Postal Service looks to new Congress for rescue

http://news.yahoo.com/postal-looks-congress-rescue-174135724--sector.html

The Congress that expired this week might have steered the nation away from the "fiscal cliff" of potentially devastating tax hikes and spending cuts, but it did not do much to save the U.S. Postal Service from its own fast-approaching cliff.

The cash-strapped mail carrier that lost almost $16 billion in the past year, ran into its legal borrowing limit and defaulted twice on required payments to the federal government, now turns to the newly sworn-in Congress for help.

The Postal Service loses $25 million every day, it says, as more Americans communicate by email and the massive payments for future retiree benefits take a toll.

It could run out of money in a little more than nine months, according to some estimates.

But Congress, bogged down by disagreements between lawmakers from rural and urban districts and distracted by fiscal policy fights, has not been able to agree on legislation to overhaul the struggling agency.

A bipartisan bill passed the Democratic-led Senate last year that would have ended Saturday mail delivery and eased its benefit payment obligations.

But the Republican-led House of Representatives, which had advocated for aggressive post office closures, never voted on a postal bill.

And several of the key negotiators left Congress or changed committees this week, leaving the future of postal legislation uncertain as the agency's financial condition deteriorates.

"It's important that they prioritize postal service legislation," said Art Sackler, head of the Coalition for a 21st Century Postal Service, which represents mailers. "We don't want to have it get lost again in the big shuffle."

As the 112th Congress expired this week, so did the proposed legislation that would have provided some legislative direction for the Postal Service as it seeks a more profitable business model.

In a prepared statement, Postmaster General Patrick Donahoe called Congress' inaction disappointing and said he would be looking to the new set of lawmakers to make postal reform legislation a priority.

Some of the players are changing. The Senate bill succeeded in large part because it was pushed by a bipartisan group of members, several of whom had experience and knowledge on postal issues.
Joe Lieberman, a Connecticut Independent who led the Senate Committee on Government Affairs, has retired. Massachusetts Republican Scott Brown lost his bid for re-election, and fellow Republican Susan Collins will no longer sit on the relevant committee.

That means all eyes are on Thomas Carper, a Delaware Democrat who now leads the government affairs committee and is expected to lead the Senate push for legislative reform in the new Congress.

House Republicans last year criticized the Senate bill, which they said would only delay the Postal Service's demise, but were unable to get enough support to pass their own bill.

Carper and Republican Representative Darrell Issa of California, the chairman of the House Oversight and Government Reform Committee and a lead voice on postal legislation last year, said in a joint statement on Thursday they were committed to working together to reform the postal service.

Sackler said his group expects that the compromises reached by the previous Senate will be reintroduced in the new Congress.

Some of the compromises, he said, included delaying the ending of Saturday mail delivery for a year while giving the Postal Service time to figure out a profitable business model, as well as spreading the funding of the future retiree health benefits program over 40 years, up from the current 10-year requirement.

The postal service has blamed much of its recent troubles on this pre-funding requirement as well as on the reduced mail volumes as more people communicate electronically. About 70 percent of last year's loss was attributed to the future retiree health benefits program.

"The Postal Service should not have to do business this way, which has undermined the confidence of our customer base and the $800 billion mailing industry we serve," Donahoe said in his written statement, released Thursday.

The Postal Service, he said, had made changes to its operations to allow Congress to pass legislation that will save it. Over the last two years, it has shed about 60,000 jobs, reduced hours at some of the post offices and consolidated some of its facilities, while increasing package volume.

Sackler said, if nothing is done soon, the Postal Service could run out of money by October.

"The bottom line here is that there is a postal cliff impending and Congress really needs to act," he said. "We need the bill passed and signed by the president."

(Reporting By Elvina Nawaguna; Editing by Karey Wutkowski and Vicki Allen)

USPS tests same-day delivery

http://news.yahoo.com/cash-strapped-post-office-tests-same-day-delivery-140931589.html

Emboldened by rapid growth in e-commerce shipping, the cash-strapped U.S. Postal Service is moving aggressively this holiday season to start a premium service for the Internet shopper seeking the instant gratification of a store purchase: same-day package delivery.

Teaming up with major retailers, the post office will begin the expedited service in San Francisco on Dec. 12 at a price similar to its competitors. If things run smoothly, the program will quickly expand next year to other big cities such as Boston, Chicago and New York. It follows similar efforts by eBay, Amazon.com, and most recently Wal-Mart Stores Inc., which charges a $10 flat rate for same-day delivery.

The delivery program, called Metro Post, seeks to build on the post office's double-digit growth in package volume to help offset steady declines in first-class and standard mail. Operating as a limited experiment for the next year, it is projected to generate between $10 million and $50 million in new revenue from deliveries in San Francisco alone, according to postal regulatory filings, or up to $500 million, if expanded to 10 cities.

The filings do not reveal the mail agency's anticipated expenses to implement same-day service, which can only work profitably if retailers have enough merchandise in stores and warehouses to be quickly delivered to nearby residences in a dense urban area. The projected $500 million in potential revenue, even if fully realized, would represent just fraction of the record $15.9 billion annual loss that the Postal Service reported last week.

But while startups in the late 1990s such as Kozmo.com notably failed after promising instant delivery, the Postal Service's vast network serving every U.S. home could put it in a good position to be viable over the long term. The retail market has been rapidly shifting to Internet shopping, especially among younger adults, and more people are moving from suburb to city, where driving to a store can be less convenient.

Postal officials, in interviews with The Associated Press, cast the new offering as "exciting" and potentially "revolutionary." Analysts are apt to agree at least in part, if kinks can be worked out.

"There is definitely consumer demand for same-day delivery, at the right price," said Matt Nemer, a senior analyst at Wells Fargo Securities in San Francisco. "The culture in retail traditionally has been to get a customer into the store, with the immediacy of enjoying a purchase being the main draw. So same-day delivery could be huge for online retailers. The question is whether the economics can
work."

He and others said that consumers are a fickle lot when it comes to shipping, seeking fast delivery, but also sensitive to its pricing. Many will order online and pick up merchandise at a store if it avoids shipping charges, or will agree to pay a yearly fee of $79 for a service such as Amazon Prime to get unlimited, free two-day delivery or even purchase a higher-priced item if it comes with "free" shipping.

"Customers do like same-day delivery when it gets very close to a holiday or it otherwise becomes too late to shop," said Jim Corridore, analyst with S&P Capital IQ, which tracks the shipping industry. "But while the Postal Service has the ability to deliver to any address, they are not always known for their speed. To increase their speed might prove to be a much more complex offering than they're thinking about."

As the Postal Service launches Metro Post and sets pricing, its target consumer is likely to include busy professionals such as Victoria Kuohung, 43. A dermatologist and mother of three young children, Kuohung for years has gone online for virtually all her family's needs, including facial cleansers, books, clothing, toys, diapers and cookware.

Kuohung lives in a downtown Boston high-rise apartment with her husband, who often travels out of town for work. The couple says they would welcome having more retailers offer same-day delivery as an option. Still, at an estimated $10 price, Kuohung acknowledges that she would likely opt to wait an extra day or two for delivery, unless her purchase were a higher-priced electronics gadget or a special toy or gift for her son's birthday.

"I prefer not to spend my time driving in a car, fighting for parking, worrying about the kids, dealing with traffic and battling crowds for a limited selection in stores," said Kuohung, as her 1-year-old-twins and 4-year-old son squealed in the background. "But right now Amazon delivers in two days since I'm a member of Prime, so it would have to be something I can't get at the corner CVS or the grocery store down the street."

Under the plan, the Postal Service is working out agreements with at least eight and as many as 10 national retail chains for same-day delivery. The mail agency says nondisclosure agreements don't allow it to reveal the companies. But given the somewhat limited pool of large-scale retailers — they must have a physical presence in 10 or more big U.S. cities to be a postal partner — the list is expected to include department stores, sellers of general merchandise, clothiers, even perhaps a major e-commerce company or two.

Consumers will have until 2 or 3 p.m. to place an online order with a participating retailer, clicking the box that says "same-day delivery" and making the payment. Postal workers then pick up the merchandise from nearby retail stores or warehouses for delivery to homes between 4 and 8 p.m. that day. In San Francisco, the post office will closely track work hours and travel, which could quickly add to costs depending on traffic, total package volume or the proximity of merchandise in a delivery area.

"We're trying to revolutionize shipping; we're not simply trying to get a niche market of consumers," said Gary Reblin, the Postal Service's vice president for domestic products. He believes people of varying ages and income levels — young adults who don't own cars, older Americans who are less mobile — will welcome avoiding costly or time-consuming trips to the store.

By targeting big partners, Reblin said, the post office eventually hopes to push pricing down by making same-day delivery a standard option on retail web sites.

The new same-day offering is part of the post office's blossoming shipping and packaging business. That sector was one bright spot in the mail agency's dismal 2012 financial report, which showed a loss of $15.9 billion and forecast more red ink next year

This holiday season, the post office expects a 20 percent jump in its package volume, higher than its shipping rivals.

What Would A World Without Mail Look Like?

By Dave Jamieson,
The Huffington Post
http://www.huffingtonpost.com/2012/07/16/going-postal-what-would-a_n_1677892.html

The post office in Syria, Va., is pretty easy to miss, but then so is the village of Syria itself. Lying in the eastern foothills of the Shenandoah mountains, about 90 miles from Washington, D.C., Syria has just a few hundred residents, mostly natives and recent retirees. The village has no stop lights and one general store, the Syria Mercantile Company, which serves as a grocer, a hunting-and-fishing outfitter and a meeting ground for town gossip.

Inside, near the cash register up front, a single employee of the U.S. Postal Service helms a tiny, wood-paneled office about the size of a generous walk-in closet.

Except for when it was briefly displaced after a pair of long-ago fires, the post office has occupied this same spot inside the general store since 1898, according to Jim Graves, the general store's owner. In a village where many residents still don't have internet access, the Syria post office -- like so many post offices around the country -- remains not only one of the few fixtures in town, but also a primary link to the outside world.

So it came as a great shock when the postal service told residents of Syria last year that the small outpost would soon be closing, the victim of budget cuts emanating from Washington.

“The rural area has no say-so,” says Graves, whose family has for generations run Syria Mercantile as well as Graves Mountain Lodge, a resort that’s the largest business in town. “When you get up there to D.C., those people up there have no concept of what’s in a rural area ... They have no idea.”

At all levels of government, budget cuts are hacking at core services that we’ve long taken for granted, from fire departments to public transportation, and the postal service is no different. The agency has been struggling to get its budget in order and climb out of the red. It is currently facing a crisis, having lost $3.2 billion in the last quarter and $3.3 billion in the quarter before that. At this pace, the agency could run out of money soon.

Americans may soon witness the fraying of an institution that, despite the rise of the internet, they still badly need. Even for those of us who pay our bills online, the postal service is intertwined in our daily lives, delivering the products we buy, the magazines we read and, in many cases, the medications we rely on. And for those on the less fortunate side of the digital divide, a society without decent mail service is hard to contemplate. Mail remains the bind between millions of Americans. For many of them, the letter carrier is the only civil servant they see all day. Even the founders recognized the role a postal service plays in a democracy, empowering Congress through the Constitution to create one.

But now, having exhausted its borrowing abilities, the postal service could face bankruptcy. That’s how Syria found itself on a list of 3,700 post offices around the country targeted for closure, many of them in rural areas where the next post office could be many miles away.

In Syria’s case, their new local post office would be about 10 miles south to Madison, the county seat -- not so far as the crow flies, but a long way on back-country roads and switchbacks, especially with gas over $3 a gallon.

“You get back in the hollows down here, some people would have to go 15 or 20 miles,” says Gene Pells, 75, a retiree in Syria. That means some residents might have to drive more than a half hour to mail a package, pick up some stamps, or buy or redeem a money order. According to Pells, some locals who can’t read also come to the post office to get help paying their bills.

“A lot of people here are pretty well in the dark,” says Pells. “We have no access to cell [service] where we are, and no access to high-speed internet until fairly recently.”

The controversy exposed a few nerves in town. Plenty of residents didn’t take kindly to Washington putting an axe to their century-old office, where for decades families have been making a daily pilgrimage to retrieve their mail at the window, chatting at the informal parlor often assembled at the front of the store. More than 170 people signed a petition, organized by Pells and a few allies, protesting the closure.

Under heavy opposition, the postal service ultimately scrapped its plan to shutter the Syria post office back late last year. But then earlier this year it announced it would be cutting the branch’s hours -- from normal business hours to just two per day, right around lunchtime -- as it would for thousands of others around the country. The lone full-time employee at the Syria office would probably be looking for new work after an unexpected early retirement.

To save the postal service, lawmakers and the agency’s own leadership want to dramatically scale back its workforce and operations. Postal workers and some public advocates warn that such moves will send the agency off a cliff, destroying a service as old as the republic itself, not to mention hundreds of thousands of jobs.

If that happens, the ramifications will be felt not just in small towns like Syria, but everywhere. And Americans who use the post office -- which is to say all Americans -- may have to adjust their expectations of government and what it does for them.

“I have a 93-year-old father in rural, south Alabama,” says Ben Cooper, president of a business association called the Coalition for a 21st Century Postal Service. “He knows what time the letter carrier comes. If he doesn’t come at the right time, my father blames the government. Most people out there have a hard time getting their hands around trillions of dollars of debt and the [European Union] and all of this. But they see the government in simple things like the postal service. If it fails and it doesn’t do what’s expected of it, people see the fabric crumbling.”

MAIL IS LIKE OXYGEN
Patrick Donahoe, the U.S. postmaster general since 2010, has put himself in an unusual position for a civil servant. He’s essentially pleading with Congress to allow him to put his own agency through significant cuts.

To right the agency, he says it’s necessary to pare back the workforce by another 150,000, eliminate Saturday delivery and close postal facilities that are a drag on the agency’s bottom line.

“Americans are smart people. They know we can’t have the same levels of service and the same size of an organization as we did in the past,” Donahoe says. “We don’t want to be a burden. We take no tax money. We want to run this like any other business.”

Though overseen by the federal government, the postal service is an independent agency whose budget comes from postage fees, not taxpayer dollars. It’s a business that isn’t really a business -- a corporation that must answer to Congress whenever its managers want to make structural changes.

Because of this quasi-corporate, quasi-governmental standing, the postal service suffers from an inherent conflict, says Ron Bloom, the turnaround expert who helped lead the bailout of the auto industry.

“You must make money, and you must carry out all these social functions at the same time,” Bloom says.

Unlike other businesses, the postal service has a “universal service” obligation, meaning it must serve every American home and business -- including the most far-flung. It must also charge the same price for a letter whether it’s going from New York City to Greenwich, Conn., or from New York City to Anchorage, Alaska.

Those letters generate the bulk of the postal service’s budget. High-density areas subsidize low-density areas, and the short deliveries subsidize the long ones. The letter you mail across the city for 45 cents helps underwrite the letter you mail across the country for 45 cents.

The Internet has disrupted this system, however. Though the volume of package deliveries has shot up with the rise of e-commerce, it’s not enough to replace the huge losses from the decline in first-class mail. Online billpay, in particular, has sucked business away from the agency, as has the worst recession in decades.

“It’s been unrelenting,” Donahoe says of the fall in first-class mail. “We’re off almost 30 percent over the last five years, from where it was at the end of 2006.”

The postal service has another unique -- and some would say more pressing -- problem. In 2006, before the housing crash and the Great Recession, Congress passed a law requiring the agency to pay for the health care benefits of its retirees decades in advance, putting the agency on the hook for $5.5 billion a year in payments -- a requirement hard to find elsewhere in either the private or public sector.

The mandate may have seemed like prudent long-term planning during rosier economic times, but most observers agree that it’s handicapped the agency. Of the $3.2 billion in losses last quarter, for instance, about $3.05 billion came from the pre-funding burden, not from operational failings.

Ohio Democrat Rep. Dennis Kucinich, a staunch supporter of postal workers, has gone so far as to argue that small-government advocates in Congress created the mandate in order to deliberately cripple the agency and create an excuse to push for cuts. “That was a move that was designed to deal a death blow to the U.S. Postal Service,” Kucinich said at a press conference last month.

Regardless of the mandate, the decline in mail volume is undeniable and will only get worse. Some supporters worry that the attempts to save the agency will end up killing it instead.

“We need to do some major, thoughtful restructuring of the postal service so it can survive in the long run,” says Bloom, who, along with the investment bank Lazard, has been hired by the National Association of Letter Carriers union to devise a turnaround strategy for the agency. “But we don’t need to rush to judgment and slash and burn the very asset the post office has, which is its network. Then it will never recover.”

Donahoe’s critics say his proposed reforms will start the agency on a “death spiral”: If you cut the post office’s core services, customers begin looking at other options, leading inevitably to more financial hardship and further cuts down the line. A majority of Americans may be willing to forgo Saturday delivery and drive farther to buy stamps, but as the value and convenience diminish, so does the agency’s long-term viability, the thinking goes.

“The post office is being pushed to the cliff, into the abyss,” Ralph Nader, the longtime consumer advocate and an acolyte of the death-spiral theory, told The Huffington Post last year. “The ultimate goal is shrinkage -- continual shrinkage and private businesses pick up the cream.”

Consider one likely service cut: the dropping of Saturday delivery. Seven in 10 Americans support the idea if the savings will help the agency survive, according to a recent New York Times/CBS News poll. But it will certainly make the postal service less convenient.

The postal service has already proposed changing its standards for first class. Whereas a first-class letter is expected to arrive within one to three days, that benchmark would be changed to two to three days, eliminating overnight service. Cutting Saturday delivery would make it even slower.

That could be inconvenient for many and even problematic for others, including those who receive prescription medications by mail.

Tonda Rush, president of the National Newspaper Association, says her members worry that a diminished postal service won’t get community papers to subscribers before they’re yesterday’s news.

Diminished service aside, a slimmed-down postal service could have a dramatic effect on the wider economy. As an American employer, the U.S. Postal Service ranks behind only the federal government and Walmart, with roughly 550,000 career employees on its payroll. (Postal service employees often aren’t counted among the federal workforce since they aren’t paid by tax dollars.)
That’s to say nothing of the wider mailing industry, which would include catalog printers, envelope manufacturers and direct-mail advertisers to name just a few -- an estimated 8 million workers and more than $1 trillion in business annually.

If the mail slowed, so could a good chunk of the economy.

“We’re seeing an unraveling of the basis of the system,” says Rush. “Mail is like oxygen. It’s there and you count on it, and you don’t get worried about it until it disappears. There is going to be concern by a lot of people if this goes away. The national concern is going to be enormous.”

WAKE-UP CALL
Congress is expected to soon pass legislation that will overhaul the postal service, likely leaving a much leaner agency in its place.

While Donahoe has requested permission to cut 150,000 jobs, the Democratic-controlled Senate passed a bill in April that would free up money to phase out around 100,000 positions. It would also lighten the pre-funding burden, limit overnight delivery in some areas and allow the agency to start shipping wine and beer like private shipping companies already do.

The plan that Rep. Darrell Issa (R-Calif.) is pushing in the House is more severe. It would allow for the phasing out of more than 150,000 jobs, facilitate a quicker move to five-day delivery and bar no-layoff clauses in labor contracts. It would also establish a commission tasked with cutting costs if the agency wasn’t hitting its benchmarks.

“What we have in the Senate is not perfect, but it’s a very good start,” says Sen. Tom Carper (D-Del.), one of the most vocal lawmakers on the issue. Carper, who logged three tours with the Navy in Vietnam during the war, says he partly sees the postal service through the lens of someone serving abroad. “The folks in Afghanistan, when I go visit them, they get mail and they look for packages, but they don’t need the mail like we did. It’s just a reality. Some people might say it’s a death spiral.

What I think it is is a wake-up call.”

Whatever the final deal, the postal service will probably be much smaller than it used to be.
In justifying the workforce cuts, Donahoe draws parallels with the auto and steel industries. “I was born and raised in Pittsburgh, and my parents worked for General Motors. I’ve seen two examples of not planning ahead and having companies and people suffering,” he says.

“My view is this: A healthy postal service that employs 350,000 to 400,000 and that pays middle-class wages is a heck of a lot better than an unhealthy one that employs 500,000 or 600,000 and runs up debt and scares people out of business.”

Even if the shrinkage is necessary, however, some question the timing. Public-sector job losses due to budget cuts have been a huge drag on the economic recovery, wiping out many of the gains made in the private sector. As the economist Dean Baker has pointed out, 150,000 jobs cut from the postal service would equal several weeks’ worth of recent job growth in this economy.

“Even if we say that’s a good thing to do, it would be much better if we could put that off,” Baker says. “I understand from an accounting standpoint they want [the workers] off the books as soon as possible, but from an economic standpoint, it’s less money going into the economy.”

Another issue is the level of pay earned by postal workers. The job has traditionally been seen as a gateway to the middle class, with wages that reflect that -- a situation that causes resentment among some, in today’s low-pay economy.

As with a lot of public-sector jobs, workers in the private sector tend to view postal employees as overpaid. Paradoxically, the postal service generally receives high marks from the public, with about three quarters of first-class mail customers offering a favorable review of the agency, comparable to FedEx and UPS, according to surveys by the American Consumer Satisfaction Index.

In other words, a lot of people who approve of postal workers’ performance resent the wages and benefits that underwrite and help ensure that performance. Tonya Detrick, a letter carrier from Hagerstown, Md., hears the gripes often, even from relatives.

“The public perception is that we’re overpaid and the taxpayers are paying us,” says Detrick. “People in my family, who I’ve known my whole adult life, still think taxpayers [pay our salaries]. No, you don’t pay my check. The stamp you put on this letter pays my check. But the taxes you pay the federal government do not.”

“I think that our wages are commensurate with where middle-class wages should be,” Detrick adds.

“We need a middle class in this country.”

The postal service was certainly the gateway to the middle class for Detrick, a 24-year veteran. She came to the agency looking for a job as soon as she got out of high school. She and her two siblings were being raised by her mother, who worked long hours for low pay as a retail clerk. They were poor, living together in public housing.

Detrick started out at a salary more than double the minimum wage at the time, she recalled. She had good health insurance and a retirement fund she could count on. She also loved the job.

“I liked meeting people, being outside, feeling like I do a service for the public,” Detrick says. “I’m a people person and it’s a lovable job when you’re a people person ... I’m very satisfied with the life that it’s given me.”

Detrick now earns a salary in the mid-five figures after two decades with the postal service. She’s managed to raise three kids mostly on her own, with one son in college and another headed in the fall. Her well-paying job at the postal service, she says, has made it all possible.

To further complicate the labor issue, postal jobs aren’t just middle-class jobs -- they’re middle-class jobs that have gone disproportionately to veterans and African-Americans. The agency remains one of the largest employers of veterans in the nation, with about one in four carriers having served in the armed forces, according to the National Association of Letter Carriers. About one in five of the agency’s employees are African-American.

Those two communities will bear the brunt of looming job cuts, says Phil Rubio, a former letter carrier who wrote a book, “There’s Always Work at the Post Office,” about African-Americans and the postal service.

“It’s shrinking,” says Rubio. “The post office was one place where African-Americans could find jobs in the 60s and 70s and after that. I’m not African-American, but like them the post office was an avenue to the middle class for me. We purchased our own home, we put our kids through college. Removing that I think is bad for the country in general. Historically, it has been such a rich institution.”

A PERSONAL AFFRONT
Postal unions have been pushing back against the most austere proposals. Unfortunately for them, today’s political atmosphere lends itself to the kind of job cuts and concessions that could fundamentally alter the agency.

GOP governors across the country have blamed public-sector unions for their budget woes. In Wisconsin, Gov. Scott Walker (R) survived a recall election after championing legislation that stripped most of the state’s public-sector workers of their collective bargaining rights. Gov. John Kasich (R) shepherded similar legislation into law in Ohio, although it was eventually overturned by voters. Many House Republicans in Washington have shown sympathy for rolling back the bargaining rights of public-sector workers.

“To destroy public unions, they would just as soon destroy the government agencies as well,” says Cliff Guffey, president of the American Postal Workers Union, which represents many of the workers who aren’t carriers. “There’s a sanctity of the mail that’s important to a lot of people in this country. But there are people who want to dismantle it.”

When it comes to postal reform, Tad DeHaven, a budget analyst at the libertarian Cato Institute, argues that lawmakers cater too much to the postal unions, as well as to their own constituents. Even self-avowed small-government types have a way of losing their convictions when it’s their own post offices on the chopping block.

“It’s supposed to run like a business, but ultimately it answers to 535 people in Congress,” DeHaven says. “They make decisions on the basis of parochial concerns.”

The unions seem to fear Rep. Darrell Issa the most. As chairman of the House Oversight and Government Reform Committee, Issa holds the key to postal reform on the House side. Unions say his attempt to bar no-layoff clauses in labor contracts as part of the postal reform bill would effectively gut their bargaining power. Issa has warned against a government bailout for the agency, arguing that taxpayers would be on the hook for billions due to labor contracts.

“If USPS is prevented from cutting costs, 400,000 USPS jobs will be put in jeopardy and Americans could face an across the board postal rate hike of 25% -- this could affect rates charged by companies like FedEx and UPS as well,” Issa said in a statement to The Huffington Post. “Eighty percent of USPS operating expenses are labor related. Continuing no-layoff protections that do not exist for the rest of the federal workforce will prevent USPS from returning to solvency and meeting its obligations to employees, retirees, and the American people.”

Postal unions had hoped they’d find an ally in Issa. The California lawmaker had actually been one of the biggest beneficiaries of campaign money from postal unions, receiving $41,000 during the 2010 election cycle, according to the Center for Responsive Politics.

But Issa cast postal employees and their unions as a primary obstacle to financial stability in an op-ed he wrote for the Washington Times in 2010. “[T]housands have less than a full day’s work, and some are even paid to sit in empty rooms,” he wrote of workers.

That rhetoric has angered and baffled employees like Robert Williams, 62, of Washington, D.C. Williams is a 39-year postal veteran who serves as president of his union local, the National Association of Letter Carriers 142. The local has about 1,800 members and covers around 90 percent of D.C.-area carriers, Williams says. Like Williams himself, the majority of the local’s members are African-American.

On a recent morning, Williams gave a reporter a tour of the neighborhood he grew up in, Anacostia, a mostly African-American area of Washington with a high poverty rate. Perhaps aware of a lack of sympathy among the general public for postal employees, Williams instead spoke about how cuts to the postal service would impact poorer residents of neglected neighborhoods in cities like Washington.

But when it comes to the anti-labor sentiment, Williams can’t hide his frustration. He draws a line between the predicament facing postal unions and the rollback of collective bargaining in Wisconsin. He seems genuinely hurt by it.

“We negotiated a contract with the postal service,” he says. “That’s what our bargain is. And now someone wants to come and take away our bargain.

“I take it as a personal affront,” he added. “I’m not going after people in the private sector. Make as much money as you want to make ... I don’t think they understand what unions have done. I really don’t think they do. All the things they have now -- five-day weeks, eight-hour workdays, overtime, child labor laws. That’s something organized labor fought for.”

Yet even Williams recognizes the problem posed by the decline in first-class mail, which isn’t an abstraction when you handle letters for a living. “You can see it,” he says of the falling volume.

THE LAST MILE
If the postal service cuts back or disappears altogether, there are two big competitors seemingly waiting in the wings. As Rep. John Mica (R-Fla.), who pushed a plan to privatize Amtrak service, said at a hearing last year: “The postal service is becoming a dinosaur and will soon be extinct ... I usually use FedEx or UPS.”

Those shipping giants may have a combined U.S. workforce comparable to that of the U.S. Postal Service, but they probably wouldn’t fill the void left by the agency. It’s doubtful that UPS and FedEx would be interested in delivering letters, postcards and bills. With web-centric people winnowing down their mail piles, the profits to be made on first-class mail are dwindling.

Besides, they don’t have the universal network that the postal service has in place, and it wouldn’t make sense for them to try to start going door to door making nickel-and-dime deliveries. Unlike the postal service, the private shipping companies have built networks designed for more specialized, high-dollar shipping, not first-class mail.

In fact, FedEx and UPS are actually dependent on the postal service, just like the rest of us. The agency does what’s called “last-mile delivery,” often carrying FedEx and UPS packages on the last leg of their trip. It simply isn’t profitable for the private companies to deliver all the way to remote homes, so they take advantage of the government’s universal service guarantee for many of their home deliveries.

Package delivery is one promising area for the postal service, thanks to the rise of e-commerce, and private industry would probably be happy to pick up the business should the postal service disappear. But the private carriers would also suffer, at least initially, if the postal service starts to contract.

Asked where UPS stands on postal reform, Kara Ross, a company spokeswoman, says, “We think it’s important to have a strong postal service. They contract to us, and we contract to them.” Maury Donahue, a spokeswoman for FedEx, echoes that sentiment, saying in an email that the company “support[s] efforts to ensure that the Postal Service is able to successfully manage its business. We believe that a healthy Postal Service, the largest postal operator in the world, is important to America.”

Private corporations, of course, have no social obligations to the public the way the postal service does. Lose the postal service and you lose a considerable public asset, and maybe something more, says Ellen Dannin, a professor at Penn State’s Dickinson School of Law who follows privatization trends.

“If you are going to have one country, then you have to take actions that help keep you knitted together as a country,” says Dannin. “I think that we are really in danger of losing what I would call important citizenship values ... We have a responsibility to one another to make [the postal service] function effectively.”

First-class Mess: Saving the U.S. Postal Service

http://knowledge.wharton.upenn.edu/article.cfm?articleid=3032

First-class Mess: Saving the U.S. Postal Service Published : June 20, 2012 in Knowledge@Wharton

The United States Postal Service (USPS) is in dire financial straits -- and the solution will involve painful restructuring. The reason: Like many large, once successful organizations, the USPS failed to adapt to sweeping technological changes that have altered how Americans do everything from paying bills to communicating with friends and family. With the USPS facing a possible cash crunch this fall, the service is scrambling to cut costs, and legislators in Washington, D.C., are debating a new law that would transform the organization. The question now is whether the overhaul of the postal service will position it to survive in the decades ahead, or whether instead it will continue on its current path to irrelevance. "The world is changing, and the institution is not changing in ways that are consistent with that," says John Kimberly, a Wharton management professor. "The tsunami has caught up with it."

The challenges facing the postal service stem from its quasi-governmental structure. The service is self financed, receiving just a small amount of federal dollars to cover items like mail sent to overseas military personnel. Otherwise, the USPS relies almost entirely on revenue generated from its mailing services to cover its costs. What it does get from the government, however, is a monopoly on delivering letter mail as well as sole rights to deliver to mailboxes across the country, according to Ben Cooper, a principal at law firm Williams & Jensen, who is leading a coalition of companies and associations with an interest in postal reform. In return, the USPS is obligated to deliver mail six days a week to every home (business addresses get five-day-a-week delivery). And the postal service must charge the same rate regardless of the distance a letter or package is being shipped.

Until recently, the USPS found that the tradeoffs worked in its favor. But starting in 2007, the tide began to turn. For one thing, the Internet and mobile devices began eating into mail volumes -- and, in particular, into the more profitable first-class mail business. "The real double whammy for [the USPS] is that not only has there been a decrease in volumes, but also the margin on their overall operation has changed," says Wharton professor of business economics and public policy Kent Smetters. "People use the post office to mail packages, not letters. But letters were a higher-margin business because they required very little in the way of labor."

The result is that the USPS has been bleeding red ink. Between 2009 and 2011, the postal service lost more than $17 billion on its operations as mail volumes slipped from 177 billion pieces to 168 billion. The volumes for high-margin first-class mail have fallen 25% since 2006, according to the USPS. And the outlook is even worse: The volume of first-class mail shipped is projected to slip to 52 billion pieces by 2020, down from 74 billion pieces in 2011.

Wharton management professor Peter Cappelli says the losses are exacerbated by the high cost structure of the USPS. "People are not sending first-class mail anymore -- they send emails and can attach large documents," he notes. "And on the cost side, they are not allowed to control the services they offer. They have to provide delivery to small communities way out in the middle of nowhere and have to keep post offices open in rural areas because legislators don't want them closed. The structure is fundamentally flawed."

'Hemorrhaging Money'
The financial pressures facing the USPS were compounded by some legislative changes made in 2006. Under postal reform passed that year, the postal service was required to make annual payments of nearly $6 billion to pre-fund retiree health care benefits over a 10-year period. That 10-year time frame was artificially short, critics argue. Williams & Jensen's Cooper says that the timeframe should have been at least 25 years, a schedule that would have put less of an immediate financial drain on the USPS. At the same time, the USPS has labor contracts that prohibit the service from laying off employees -- provisions that make it difficult to cut labor costs which account for about 80% of total operating expenses.

As a result, the postal service is unlikely to regain its financial footing without legislative action. Delaware Senator Tom Carper has co-sponsored legislation that has already passed the Senate and would extend the period for pre-funding retiree health care costs to 40 years, return $11 billion in funds the USPS overpaid to the federal government for pension obligations -- money that could be used to fund early retirement packages for about 100,000 postal employees -- and free up the postal service to offer new products and services, including shipping beer and wine. A bill in the House sponsored by California Representative Darrell Issa takes a more aggressive stance on the labor cost issue, eliminating the no-layoff provision in the current union agreement and prohibiting such a clause in future contracts.

"The U.S. Postal Service is hemorrhaging money at an historic pace, and Congress can't stand idly by and allow it to continue to creep towards total financial collapse," Carper said in an email to Knowledge@Wharton. "The longer the House delays action, the more consumers and businesses become uncertain about the future of the postal service -- undermining confidence in the service's future and harming its ability to build new business. To protect a mailing industry that employs over eight million people and generates almost $1 trillion in economic activity each year, we need Congressional action."

But even if postal reform passes Congress, the USPS still faces challenges. For one thing, the service will still need to balance its business objectives against political realities. Consider the USPS's recent attempts to restructure. Management put forward a plan earlier this year to bring the service back into the black, including support of legislation that addresses the health care retiree payment schedule. Among the draconian changes the USPS outlined: the closing of thousands of rural post offices and moving from six-day-a-week delivery to five-day. But a political uproar, most notably from politicians from rural areas that would be hit by the closings, has forced the USPS to backtrack on those cuts.

"There was push back from Congress, and the postal service reacted to that and slowed down their plans," says Lorelei St. James, director in the Dallas Field Office of the Government Accountability Office. "But the more slowly they cut their costs, the harder it will be to catch up [and solve the financial problems]." And if the problems at the USPS are not resolved, the U.S. government would be on the hook to pay the service's employee obligations. "Their employees participate in federal employee retirement and health care systems," St. James points out. "Ultimately, the taxpayer is at the end of the line."

A 'Seismic Shift'
The political pressures weighing on the USPS will make it hard for the organization to navigate what Wharton marketing professor Peter Fader argues is a "seismic shift" in the business landscape. "We are going through an evolution from a product-centric mindset to a customer-centric mindset," he says. "The old mindset, which applies to pretty much every business enterprise including the USPS, was: 'Let's do things at very high volumes, and that will justify the cost of building the infrastructure in the first place. It will help cut the ongoing variable cost, so the more we do, the cheaper it gets.'"

Furthermore, according to Fader, this same mindset comes into play when an organization such as the USPS searches for a path forward: "The USPS is obsessed with the product-centric question -- what products and services can we offer to the customer to help improve our financial health? But instead, they should be asking the customer-centric question -- what kinds of customers find the most value in our current portfolio of products and services? Can we deepen our relationship with them while throttling back a bit on customers who find little value in our offerings? The one-size-fits-all approach just can't work for the USPS anymore."

There are cracks in the product-centric approach "largely, but not exclusively, due to technology," he adds. "Technology makes it possible to [imitate] products and services and come up with a new product more cheaply, and it allows a consumer to get information on alternatives. At the same time, there is a cultural change -- today's customers are selfish and impatient. They want what they want, when they want it."

Fader says the key to finding and serving these customers is to use all the data that the USPS has at its fingertips. "We can track individuals doing things over time in a way that was impossible before," he notes. "What the data does is open up the opportunity to identify valuable customers and to being able to pick and choose among them." But Fader, author of a recent book titled, Customer Centricity: Focus on the Right Customers for Strategic Advantage, recognizes that there are massive challenges here that other companies don't face. "The postal service can't currently be selective like this -- not under their traditional business model. They have this broad mandate to serve in a way they have served before, even though the rest of world has [moved] in another direction. Quite simply, they -- and the U.S. government -- have to be willing to let go if the USPS is to survive."

To address that sort of shift, the USPS needs to become a more agile, innovative organization. But questions abound about how an operation as large and bureaucratic as the USPS can manage such a transformation. Kimberly says there are notable examples of large organizations that have been able to do so successfully. "The classic example of a company that reinvented itself is IBM," he notes. "They have done it because they understand the environment, and they have all sorts of ways of plugging into and trying to understand what the world will look like in 15 to 20 years. The lesson is: Make sure you are always hungry and you are never satisfied. Keep your eye on where the ball is headed, not where it is."

That sort of approach could involve finding opportunities in the transition to the digital age. Among the possibilities suggested by some USPS-watchers is to have the postal service provide standard and completely secure email accounts to all Americans in the same way it delivers mail to individual addresses. John Payne, CEO of consumer email management firm Zumbox, says while that may have made sense back in the 1990s when the USPS considered a move into email, "it's too late now" because such services already exist. Instead, he says, the USPS would do better to focus on other electronic services. "The question you always come up with is: 'Should they operate a broad brush platform or special services more suited to their strength?' There is certainly an opportunity for them to provide premium services -- for example, certified letters or registered letter delivered electronically."

But capitalizing on new opportunities would require a new mindset at the USPS. "This is an organization that got stuck in a template or a way of thinking about what its mission was," Kimberly notes. "There was very little in the way of internal motivation to change. That competitive edge that has people asking, 'How can we do this better?' just wasn't there." As for the likelihood of the post office coming up with innovative new solutions that competitors aren't already offering, Kimberly says, "It's not impossible, but the odds are long."

Private Rivals
Of course, the USPS has been going up against innovative rivals in the package business for decades. While the postal service has a monopoly on non-urgent letters, it competes head-to-head for package delivery business with FedEx and UPS. UPS, which traces its roots back to a company started in Seattle, Wash., at the turn of the 20^th century, and FedEx, which was started by Frederick Smith in 1971, began to grow rapidly in the 1980s, and by 2011 were racking up revenues of $53 billion and $40 billion, respectively. Much of the time-sensitive package shipping has moved to those companies, with the USPS offering lower cost but typically slower delivery.

To drive a true revival of the USPS, some argue that the organization should be privatized. "There are some smart people working there who are very aware of what is happening," says Wharton professor of operations and information management Morris Cohen. "I don't think they are constrained by lack of ideas but by the politicization of the postal service. They should be privatized. It makes no sense having a congressman deciding that a post office can't be closed in some small town. FedEx doesn't deal with that. UPS doesn't deal with that."

While there is no serious talk of privatization on Capitol Hill right now, such a move would certainly allow the USPS to respond to customers in ways that Fader says they are demanding. "Once we recognize there is [a] vast array of customers, [we realize it is] impossible to make all of them happy," he notes. "But it does create an incredible opportunity. Shouldn't [the USPS] be able to pick the kinds of customers they want to serve? They can find people who thrive on physical mail and focus on them. And the people who see little benefit from 'snail mail' would be better served by other providers."

However the USPS evolves in the years ahead, it is clear that the mail-based form of communication in the U.S. is rapidly disappearing. And that will bring real changes to communities around the country. "It is an old-fashioned delivery system," says Kimberly. "I believe that the mailbox as we have known it is a vanishing species. And so the next question is, what about the rural post office --that little building that in many ways serves as a community center? Are these all going to be shut down? And if they are, what will replace them? That is an interesting sociological question."

Can the U.S. Postal Service Be Saved?

http://www.businessweek.com/articles/2012-04-18/can-the-postal-service-be-saved
By Elizabeth Dwoskin

Tax day is traditionally a frenetic day for the U.S. Postal Service. But with over 80 percent of taxpayers filing online, April 17 became just another day in which the USPS’s chronic problems were on display, with fewer post offices extending their hours to accommodate later filers.

Thanks to the Web, the economic downturn, and some stringent budgetary requirements, the U.S. Postal Service has been on a fast track toward financial insolvency for some time. Last year the USPS was in the red by about $5 billion. This year the service has continued to bleed money: In the first quarter, expenses surpassed revenues by $3 billion.

So can the Postal Service be saved? Tom Carper, the Delaware Democrat who sits on the Senate’s Homeland Security and Government Affairs Committee, thinks he has a solution. He’s introduced a bill, the 21st Century Postal Services Act, which he says would reduce operating costs and modernize the USPS’s failed business model. The bill, which is co-sponsored by Senate Republicans Scott Brown of Massachusetts and Susan Collins of Maine, was debated on the Senate floor Tuesday.

One of the ways Carper would cut operating costs is by taking funds set aside for employee pensions and putting them back into the operating budget. He says this won’t hurt employees because the USPS currently overpays its pension fund, a claim that has been disputed by the nonpartisan Government Accountability Office. He also wants to use financial incentives such as buyouts to encourage exits for two-thirds of the 150,000 employees who are largely unionized and near retirement age.

Carper would do away with the practice of paying worker’s compensation benefits to employees who are over 65 and therefore unlikely to return to the job. Forty percent of all federal employees who claim worker’s compensation are postal workers, and Collins has criticized the worker’s compensation system as being an “alternative retirement program that is far more financially lucrative than the standard federal retirement system.” The senators behind the bill say the Postal Service could generate more revenue if it were allowed to ship beer and wine, which the powerful alcohol distribution lobby hotly opposes.

When a local post office is losing money, Carper says his bill would offer communities a menu of options to preserve the mail system. They could vote, for example, to keep the post office open three days a week instead of five. Or they could move it into a kiosk at a Walgreens (WAG) outlet, as is happening in some rural communities in the West. (Apparently, postal kiosks are already featured in some Canadian stores.)

The Senate’s intense debate over the USPS overhaul on Tuesday shows that lawmakers still disagree about how to address its fundamental problems. Among the flurry of amendments hashed out was one that would limit the compensation packages of Postal Service executives. Another would ban some post office closures in rural areas, while yet another bars the USPS from ending overnight delivery services in certain areas. At least one proposed amendment had nothing to do with the service’s impending bankruptcy: Kentucky Senator Rand Paul, son of GOP presidential candidate Ron Paul, tried to slip in a proposal that would block foreign aid to Egypt. It’s unclear if Congress will reach a compromise anytime soon.

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.