to its first-quarter financial statement.

None of the facilities would close before mid-May due to a temporary moratorium announced in December that is intended to give Congress time to pass legislation to help overhaul the mail agency.

The Postal Service, which does not receive taxpayer funds, wants Congress to eliminate an annual payment to prefund retiree health benefits and let it end Saturday mail delivery.

The agency also wants to take over its health benefits from the federal government and to close thousands of post offices.

Lawmakers have been deeply divided on whether to allow facility closures, end the prefunding payment and other measures. Some lawmakers have praised the Postal Service for "rightsizing" its network, while others say the planned closings will hurt the agency's business model.

"At a time when the Postal Service is competing against the instantaneous delivery of information from email and the Internet, slowing down mail delivery service will result in less business and less revenue," said Senator Bernie Sanders of Vermont in a statement on Thursday.

Donahoe told lawmakers last week, in a letter announcing the agency's five-year turnaround plan, that failing to take all of its planned cost-cutting actions could lead to annual losses of $18.2 billion by 2015.

How the U.S. Postal Service Fell Apart (Nov 2011)

http://www.time.com/time/nation/article/0,8599,2099187,00.html?artId=2099187

By Josh Sanburn

Inside a grad student's apartment at the University of Pennsylvania sits a slightly faded blue-and-white wooden sign from a post office in Malone, Wash., that no longer exists.

If this were any other college student's place, the sign would probably be a trophy from some kind of prank. But no: it was a gift from the post office to 25-year-old Evan Kalish, a UPenn graduate student who has crisscrossed the Northeast, driven down South and flown to Hawaii to see more than 2,700 post offices, many of which are in danger of closing or have already been shuttered.(See pictures of the history of the U.S. Postal Service.)

Over the past three years, he's documented the slow death of an institution that was once at the heart of small-town America, taking photos, collecting postal cards, paying tribute. Many of the postal buildings are historic, some marking the establishment of a community in a growing nation or the revival of one after a disaster. "The post office helped build the country," Kalish says. "And it's almost like they're trying to destroy themselves."

The Malone post office is the only landmark listed if you search for the town on Google Maps. But it closed down Aug. 9. The next day, across the street, Red's Hop N' Market began providing limited postal services — selling stamps and fixed-rate shipping boxes alongside live worms, cigarettes and beef jerky. It became the first "Village Post Office" in the country and part of a strategy that the postal service is counting on to help close a massive budget gap.

Resistance, both emotional and economic, to the closing of 3,000 to 15,000 post offices is growing, fueled by the objections of individuals like Kalish and mail-carrier unions which have taken out ads as part of a national public-relations campaign to save what could be more than 100,000 layoffs. But the financial situation remains dire.(Read "1 in 10 Post Offices Could Close.")

The U.S. Postal Service (USPS) has been sliding down an unsustainable fiscal path for years. A toxic combination of a poor economy, an increase in online bill paying, the proliferation of e-mail and other digital communication, and congressional mandates have created billion-dollar deficits for the USPS since 2007. Last year it lost $8.3 billion. This year, it lost $5.1 billion (only because a mandatory $5.5 billion prepayment for retiree health benefits was postponed). Mail volume declined 1.7%. Projected mail volume over the next decade? Down, down, down. Officials say if nothing's done, the postal service will run out of money by August or September of next year, and absent congressional action by Friday, the USPS will default on that mandated $5.5 billion payment.

There are a number of plans in the works to stem the losses, including one now making its way through the Senate. Some proposals being considered would lay off 120,000 postal workers and cut another 100,000 through attrition, not to mention the recent announcement that two-thirds of all mail-processing centers will close and — the thing that has riled up people across the country the most — the closure of thousands of post offices. All told, it would reduce costs by $20 billion.

"It's a race against the clock," Kalish said when asked about the fate of the small-town post offices and the institution itself. His hobby turned addiction that often has the grad student on the road from 8 a.m. to 7 p.m. many days, talking to locals, updating Google Maps as well as his blog Going Postal with images and details about each postal building he visits. "The postal service is threatening all of them. You have no idea how long any of them will be around."

Kalish's fascination with post offices has become a kind of quirky and extreme thesis on Americana, but it's hardly unmerited. For years, the USPS hasn't just delivered our mail. It's been a gathering place for small communities while operating as part of something larger than just a collection of mailboxes and places that sell stamps.

"The post office is a foundation piece of democracy," says New York University professor Steve Hutkins, who has been studying the USPS's financial issues. "And it's being treated like a business. And it's not."

Pack Mules and Snowmobiles
It wouldn't be far-fetched to argue that the postal service has been the most important institution in our country's history. For decades, the postal service was the largest public-sector employer in the U.S. At one point in the 19th century, three-quarters of all government employees were postal workers. The Founding Fathers considered the postal service so important that they put it in the Constitution, mandating that Congress have the power to establish and regulate post offices. (See how the postal service must push the envelope.)

In the country's early days, the postal service held together the far-flung populations of the U.S. by delivering newspapers — the only real source for information about the new nation — throughout the country. It provided a link between families and soldiers during war. It carried mail by steamboat when no roads existed. It linked California to the rest of the country by delivering mail across the Isthmus of Panama, even before the canal was built, by using boats, pack animals and canoes.

Even today, the USPS's methods to deliver our mail are just as remarkable. Want to send a letter to the Havasupai Indian Reservation at the bottom of the Grand Canyon? The postal service will take it there by mule. Need to mail a package to the Alaskan wilderness? The USPS can get it there by parachute or snowmobile. (It used sled dogs until 1963.) Have to mail something along Alabama's Magnolia River? The USPS has boats that travel from dock to dock. It has even sent mail via pneumatic tubes, missiles and hovercraft. And somehow, it's still just 44 cents to get a letter anywhere (well, 45 cents starting Jan. 22).

Today it's the country's second largest employer (after Walmart) and operates the world's largest fleet of vehicles — not to mention that it handles 40% of the entire world's mail volume. (See if the postal service could really close.)

For decades, this massive operation ran fairly smoothly, expanding along with the country and taking advantage of the new technologies brought about by railroad and flight. Mail volume increased from 50 billion pieces in 1953 to 75 billion in '66. Even so, the postal service often ran deficits. Its mandate of universal mail access almost ensured that it would go in the red. By the middle of the 20th century, the postal service was losing $600 million a year, and that's when the system starting breaking down.

On the brink of the holiday season in 1966, a sudden influx of advertising mail hit the enormous Chicago main post office (13 stories high, covering 60 acres and billed at the time as the world's largest postal facility). What happened? The mail simply stopped. Stopped. For almost three weeks, 1 million lb. of mail — 10 million pieces — barely moved. It was a confluence of employee hours' being cut, inexperienced workers' attempting to sort the mail, a postmaster position left empty for too long and improved pensions that led to a high number of retirements.

The fiasco made two things clear: the institution was vital to the nation's functionality, and there was something very wrong with the way it was being operated. Postmaster General Larry O'Brien proposed a new postal service, warning that there were cracks in the postal service's foundation and that it was close to collapse.

A few years later in New York City, a wildcat strike (one in which workers defy their union leadership) broke out, primarily over low wages. TIME called it "the Strike that Stunned the Country." At the time, postal workers were making less than sanitation workers, according to Philip Rubio, an assistant professor of history at North Carolina Agricultural and Technical State University. "A postal worker with a family of four could qualify for food stamps," he said.

When the workers walked out, President Richard Nixon sent in National Guard and U.S. Army troops to try to sort the mail. But it didn't help. "They rapidly realized what a failure that was," Rubio said. "They just couldn't get up to speed, and the mail kept stacking up. Within eight days, the Nixon Administration signaled it was willing to negotiate."(Read about a small success at the U.S. Postal Service.)

These incidents led to the Kappel Commission, a presidential advisory group made up of corporate leaders who had, admittedly, little knowledge about mail-delivery operations. By 1970, they were at work on proposals to reform the postal service, which eventually became the Postal Reorganization Act, turning the U.S. Post Office Department into the U.S. Postal Service. It was more than just a name change. Congress essentially turned the postal service into a quasi-governmental organization — not really a business but not really part of the government either. It was being forced to run more like a corporation or a private entity, to be self-supporting, even as it was still tasked to maintain service to every home in the country.

For the next several decades, the USPS was successful by most measures, surviving the occasional disgruntled worker's becoming violent — incidents that brought the phrase going postal into our consciousness. And, of course, there were some perennially angry customers fed up with long lines at the post office. But in general, the USPS was doing well enough that Congress decided it should start prefunding its retiree accounts — for the next 75 years. So in 2006, Congress passed a law requiring an annual prepayment of retiree health benefits, to the tune of $5.5 billion a year for 10 years. Except Washington didn't see the recession coming two years later. "That act has left such a devastating legacy that it threatens to drive our nation's postal service off the rails," Rubio said.

Penny-Wise and Pound Foolish?
Enter Patrick Donahoe, the 55-year-old Pennsylvanian who became the nation's 73rd postmaster general in October of last year, perhaps the rockiest time in the history of the place. Donahoe has worked at the postal service for 36 years, first as a clerk in his hometown of Pittsburgh. He eventually worked his way up to the office that Pennsylvania's Benjamin Franklin once held, postmaster general. "I'm an antique," Donahoe jokes.

Speaking to TIME, Donahoe calmly laid out his plans to fix the USPS's predicament: reducing costs by $20 billion through 2014, pushing Congress to approve five-day rather than six-day delivery, laying off tens of thousands of workers. Listening to his sleepy Pennsylvania accent, one could easily forget that he's talking about gutting and radically transforming an American institution. (See how much a postal stamp should cost.)

The Obama Administration recently extended the deadline for the post office to make its next $5.5 billion retiree payment. That deadline is Nov. 18. But even that isn't enough — even without making that payment, the USPS lost $5.1 billion in the fiscal year ending in September.

And that's where the post-office closings come in. Thousands of them. So far, it has placed 3,650 post offices on a review list for possible closure, but that's not the end of it. Donahoe says that the number could be much higher.

"We'll probably look at 15,000 post offices rather than just 3,700," Donahoe says. "Not to say that anything is guaranteed to close, but if you're spending $70,000 to operate a place that's bringing in $10,000, there have to be some other solutions."

According to Donahoe, officials are looking at two types of post offices that could be closed: rural post offices that have less than an hour's work a day and urban post offices that generate less than half a million dollars in revenue and have another post office nearby. But to some, shutting down post offices seems not only reckless but also pointless.

"Closing post offices has almost nothing to do with the financial problem that the postal service finds itself in today," says Hutkins, founder of savethepostoffice.com. "Virtually nothing. The cost of operating these post offices and the amount of money that will be saved by closing them is minuscule in the context of the budget of the postal service and the deficit that it's running."(See why the postal service must change, from TIME's archives.)

Hutkins teaches courses at NYU on our sense of place and how traveling affects our behavior. He got interested in post offices when he heard his post office in Rhinecliff, N.Y., was going to close. So he fought back. With magnets.

He began artfully constructing refrigerator magnets with a photograph of his post office on them and then handed them out to raise awareness around town. What concerns him is not just losing an important service but also what he sees as willful destruction of something that helped build the country. And he thinks postal officials aren't being truthful about it.

By the USPS's calculations, closing all the 3,650 post offices up for review would save just $200 million, or 2% of the deficit of about $10 billion. But it would also eliminate thousands of jobs. "This is a problem I really struggle with because it seems so irrational," Hutkins says. When you get him going, he has a litany of complaints against an institution he holds dear to his heart — the way the USPS is explaining the post-office closures to communities, how it uses "emergency suspension" procedures to eventually close post offices that have been damaged by natural disasters, how it's laying off not 100,000 workers but actually more than 200,000 through what the postal service calls attrition.

When I asked Donahoe about the post-office closings and if they amounted to only about 2% of the deficit, he, surprisingly, agreed. (See why stamps will now feature living people.)

"It's pretty close to being accurate," he said. "If you think about it from a $20 billion perspective" — the amount the USPS is trying to cut — "it's about 1% of that. But any other business would do this, and the postal service by law is required to do better than break even."

True, any other business might do this, but that's what makes this debate so difficult. The USPS is a quasi-governmental public utility. It's a semiautonomous organization that is partly private, partly governmental.

"The rhetoric of business is a way to push the postal service toward privatization," Hutkins says. "That's ultimately what this is all about. My one theory is they're just penny-wise and pound foolish, and it may simply be that they're so locked in to the mind-set that if they can save a nickel, that's reason enough to close a post office."

In Philadelphia one of the locations slated to close is the colonial-themed B. Free Franklin post office. It doesn't fly a flag because the mail delivery there was established before the nation was founded. It uses a unique postmark featuring a franking technique created by Ben Franklin. And it's on the list of post offices slated to close, stirring up sadness and anger for those who love the historic location.

I asked Donahoe what sort of advice Franklin, the first postmaster general, might give his successor today. "I think that Benjamin would probably say, Don't be penny-wise and pound foolish."(See a post-office ad that warns about the dangers of e-mail.)

Will Walmart Be the New Post Office?
While some post office services are migrating to small general stores, many are going into national big-box stores like Walmart and Costco and Safeway, where you can get anything from a flu shot to spark plugs to new glasses.

Some will have P.O. boxes, and they'll all sell stamps and allow people to mail packages. Many will even be open later than a traditional post office.

"They really like to make the point that you can buy stamps in 100,000 places like Walmart, but that's really not all the post office entails," says Kalish, the postal-card collector. "The reason they're doing this is so they can say, Hey, look, in your community we just saved money. But it's just devaluing that community."

Those who are trying to save the USPS often argue that Village Post Offices like the one in Malone are being incorrectly billed as direct replacements for traditional post offices. "They're designed to be as bare-boned as possible," Kalish says. "You can't request a [return] receipt. You can't weigh a package. You have to send it priority. You have to send it in this type of box. It's just not a sufficient replacement."

The services are reduced, but the real issue that is driving those concerned and obsessed with the postal service is that we're slowly watching a piece of American history evaporate — the colonial Franklin post office in Philly, post offices (some designed by Franklin D. Roosevelt himself) with incredible New Deal murals, the South's first post office built after the Civil War. All of them could be gone as those and others get turned into shops and real estate offices and Bergdorf Goodmans. (See if post office cuts will cost you late fees.)

In the end, the debate about the USPS is simple: it's the privatization of a service that is supposed to be universal. But universal access doesn't exactly sync with the market's guiding hand. That's why UPS and FedEx don't ship everywhere. It's just not profitable for them. So where do they turn for last-mile delivery? To the postal service. Those private mail carriers are two of the USPS's biggest customers.

Meanwhile, as post offices are closing, as Washington is grappling with the larger financial problems of the nation and as communities are protesting, Kalish is on the road. In between taking classes and adjusting to his new life as a grad student, he's documenting the slow death of an American institution.

"This weekend I visited another 119 post offices, including 32 on the hit list," he e-mailed me last month. "Four days, 1,110 miles, 45 hours on the road. Grand total: 2,561 ... And yes, all this while doing graduate work at UPenn. But somebody's got to stand up for these communities."

Editor's note: Since we talked to Kalish, the Malone, Wash., sign has been moved to a museum in Ohio.

Post Office closings isolate small towns and poor (Feb 2012)

http://www.msnbc.msn.com/id/46381619/ns/business-us_business/

"There's still a real digital divide between rural and urban America"

By Cezary Podkul and Emily Stephenson

Postal officials were blunt in December when they stood before 120 residents in Dedham, Iowa, to tell them why their town's post office has to close. The Internet, officials said, was killing the U.S. Postal Service.

"Well, I have no Internet," resident Judy Ankenbauer said at the meeting. Like many of Dedham's 280 residents, Ankenbauer said she still relies on the post office to buy stamps and send letters and packages.

Dedham is hardly alone in its dependence on the Postal Service. Some of America's poorest communities - many of them with spotty broadband Internet coverage - stand to suffer most if the struggling agency moves ahead with plans to shutter thousands of post offices later this year, a Reuters analysis found. Nearly 80 percent of the 3,830 post offices under consideration are in sparsely populated rural areas where poverty rates are higher than the national average, demographic data analyzed by Reuters shows.

Moreover, about one-third of the offices slated for closure fall in areas with limited or no wired broadband Internet, Reuters found.

"We're not the ones in the big cities who are just emailing everything to everybody. We're the ones that are actually still sending our Christmas cards and our birthday cards," said Sarah Clyden, who runs a feed store in Oakwood, Okla., where the agency is considering closing the post office.

Federal law requires the Postal Service to provide "a maximum degree of effective and regular postal services" to rural areas and small towns. Today, with 32,000 retail locations and 150 million delivery points, the Postal Service has a larger footprint in the U.S. than McDonald's, Starbucks and Wal-Mart combined, according to its website.

Even so, the rise of email, a drop-off in first-class mail, onerous labor costs and the growth of shippers such as UPS and FedEx have left the Postal Service hemorrhaging money. By fall, postal officials have warned, they may not be able to borrow money.

The Postal Service is not studying the economic impact on communities where post offices are slated to close, spokesman David Partenheimer said. But in the 3,004 rural communities across 48 states where post offices may close, many residents fear the impact will be pronounced.

About 2.9 million people live in the rural communities where the post office that may close is either the only one or one of two post offices serving their zip code area. For many rural residents, that would translate into longer drives to mail packages, pay bills or buy stamps.

Like all of the post offices on the closure lists, the post offices in Dedham and Oakwood wouldn't close until mid-May, thanks to a temporary moratorium on closings put in place in December. The moratorium was intended to give Congress a window to pass legislation offering the Postal Service some relief. But with lawmakers still deeply divided over how to address the Postal Service's financial woes, state and local government officials worry thousands of closings are on the way.

"The Postal Service is supposed to be a universal service available to people wherever they live in America," said Iowa Gov. Terry Branstad, who pushed hard for the moratorium. "What they're doing is going against that premise."

'Drop in the bucket'
The Postal Service chose post offices for possible closure based primarily on revenue. Two-thirds of the 3,830 post offices slated for closure earned less than $27,500 in annual sales, postal data show. Nearly 90 percent of these post offices are located in rural areas, where shrinking populations and dwindling businesses mean the post offices simply cost more to operate than they earn.

"These offices are decreasing in revenue year after year after year," said Dean Granholm, the Postal Service's vice president for delivery and post office operations.

Despite a request under the Freedom of Information Act, the Postal Service declined to provide data on revenues for individual post offices. But the Postal Service did provide Reuters expense data for all post offices. The statistics show that closing all of the post offices under consideration would save about $295 million a year - about four-tenths of 1 percent of the Postal Service's annual expenses of $70 billion.

"That's a drop in the bucket," said William Henderson, who served as Postmaster General from 1998 to 2001. Then he corrected himself: "That's not even a drop in the bucket. The bucket won't ripple."

The Postal Service says the closures are necessary because Americans increasingly are turning to the Internet to send email and pay bills, resulting in plummeting mail volume and revenue.

"We've lost our business to the, you know, online communications," Kent Gochenour, an Iowa postal official, told residents at the town hall in Dedham.

To match the falling demand, the agency says it needs to cut $20 billion in operating expenses by 2015. Restructuring healthcare programs, eliminating jobs, ending Saturday delivery and closing post offices are among the moves being considered, though some of these would require permission from a Congress that remains deeply divided on how to address the Postal Service's woes.

"When you deal with billions, there's nothing that you should ignore, even if it's only a couple percentage points of your total operating costs," Postmaster General Patrick Donahoe said during an October interview.

But for many in the communities where post offices are slated to close, doing business online is not an easy option. Trinchera, Colo., a rural town near the New Mexico border, lacks wired broadband. Carlos Sandoval, a local rancher, said he relies on the post office for everything except groceries. He said he only uses a computer when he visits his daughter "in town" - Trinidad, Colo., about 15 miles from his home.

Like Sandoval, about a third of the 110 people served by the Trinchera post office have no Internet access, according to Gene Caldwell. The 82-year-old began mustering statistics last fall to share with postal officials during a community meeting on the post office .

Many residents live as many as 50 miles from the nearest town, and to get there, they have to travel mostly on unpaved roads, Caldwell said. They rely on the Postal Service for livestock vaccinations and medicines, notices of livestock sales, trade newspapers and other items.

More than half of the 58 Colorado post offices on the closure list fall in areas that, like Trinchera, have limited access to broadband Internet.

Nationwide, about 1.7 million people live near post offices slated for closure in areas with limited or no broadband Internet service, Reuters found.

"We're targeting the wrong people," said Mark Strong, president of the National League of Postmasters. "We probably should have taken a look to see if first of all they have Internet accessibility in their communities."

Graph: Types of Mail Received by Households

http://www.usatoday.com/news/nation/story/2012-02-08/postal-service-mail/53002066/1

Bell tolls for the U.S. Mail, as we know it (Feb 2012)

http://www.usatoday.com/news/nation/story/2012-02-08/postal-service-mail/53002066/1




The most predictably disappointing part of David Gerber's day is when he opens his mailbox.

By Doug Benz, for USA TODAY

David Gerber retrieves the mail at his Buffalo home Thursday. The volume of stamped letters went down last year for the sixth straight year.

This is what the Postal Service calls "the mail moment," when we collect, sort and open our mail. For generations, this moment has bound us together as people and a nation.

It's when we learned what Grandma sent us, who wanted to be our valentine, where we'd gotten into school, whether we'd be drafted. It's when we heard who had been born and who had died, and whether the check really was in the mail.

The mail moment brought news of men lost at Antietam and rainy weather at summer camp. It had the gossip from Kerry and Calabria and San Juan.

Each household's mail moment has its rules and rituals — who opens what, whether it's left on the kitchen counter or hall table. It's when someone calls, "Anything good in the mail?" The answer, usually, has been yes.

But these days Gerber, a 67-year-old professor who regards the mail's 3 p.m. arrival with ingrained expectation, is invariably frustrated. "We don't get as much mail as we used to," he says, "and what we do get is junk."

Americans say they love to receive mail, yet send less and less of it. The Postal Service says almost two months pass before the average household gets a personal letter, compared with two weeks 15 years ago. Only 4% of household mail comes from another household.

In 2011, First-Class Mail — letters, large envelopes, small packages — was down 6.4%, the sixth decline in six years. As First-Class drops, Standard Mail — mostly advertising and solicitations — becomes a bigger part of the mail stream. Last year, as total mail volume dropped, Standard rose 2.9%; it now weighs more than twice as much as all First-Class Mail.

Even when the economy recovers, says David Partenheimer, a Postal Service spokesman, "we don't think First-Class volume is coming back."

Gerber considers himself a friend of the U.S. Mail. In his youth, he worked holidays at a post office. As an historian, he made use of 19th-century immigrants' letters, and in 2008 he received a history award from the Postal Service.

But even he has to admit it: "The mail is slowly dying. We're at the end of an epoch."

If so, it ends with offers for credit cards we don't need, catalogs for things we don't want, postcards for colleges we will not attend, coupons for pizza we cannot digest and promotions for events you could not pay us to attend. And, in Gerber's case, with ads addressed to parents who have been dead for a decade.

The Internet provides a faster, cheaper and easier way to communicate. This, along with a huge overhead, has plunged the Postal Service into financial crisis. Last year, it lost $5.1 billion.

But the proposed response — including an end to Saturday and next-day delivery, and closing hundreds of local post offices — should not obscure a more fundamental change: With personal correspondence, periodicals and transactions (bills, statements, payments) now accounting for less than 40% of household mail volume, the mailbox is becoming an advertising channel.

It's an effective one; unlike commercial e-mail, almost two-thirds of Standard Mail is read or looked at. Anthony Conway, who lobbies in Washington for an association of non-profits, says mail is still the best way for such organizations to reach supporters.

So the Postal Service, which also delivers packages profitably and provides a vital link to the rural, the elderly and others without online service, probably will survive.

But the U.S. Mail — an institution older than the republic, one that sponsored long-distance stagecoach, rail and air travel, that delivered in snow, rain, heat and gloom of night, from the top of the Continental Divide to the bottom of the Grand Canyon, that still delivers 40% of the world's mail, and that symbolizes federal authority in the humblest hamlets — is fading before our eyes.

'A national treasure'

Everyone has mail memories.

For Tamra Lindquist of Escondido, Calif., it's what her grandmother sent — cards, articles, a dollar for Valentine's Day. "To this day," she writes, "I am always a little hopeful when I open the mailbox!"

For others, the memories are more recent.

Hyejin Lee is a 36-year-old South Korean who attended graduate school in Washington state. During that time, she had a difficult relationship with her elderly father back home. He once took such offense to her correcting him over a bill that he stopped taking her calls.

So she wrote her father one conciliatory note after another. She got no answer. But months later, when she visited home, the old man was more receptive. And she found all the cards she'd sent, neatly stacked, in his dresser drawer.

"Nothing better may carry and connect sincere hearts," the daughter writes, "than a travel-worn letter with your name and address, handwritten."

Such memories have led John Klopp of Myerstown, Pa., to call the U.S. Mail "a national treasure. It stands right next to the American flag and the American Eagle as a symbol of what this country is all about."

That's as the Founding Fathers intended in 1775, when they created an organization (Benjamin Franklin was the first Postmaster General) to bind 13 far-flung colonies, as George Washington said, "with chains that will never be broken."

The U.S. Mail spread with the nation. It reached sodbusters on the Plains, prospectors in the Yukon and Marines at Iwo Jima. For immigrants such as Henrietta Jessen, a girl who moved from Norway to Milwaukee in 1850, it was a link with home, she wrote to her sisters, "although I will never see you again in this life."

But for some, the mail moment has become an annoyance.

Gerald Dunn of Addison, Texas, who says he receives "reams and reams of unsolicited commercial tripe," has moved a paper shredder near his mailbox. Edward Sobrito of Southampton Township, Pa., has placed a trash can out by the mailbox so he doesn't even have to bring all his junk mail inside.

Fewer than half of all bills are now paid through the mail. Even Glenn Majka of Cary, Ill., a 60-year-old self-described "old fart," pays online. "I don't know anybody that will miss the mail if all of the mailboxes are removed," he says. About 60% of the blue street-deposit boxes already have been.

Communities such as Seattle direct residents to a website that helps them opt out of advertising mail. The website operator, Catalog Choice, says it's processed more than 20 million stop orders, usually because people don't want what's advertised or do want to save trees.

It's not just recipients. Tommy Stubbs, a veteran letter carrier in Clementon, N.J., says his job has lost its romance because of what he delivers — "unwanted advertisements, bills and court notices." Only a few years ago, he writes, people would wait by the mailbox; now, he says, "more people seem to cringe at the sight of me."

A letter: 'Like visiting with somebody'

Allison Leach of New Braunfels, Texas, was raised not only to hand-write thank you notes, but to mail them — even if the recipient lives a few blocks away.

Last year, Leach did her part to revive that tradition. Each day, she wrote and mailed an unsolicited thank-you note. She wrote relatives, friends, clerks and, after waking with a hangover, the makers of Advil. And she blogged about it.

Although many of the 365 recipients were pleased, most who replied did so by phone or online; she got only a few written replies. Even some of her friends think notes are a waste of time: "They say, 'I don't have time for that. I'm a busy mom.' "

Leach, 33, who has four kids herself, says she hates to admit defeat, "but unless something changes, this is a dying art."

If so, she and others say, something profound will be lost.

Mailed personal correspondence is a sensory experience — "almost a physical thrill," says Gerber, the Buffalo professor. There's the sound of envelopes clanking in the box or sliding through the chute, the sight of distinctive handwriting, the scent of the writer's perfume or cologne, the heft of the paper.

"Clicking on a new e-mail isn't the same," he says.

Writing or reading a letter is "like visiting with somebody," says Michael Sull of Gardner, Kan., a penmanship instructor and enthusiast who uses a flowery cursive script in his communications. (When time is of the essence, his wife types up what he writes out and e-mails it.)

E-mail, writes Margaret Shepherd, author of The Art of the Personal Letter, is "a thinner, less personal mechanism." But "being human, most of us use it."

What's lost? Something that can be touched and saved, such as a soldier's last letter from war, or a child's first thank-you note.

Chuck McKnight of Key West has a box of letters his father sent his grandmother during World War II. When his mother died, he found all the letters he sent her from college and the Coast Guard. "This generation," he says, "will never have such treasures."

Maybe not. Andy Simonoff, a 57-year-old mother in Costa Mesa, Calif., has been reduced to saving her three sons' text messages. Sociologist Amitai Etzioni says written correspondence can't be hacked or go viral and is less apt to be sent off in anger. And without paper correspondence, historians could lack a vital research resource.

In the future, "What will we know of our current leaders?" asks John Boeger of St. Louis County, Mo. "Only what they want the public to know."

For now at least, some things — condolences, formal invitations, thanks for big gifts or favors — still are widely thought to demand pen, paper and stamp. Anna Post, great-great-granddaughter of etiquette arbiter Emily Post, says the very rarity of handwritten notes makes them more valuable and may ensure their survival.

Such a note, sitting in a sea of junk mail, has "an exaggerated impact," Shepherd agrees. Recipients often thank her for the thanks, albeit by phone or e-mail.

And as long as there is war, there will be a hunger for mail that bears the author's touch.

Last year, Sasha Thueringer of Cambridge, Ohio, was home on winter break from college when her dorm forwarded three letters from her fiancé, Ryan Andersen, a medic with the Marines in Afghanistan.

They'd been written in his first week in Afghanistan. Since then, the couple had spoken a few times via satellite phone, but "hearing his voice through the letters was so refreshing, and what he had written took my breath away," she recalls.

What he wrote is between them, but Sasha says that "to think how far those letters traveled was amazing, and to have something he had touched so close to me was more than amazing."

For the rest of Ryan's deployment, Sasha wrote him a letter a day. He got home last May. They married three weeks later.

Video: A refrigerator has never been hacked

A Postmaster Goes to War Against His General (Sep 2011)

http://www.businessweek.com/magazine/a-postmaster-goes-to-war-against-his-general-09292011.html

Employees take aim at a plan to close thousands of post offices

By Devin Leonard

Mark Strong will happily tell you he knows quite a bit more about the post office than the average person. He should. He began his career with the U.S. Postal Service 34 years ago at a rural post office in Montana. Today he is postmaster of Sun City, Ariz., where he commands the country’s largest bike delivery fleet. Strong is also president of the National League of Postmasters of the U.S. It is in this capacity that he is leading a postmasters’ revolt against U.S. Postmaster General Patrick R. Donahoe’s plan to close as many as 3,650 post offices in hopes of staunching the financial losses at his agency. Strong has testified before Congress, warning that closing post offices will leave millions of people without easy access to a basic service. His members have also embarked on a campaign to enlist the public’s help in fighting the closures.

There are more than 26,000 post offices in the U.S. Nearly every one has its own postmaster. Naturally, Strong’s colleagues aren’t thrilled with Donahoe’s cost-cutting efforts, which would mean fewer of their positions. But Strong insists his campaign isn’t merely about self-preservation. He says Donahoe’s plan would be catastrophic for small towns, where the post office often serves as a quasi-community center and information hub. “Rural areas, they only have the post office,” Strong says. “They don’t have banks. Many of them don’t even have cell phone service, let alone the Internet.” Eliminate the post offices in these places, and you might as well wipe them off the map, he argues, perhaps a bit melodramatically.

The USPS downplays the rift with its postmasters. “These are extremely challenging times for the postal service and all of its employees,” says spokeswoman Sue Brennan. The service celebrates postmasters on its website. Two U.S. presidents—Abraham Lincoln and Harry Truman—held the title. So did hotel baron Conrad Hilton and Nobel-Prize-winning novelist William Faulkner. The author of The Sound and the Fury played cards on the job at the University of Mississippi’s post office and could be surly with patrons.

Donahoe, a postmaster himself in Lancaster, Pa., from 1990 to 1992, can’t afford to be nostalgic. The postal service projects a $10 billion loss this year. It will shortly reach its statutory debt limit of $15 billion. That means it is unlikely to make a required $5.5 billion payment on Sept. 30 to fund future retirement benefits. The USPS would like Congress’s blessing to dip into what it describes as $75 billion in overpayments it made for decades to the federal civil service system. Long is enthusiastic about this proposal, too, because it would considerably ease the agency’s financial strain. But the White House doesn’t seem interested, and congressional Republicans are strongly opposed, saying it would amount to a bailout of an agency that hasn’t done enough to cut costs.

Donahoe has estimated that reducing the number of post offices would save about $200 million a year. According to the USPS, 80 percent of post offices lose money. R. Richard Geddes, an associate professor of policy analysis and management at Cornell University, says many rural post offices typically do only $50 worth of business each day. “That is not enough to cover the heat and electricity, let alone the salaries.”

Donahoe would like to move some postal services into supermarkets and convenience stores where they can be run less expensively. Strong doesn’t think much of that idea. He laments they might not offer financial services such as money orders or provide that special quality postmasters bring to the position. “There’s something about having that title,” Strong says. “You’ve got someone who is proud of that job.”

Even so, Strong concedes his fellow postmasters won’t go hungry if Donahoe succeeds in shutting down the post offices. It’s hard to get rid of people who work for the postal service, which may be part of the reason the agency is in such dire shape. Strong says displaced postmasters would qualify for jobs as union-protected letter carriers and clerks if they can’t find other managerial positions. “They’d probably make more money,” he says.


The bottom line: The USPS says 80 percent of the nation’s post offices lose money. Some rural outposts do only $50 worth of business a day.

No more mail? What would Ben Franklin think? (Sep 2011)

Published September 10, 2011 Associated Press

WASHINGTON-- Imagine a nation without the Postal Service.

No more birthday cards and bills or magazines and catalogs filling the mailbox. It's a worst-case scenario being painted for an organization that lost $8.5 billion in 2010 and seems headed deeper into the red this year.

"A lot of people would miss it," says Tony Conway, a 34-year post office veteran who now heads the Alliance of Nonprofit Mailers.

Businesses, too.

The letter carrier or clerk is the face of the mail. But hanging in the balance is a $1.1 trillion mailing industry that employs more than 8 million people in direct mail, periodicals, catalogs, financial services, charities and other businesses that depend on the post office.

Who would carry mail to the Hualapai Indian Reservation in the Grand Canyon? To islands off the coast of Maine? To rural villages in Alaska? Only the post office goes to those places and thousands of others in the United States, and all for 44 cents. And it's older than the United States itself.

Ernest Burkes Sr. says his bills, magazines and diabetes medication are mailed to his home in Canton, in northeast Ohio, and he frequently visits the post office down the street to send first-class mail, mostly documents for the tax service he runs. As his business increased over the past three decades, so has the load of mail he sends, and it's still pretty steady.

"I don't know what I'd do if they'd close down the post offices," said Burkes, who doesn't use rival delivery services such as UPS or FedEx. "They need to help them, just like they helped some of these other places, automobiles and others."

Postmaster General Patrick Donahoe is struggling to keep his money-losing organization afloat as more and more people are ditching mail in favor of the Internet, causing the lucrative first-class mail flow to plummet.

Donahoe has a plan to turn things around, if he can get the attention of Congress and pass a series of hurdles, including union concerns.

"The Postal Service is not going out of business," postal spokesman David Partenheimer said.

"We will continue to deliver the mail as we have for more than 200 years. The postmaster general has developed a plan that will return the Postal Service to financial stability. We continue to do what we can on our own to achieve this plan and we need Congress to do its part to get us there."

He acknowledged that if Congress doesn't act, the post office could reach a point next summer where it doesn't have the money to keep operating.

That wouldn't sit well with Mimi Raskin, a wine and antiques store owner in Grants Pass, Ore., who likes her birthday card mailed. "If you get a birthday card on the Internet, it's like, well, I didn't care about you enough to go to a store, buy a card that suited your personality, and mail it," she said.

Donahoe and his predecessor, John Potter, have warned for years of the problems and stressed that the post office will be unable to make a mandated $5.5 billion payment due Sept. 30 to a fund for future medical benefits for retirees.

A 90-day delay on the payment has been suggested, but postal officials and others in the industry say a long-term solution is needed.

Donahoe has one. It includes laying off staff beyond the 110,000 cut in the past four years, closing as many as 3,700 offices, eliminating Saturday delivery and switching from the federal retirement plan to one of its own.

Cliff Guffey, president of the American Postal Workers Union, called the proposal "outrageous, illegal and despicable."

A contract signed in March protects many workers from layoffs. Guffey said the attempt to change that now "is in utter disregard for the legal requirement to bargain with the APWU in good faith." Other unions, including the National Association of Letter Carriers, are negotiating their contracts with the post office.

Yet Donahoe's efforts are drawing praise from people such as Conway, the head of the nonprofit mailers, who says these are necessary steps that officials have shied away from in the past.
Several bills proposing ways to fix the agency are circulating in Congress. One, by Rep. Darrell Issa, R-Calif., would impose a control board to make the tough decisions.

When it was first introduced, the bill was perceived as "way out there," Conway said. But as the postal financial problems have become more obvious, "you're seeing people thinking maybe it isn't that extreme."

Gene Del Polito, of the trade group American Association for Postal Commerce, said now that Donahoe has offered a plan, "why not give him the authority do to do what needs to be done." If that fails, then a control board could be instituted, he said.

Closing offices seems an easy way to save, but members of Congress never want cuts in their districts, and while the public may mail less, people still want their local office to stay open.

The changes that Donahoe are proposing would mean a different post office, but one that still operates for people such as Jovita Camesa, who's 75 and lives in a downtown Los Angeles retirement complex. She said she's sending more first-class mail than ever due to her expanding circle of grandchildren.

Camesa said she wouldn't think to use the Internet for those birthday and holiday greetings, or start going online to seek out the articles she now reads in the issues of Vogue, Readers Digest, Prevention and other magazines that are delivered to her. "I'm not interested in the Internet or computers," she said. "I'm very traditional."

Ellen Levine, editorial director of Hearst Magazines, told a Senate hearing that the Internet has not eliminated the need for mail delivery of magazines.

"Nearly all publishers use the United States Postal Service to deliver their magazines to subscribers," she said. "While most consumer titles are also available on newsstands, mail subscriptions will remain the major component of hard-copy magazine circulation in the United States for the foreseeable future." Overall, Levine said subscriptions account for about 90 percent of magazine circulation.

Olive Ayhens, an artist who lives in Brooklyn, N.Y., says she pays her bills online but still uses first-class mail. She was mailing announcements of her newest gallery opening; one was going to her son in London.

"Less than a dollar, I'm sending to London," she said during a stop at the James A. Farley Post Office in Manhattan.

The internet, along with the advent of online bill paying, has contributed to a sharp decline in mail handled by the post office, from 207 billion in 2001 to 171 billion last year. Although the price of stamps has increased from 34 cents to 44 cents over the same period, it is not enough to cover the post office's bills, in part because of higher labor costs.

Yet one of the biggest problems isn't mail flow or labor or other costs. Rather, it's a requirement imposed by Congress five years ago that the post office set aside $55 billion in an account to cover future medical costs for retirees. The idea was to put $5.5 billion a year into the account for 10 years. That's $5.5 billion the post office doesn't have.

No other government agency is required to make such a payment for future medical benefits, so why not drop it for the post office.

Like everything in Washington, it's not that simple.

The Postal Service is not included in the federal budget, but the Treasury Department account that receives that payment is.

That means that when the post office deposits that money, it counts as income in the federal budget. So, if it doesn't make the payment, the federal budget deficit appears $5.5 billion bigger, something few members of Congress are likely to favor.

In announcing his bill, Issa warned of a need to avoid a "bailout" of the post office, which does not receive taxpayer money for its operations.

Others, however, have characterized the $5.5 billion payments as a post office bailout of the federal budget because it makes the deficit appear smaller.

"We have made that argument," said Del Polito. But it has been rejected with the argument that the payments are required by law and ending them requires a change in the law.

That problem of appearing to increase the federal deficit creates a reluctance to deal with the matter directly, Del Polito said.

So where does that leave the post office and those Americans who don't have access to the internet?

Sen. Joe Lieberman, I-Conn., suggested more people start sending passionate letters as a way to save the agency.

As good an idea as love missives may be, they are unlikely to be enough.

The Electronic Nails in the Post Office’s Coffin (Sep 2011)

http://www.businessweek.com/magazine/the-electronic-nails-in-the-post-offices-coffin-09082011.html

Startups such as Zumbox, Manilla, and Doxo add to the USPS’s woes by digitizing bills and statements

By Tom McNichol

As if the U.S. Postal Service weren’t already in enough financial trouble, a growing number of startups are about to make its future even more uncertain. They’re trying to lure one of its main revenue sources—the nearly 48 billion bills, statements, account notices, and offers that companies send to households every year—into the electronic realm. That could make the USPS’s $3.1 billion third-quarter loss seem like small change. The companies aim to do so with secure online services that, unlike e-mail, are inaccessible to spammers and allow consumers to receive, organize, and respond to important correspondence all in one digital place. Matt Swain, associate director at research firm InfoTrends, calls the technology “a potential game-changer.”

Zumbox, a Los Angeles firm launched in December 2009, was the first digital mail service out of the gate. With $17.7 million in venture funding from private investors including former Walt Disney (DIS) Chief Executive Officer Michael D. Eisner, the company is creating a digital mailbox for every street address in the country. (Ironically, it’s using a freely available USPS database to do so.) When customers sign up, Zumbox mails them a PIN which they must use to register their account, a step that verifies the link between the virtual Zumbox and the real-world address. That assures mail senders that information is going to the right household. Users can then access their Zumbox, free of charge, to receive and store electronic mail, pay bills, and opt out of paper mailings. “There’s sort of an inevitability about the migration of the mail to digital,” says Zumbox CEO John Payne.

The inevitable can’t come quickly enough for some companies. In 2010, for the first time, households reported paying more bills electronically than by mail, according to the most recent USPS Household Diary Study. But only about 15 percent of consumer bills and statements are delivered exclusively online. Businesses spend about $30 billion each year printing, collating, and mailing documents, and a typical bill costs a company anywhere from 70¢ to a dollar to deliver. Zumbox charges senders as little as 20¢. “Mailing is all about the cost of postage,” says Frank Delfer, chief technology officer of DST Output, an El Dorado Hills (Calif.) company that processes 2.3 billion paper bills, statements, and financial documents annually for large companies. DST started offering Zumbox to its customers in early August. “Digital postal mail lets companies save money compared to the way they’re doing it today.”

Zumbox already has competition. In January, Pitney Bowes (PBI), a maker of postage meters and machines, announced plans to offer a service called Volly that, like Zumbox, will create a digital mailbox tied to a customer’s mailing address. Manilla, a startup owned by Hearst that launched in February, characterizes itself as a free personal account management service. It can’t actually receive mail as Zumbox does, but once users give Manilla the credentials for their business accounts, the site provides an organized view of all their bills, finances, travel rewards programs, and subscriptions, along with payment reminders. Doxo, begun in October 2010 and backed in part by Bezos Expeditions, which manages Amazon.com (AMZN) founder Jeff Bezos’s personal investments, operates similarly to Manilla but also allows users to upload and store documents.

All the services are free to consumers and make money by charging mailers a per-document fee when customers agree to paperless billing. They also promise to do away with junk mail, since spammers won’t be able to infiltrate the gated electronic system set up by the digital mail services. That doesn’t mean the mailboxes will be entirely annoyance-free. Zumbox says it plans to allow verified marketers to send mail—otherwise known as spam—but that customers can filter those messages and opt out of unwanted marketing. And while no online service is completely impervious to being hacked, the digital mail providers have invested in the same level of encryption and security that banks use.

Right now, the various digital mailbox services are rushing to form partnerships with companies that send out bills and statements, while building up their user base. Manilla is taking out two-page spreads in Hearst magazines such as Cosmopolitan and Redbook, and Zumbox has launched a million-dollar sweepstakes to get people to sign up and refer friends. Pitney Bowes has promised to commit 5¢ to 10¢ per share, or about $20 million, for market development of Volly.

Swain, the InfoTrends analyst, expects more companies to jump into the digital mailbox business. Digital postal mail has already caught on in Finland and Denmark, he says, and New Zealand’s postal service recently licensed Zumbox’s platform. The country plans to roll out digital mail to 1.45 million households as early as year’s end. If the trend holds in the U.S., then in a few years’ time, the USPS may have nothing to deliver other than the mail no one really needs.


The bottom line: Digital mail services are targeting the 48 billion bills, statements, and financial documents sent by companies through USPS every year.

The U.S. Postal Service Nears Collapse (May 2011)

http://www.businessweek.com/print/magazine/content/11_23/b4231060885070.htm

Delivery of first-class mail is falling at a staggering rate. Facing insolvency, can the USPS reinvent itself like European services have—or will it implode?

By Devin Leonard

Phillip Herr looks like many of the men who toil deep within the federal government. He wears blue suits. He keeps his graying hair and mustache neatly trimmed. He has an inoffensively earnest manner. He also has heavy bags under his eyes, which testify to the long hours he spends scrutinizing federal spending for the U.S. Government Accountability Office, the congressional watchdog agency where he is Director of Physical Infrastructure Issues. As his title suggests, Herr devotes much of his time to highway programs. But for the past three years he has been diagnosing what ails the U.S. Postal Service.

It's a lonely calling. "Washington is full of Carnegie and Brookings Institutes with people who can tell you every option we have in Egypt or Pakistan," laments Herr, who has a PhD in anthropology from Columbia University. "Try and find someone who does that on the postal service. There aren't many."

Yet Herr finds the USPS fascinating: ubiquitous, relied on, and headed off a cliff. Its trucks are everywhere; few give it a second thought. "It's one of those things that the public just takes for granted," he says. "The mailman shows up, drops off the mail, and that's it."

He is struck by how many USPS executives started out as letter carriers or clerks. He finds them so consumed with delivering mail that they have been slow to grasp how swiftly the service's financial condition is deteriorating. "We said, 'What's your 10-year plan?' " Herr recalls. "They didn't have one."

Congress gave him until the end of 2011 to report on the USPS's woes. But Herr and his team concluded that the postal service's business model was so badly broken that collapse was imminent. Abandoning a long tradition of overdue reports, they felt they had to deliver theirs 18 months early in April 2010 to the various House and Senate committees and subcommittees that watch over the USPS. A year later, the situation is even grimmer. With the rise of e-mail and the decline of letters, mail volume is falling at a staggering rate, and the postal service's survival plan isn't reassuring. Elsewhere in the world, postal services are grappling with the same dilemma—only most of them, in humbling contrast, are thriving.

The USPS is a wondrous American creation. Six days a week it delivers an average of 563 million pieces of mail—40 percent of the entire world's volume. For the price of a 44¢ stamp, you can mail a letter anywhere within the nation's borders. The service will carry it by pack mule to the Havasupai Indian reservation at the bottom of the Grand Canyon. Mailmen on snowmobiles take it to the wilds of Alaska. If your recipient can no longer be found, the USPS will return it at no extra charge. It may be the greatest bargain on earth.

It takes an enormous organization to carry out such a mission. The USPS has 571,566 full-time workers, making it the country's second-largest civilian employer after Wal-Mart Stores (WMT). It has 31,871 post offices, more than the combined domestic retail outlets of Wal-Mart, Starbucks (SBUX), and McDonald's (MCD). Last year its revenues were $67 billion, and its expenses were even greater. Postal service executives proudly note that if it were a private company, it would be No. 29 on the Fortune 500.

The problems of the USPS are just as big. It relies on first-class mail to fund most of its operations, but first-class mail volume is steadily declining—in 2005 it fell below junk mail for the first time. This was a significant milestone. The USPS needs three pieces of junk mail to replace the profit of a vanished stamp-bearing letter.

During the real estate boom, a surge in junk mail papered over the unraveling of the postal service's longtime business plan. Banks flooded mailboxes with subprime mortgage offers and credit-card come-ons. Then came the recession. Total mail volume plunged 20 percent from 2006 to 2010.

Since 2007 the USPS has been unable to cover its annual budget, 80 percent of which goes to salaries and benefits. In contrast, 43 percent of FedEx's (FDX) budget and 61 percent of United Parcel Service's (UPS) pay go to employee-related expenses. Perhaps it's not surprising that the postal service's two primary rivals are more nimble. According to SJ Consulting Group, the USPS has more than a 15 percent share of the American express and ground-shipping market. FedEx has 32 percent, UPS 53 percent.

The USPS has stayed afloat by borrowing $12 billion from the U.S. Treasury. This year it will reach its statutory debt limit. After that, insolvency looms.

On Mar. 2, Postmaster General Patrick R. Donahoe warned Congress that his agency would default on $5.5 billion of health-care costs set aside for its future retirees scheduled for payment on Sept. 30 unless the government comes to the rescue. "At the end of the year, we are out of cash," Donahoe said. He noted that the unusual requirement was enacted five years ago by Congress before mail started to disappear.

This should be a moment for the country to ask some basic questions about its mail delivery system. Does it make sense for the postal service to charge the same amount to take a letter to Alaska that it does to carry it three city blocks? Should the USPS operate the world's largest network of post offices when 80 percent of them lose money? And is there a way for the country to have a mail system that addresses the needs of consumers who use the Internet to correspond?

The Capitol Hill debate is primarily about money. The USPS and its employee unions are lobbying for the least painful remedy: They want the agency to be relieved of its requirement to build a health-care trust fund for its future retirees. They are supported by junk mailers, greeting card manufacturers, and magazine publishers whose businesses are, in some cases, subsidized by the post office's generously low mailing prices. Never mind that their benefactor loses money on some of their products, most notably magazines and some junk mail.

Democrats receive the vast majority of the contributions made by postal workers' unions, according to campaign finance records, so they tend to be sympathetic. President Barack Obama inserted a proposal in his 2012 budget to absolve the USPS of $4 billion of its retiree health-care liabilities in 2011. This would enable it to slog through another year without extraordinary changes. Meanwhile, Senator Thomas Carper (D-Del.) introduced a bill on May 17 that would relieve the USPS of its prefunding headaches. "If we do nothing, we face a future without the valuable services that the postal service provides," Carper cautioned in a statement the same day. The bill would give the postal service access to as much as $75 billion it claims to have overpaid the federal retirement system. Naturally, the USPS and its unions are pushing for this because it would swiftly erase the agency's red ink. Others in Washington dispute the postal service's claim and call this wishful thinking at a time when there is such concern about the rising deficit. They also add that the bill would do nothing to address the larger issues afflicting the USPS.

House Republicans are less charitable. They oppose anything that could be construed as a bailout. They are pushing instead for the USPS to make deep budget cuts. Even so, budget hawks sound nervous. In a March hearing, the often provocative U.S. Representative Darrell Issa (R-Calif.) said two post offices could be closed in every congressional district. He added with a laugh: "Let's hope there's not one—or three—in mine." (A spokesman for Issa says that the congressman was trying to "introduce a bit of levity" into the proceeding and is fully in favor of shuttering postal facilities.)



The irony of the political stalemate is that it may be much simpler to fix the USPS than more intractably troubled federal programs such as Medicare and Social Security. Indeed, many other countries have figured out profitable ways to run a postal service. The U.S. could learn a lot from them. Yet hardly anybody is talking about this, except for Herr.


It's a sunny afternoon in early March, and Patrick Donahoe is talking about music. "Are you a fan of the Allman Brothers?" he asks. "They used to sing that song One Way Out. There's a way out."

The 73rd Postmaster General sits comfortably in a blue leather chair in his wood-paneled Washington office, surrounded by postal artifacts. There's a portrait of original Postmaster Benjamin Franklin on loan from the Smithsonian Institution and a bronze statue of a Pony Express rider. Donahoe, a car buff, has also decorated the room with sports car stamps.

A broad-shouldered 55-year-old from Pittsburgh, he looks like he could easily deliver a heavy sack of mail. He has toted plenty in his time. He started as a clerk in his hometown mail sorting center when he was in college. "I just never left," Donahoe chuckles. "That's the story of a lot of people around here."

Donahoe, who took office in January, is surprisingly upbeat for someone in charge of an agency on the verge of bankruptcy. He says he wants to dispel "some of the negative vibes that have been floating around" the postal service. He acknowledges that first-class mail is in an inexorable decline, but he sees junk mail rebounding with the economy. In the last quarter of 2010, junk revenue climbed 7.1 percent. "That proves that there is viability in our system," Donahoe insists. (Unfortunately for the USPS, junk volume has since plateaued.)

The Postmaster General promises that if the USPS is excused from its annual health-care prepayment, he will wring enough costs out of the system to turn a profit on its remaining mail stream. He wants permission from Congress to cut weekly delivery from six to five days, which he says will save $3 billion a year. He says he wants to reduce the USPS’s headcount by 20 percent over the next five years through attrition; the agency’s union contracts prohibit layoffs.

What's more, Donahoe wants to close post offices and move some of their operations into convenience stores and supermarkets, where nonunion workers can staff them. The USPS is targeting 2,000 of its 31,871 post offices. That's not much for an agency that's nearly $15 billion in debt. Donahoe says he's doing what he can, despite a federal stricture that forbids the closing of post offices solely for economic reasons. He tells anybody who will listen on Capitol Hill that the prohibition makes little sense at a time when his agency's coffers are nearly depleted.

Some praise Donahoe for his early efforts. "I'm really high on the guy," says Anthony W. Conway, executive director of the Alliance of Non-Profit Mailers, a coalition of colleges, fraternal organizations, and advocacy groups that use the mail for fundraising. "Pat," he says, "is a breath of fresh air."

The USPS has historically placed the interests of its unions first. That hasn't changed. In March it reached a four-and-a-half-year agreement with the 250,000-member American Postal Workers Union, which represents mail clerks, drivers, mechanics, and custodians. The pact extends the no-layoff provision and provides a 3.5 percent raise for APWU members over the period of the contract, along with seven upcapped cost-of-living increases. The union is happy. "Despite the fact that the postal service is on the edge of insolvency, the union and management have reached an agreement that is a 'win-win' proposition," said APWU President Cliff Guffey on the union's website. A USPS spokeswoman said the agency agreed to the raise because it feared the decision would otherwise be made by an arbitrator who might be even more deferential to the union.



Congressional Republicans say the agreement sets a bad precedent for the USPS's other three unions, whose contracts expire this year. Fredric V. Rolando, president of the 275,000-member National Association of Letter Carriers, doesn't sound like he's interested in making major concessions. He argues the agency should be increasing rather than cutting its services. One of his ideas is to outfit postal trucks with sensors so mail carriers can thwart possible biological terrorist attacks. "They can work with Homeland Security to detect things that are in the air," Rolando says. The Homeland Security Dept. declined to comment.


The more Phillip Herr tried to figure out the USPS and its financial agonies last year, the more he was vexed by something: He couldn't say for sure how poorly it was doing because he had nothing to contrast it with. "There is always the 'compared to what?' question," Herr says. "Compared to FedEx? Compared to UPS?"

Herr thought it made more sense to compare the USPS to postal services in other countries. Last summer he sent a small team of analysts to Finland, Sweden, Germany, Switzerland, Austria, and Canada. He was fascinated by what they discovered.

Three decades ago, most postal services around the developed world were government-run monopolies like the USPS. In the late '80s, the European Union set out to create a single postal market. It prodded members to give up their monopolies and compete with one another. The effort roused an industry often thought to be sleepy and backward-looking.

Many countries closed as many of their brick-and-mortar post offices as possible, moving these services into gas stations and convenience stores, which then take them over—just as the USPS is trying to do now, only far more aggressively. Today, Sweden's Posten runs only 12 percent of its post offices. The rest are in the hands of third parties. Deutsche Post is now a private company and runs just 2 percent of the post offices in Germany. In contrast, the USPS operates all of its post offices.

Some of these newly energized mail services used the savings to pursue new business lines. Deutsche Post bought DHL, a package deliverer that competes with FedEx and UPS. "More than half of our workforce is outside of Germany," says Markus Reckling, executive vice-president for corporate development at Deutsche Post. "It's pretty much the same thing for our profits."

Many used their extra cash to create digital mail products that allow customers to send and receive letters from their computers. Itella, the Finnish postal service, keeps a digital archive of its users' mail for seven years and helps them pay bills online securely. Swiss Post lets customers choose if they want their mail delivered at home in hard copy or scanned and sent to their preferred Internet-connected device. Customers can also tell Swiss Post if they would rather not receive items such as junk mail.

Sweden's Posten has an app that lets customers turn digital photos on their mobile phones into postcards. It is unveiling a service that will allow cell-phone users to send letters without stamps. Posten will text them a numerical code that they can jot down on envelopes in place of a stamp for a yet-to-be-determined charge.

Anders Asberg, Posten's head of marketing and development, says the service is experimenting with these initiatives, and he expects some will prove to be lucrative. "The customers are all on these digital interfaces now," he says. "That's where the growth is going to be in the future."

Posten can afford to take chances. In 2009 the Swedish mail carrier merged with Post Danmark, the Danish postal service, creating PostNord, a company with $6.2 billion in net sales and $320 million in EBITDA. In 2010 the latter rose by 43 percent, to $490 million.

"The question is, are there any special circumstances that suggest all these other countries are wrong and we are right?" says James I. Campbell Jr., a consultant in Potomac, Md., who advises foreign governments on postal policy issues. "The answer is pretty simple: The European countries are on a reasonably viable course. The U.S. is not."



Herr traveled to Sweden, Switzerland, and Finland last summer. He met with Posten executives who told him how hard they had worked to sell their plans to close post offices to a skeptical public. Not everyone approved. Some Swedes were very upset. Eventually, they got over it. In the end, they got their mail as efficiently and reliably as before.

In Switzerland, Herr met with Swiss Post executives who demonstrated the digital mail service. "You can say, 'Here's what I want,'" he explains. "'No, thank you, I'd rather not have that seed catalogue. But I would like to have my bill from Citibank (C) and my mortgage.' Well, maybe the advertising mail people wouldn't be too excited about that."

Herr returned to America full of excitement. In February he delivered a 40-page report to the House subcommittee that oversees the postal service. It makes two major points: The USPS needs to close post offices, as many foreign postal services have done despite real opposition. And the USPS needs to create products for its wired customers if it wants to play a role in the future of communication. He acknowledges some foreign digital services are in early stages, but they are in demand, and in some cases the digital technology reduces delivery costs.

Joseph Corbett, the American postal service's chief financial officer, thanked Herr for his efforts. At the same time, he said the agency was sticking to its plan. Postmaster Donahoe says he isn't so sure about the digital mail initiatives emerging outside the U.S. "The value added there might not be as much as everybody thinks," he says. Joanne Veto, a USPS spokeswoman, said in an e-mail that the USPS had hired outside consultants who examined some of these digital mail offerings and advised the agency not to pursue them: "While foreign posts did make money by diversifying their products, it took as many as 20 years before a profit was realized. In the short term, there was limited or no profit. We do not have 20 years."

Under Donahoe, the USPS is focused instead on trying to slow the migration of its customers to the Net. The man in charge of this task, which brings to mind King Canute's attempts to hold back the incoming tide, is Paul Vogel, a former letter carrier who is now the postal service's chief marketing sales officer. He is less spirited than his boss and understandably so; his job is to persuade banks to keep sending paper statements in the mail. It's a losing battle, and Vogel knows it. "Inevitably, it's going to go to those new technologies," he sighs.

Herr couldn't agree more. The other day he got a notice in the mail from the U.S. Senate Federal Credit Union. It said it was going paperless in August. Customers who still want to get their statements mailed to them would have to pay a fee. He dropped by the office on Capitol Hill to find out how much. "I have a disproportionate interest in things like this, given the work I've been doing lately," Herr says.

A credit union worker told him the fee was $5 a month. Herr was astonished. "I thought to myself, that's $60 a year," he recalls. "Who's going to want to do that? What happens when Bank of America (BAC) or Citigroup says you are going to have to pay to get your statement on paper? That's going to change a lot of behavior. It's going to affect the postal service. That's how they make most of their money."


The baying begins as soon as Jim Rice climbs out of his truck with his mail sack on his shoulder. He looks around warily. "This is the street where I've had some issues with dogs," he says.

It's a pleasant morning in early April, and Rice, a 58-year-old letter carrier, is going from house to house on Rugby Road in Cardinal Valley, a blue-collar neighborhood in Lexington, Ky. He hardly appears a threat in his white pith helmet and ill-fitting blue uniform. The pets on his route have a different view. Rice has fought off Piper, a black Labrador retriever. He recently used his mail pouch to fend off Rocky, a German shepherd.

The Kentucky letter carrier is stoic about his scrapes. Some things about his job are eternal. Others are changing rapidly. He carries a lot more of what he calls "standard mail." "Civilians call it junk mail," Rice says, joking. "We don't like that term. We call it job security."



Rice's ritual hand delivery of the mail remains the essence of the USPS's business. Until fairly recently, this was a fabulous model, although its history of success, in retrospect, is notable for its missed opportunities.

As America's population expanded, so did the postal service. In its early years, people paid to receive mail. In 1863 the U.S. Post Office Dept., a Cabinet level agency, was flush enough to begin offering free city delivery. In 1896 it expanded free service to rural areas, providing what it now refers to as "universal service" to all Americans. Mail volume exploded. In cities such as Philadelphia and Boston, letter carriers made their appointed rounds three times a day.

Inevitably, perhaps, there were problems. The post office became a patronage dumping ground. After decades of mismanagement and neglect, service broke down completely in Chicago in 1966. "The sorting floors were bursting with more than 5 million letters, parcels, circulars, and magazines that could not be processed," Lawrence O'Brien, the Postmaster General at the time, would recall somewhat poetically. "Outbound mail sacks formed still gray mountain ranges as they waited to be shipped out."

Four years later, President Richard M. Nixon signed the Postal Reorganization Act, transforming the Post Office Dept. into the U.S. Postal Service, a government corporation that was supposed to pay for itself and behave more like a private business. This proved a naive assumption. The USPS's leaders rewarded their union employees with more expensive benefits than most federal employees enjoy. According to the U.S. Postal Service Inspector General's Office, it covers 79 percent of most of its employees' health benefits, compared with the typical 72 percent for federal workers.

The USPS was slow to react to shifts in the industry. In the late '70s, Congress prodded it to allow private companies to carry letters needing urgent delivery. FedEx and UPS built enormously valuable businesses on the USPS's turf. They weren't required to visit every doorstep in the country on a daily basis. They set their own rates and had no qualms about extracting concessions from their unions. The postal service tried to compete, without much success. "They just cleaned the postal service's clock," says Tad DeHaven, a budget analyst at the Cato Institute, a libertarian think tank in Washington. It didn't matter at the time. The agency had its slower-moving letter monopoly, and mail volume kept climbing.

The USPS slumbered as the postal service industry was upended overseas. Michael Coughlin, former Deputy Postmaster General, attended meetings in Brussels in the early 1990s where his peers in Sweden and Germany described the innovative things they were doing. "I would sit there and think, I wish that was us," he says. Coughlin left the USPS in 1999 to work at Accenture (ACN), a global consulting firm, where he advised foreign postal services on their streamlining efforts. He retired in 2009.

In the late '90s, there was talk within the USPS about reforms, including privatizing the organization. Robert Reisner, a former USPS vice-president of strategic planning, recalls raising some of these issues during a visit to the White House with a Clinton Administration official: "She said, 'Well, we would have to ask our union friends. You know they are critical to the coming campaign.' "

At the same time, e-mail took hold. By 2000 the USPS was losing money. The GAO warned that the service might not be able to cover its retiree health-care costs.

Congress came up with what it thought would be a fix. In 2006 it relieved the postal service of $27 billion in pension liabilities for workers with military service. At the same time, the USPS agreed to make annual payments of $5.5 billion for the next 10 years to build up a fund for future retirees. John E. Potter, the Postmaster General at the time, was ecstatic when the bill was signed into law. "We're planning for the future right now," he said. "Today the postal service is operating in the black."



The USPS was O.K. that year. Then, over the next three years, the economy collapsed, and the service lost $12 billion.

A former letter carrier in the Bronx, Potter remained ebullient. He testified before Congress in 2009 that mail volume would eventually return. Herr sat nearby. He says he was stunned. Potter announced his resignation six months after Herr issued his report on the USPS's broken business model. The postal service rushed out a study of its own around the same time by McKinsey that reached the same dispiriting conclusions.

The USPS, however, still seems to be in denial. "The postal service is already carrying more junk than first class," says postal consultant Campbell. "Pretty soon it's going to be a government-run advertising mail delivery service. Does that make any sense? It doesn't make any sense."

There are still flaws in the USPS's junk-centric plan. The service now predicts that total mail volume will decline from 171 billion pieces annually in 2010 to 150 billion in 2020. That's a best-case scenario. The worst-case, according to its own projections, is 118 billion.

That's still a lot of stamps to sell. The problem is that costs keep rising. The number of addresses the USPS services climbs at an average of roughly 1 million a year as the population grows. Meanwhile, the agency continues to raise the salaries and benefits of its clerks and mail carriers even with periodic freezes.

"I really believe that the USPS is going to get to a point where, regardless of what it does with the prefunding [of retiree health care], it is going to implode," says R. Richard Geddes, an associate professor of policy analysis and management at Cornell University. "It is either going to default on those obligations to its retirees or we are going to have to give it a direct bailout from the United States taxpayers."

The implosion could happen this year because of the stalemate in D.C. Maybe that's what it will take for Americans to get a modern mail service. Even Donahoe, who advocates something less, sounds as if he would welcome it because there's no other way out. "Some people say if you crash the system," he says, "then people will pay attention to you."