The Emerging Postal Crisis of 2009

April 6, 2009

Background

In a hearing last week before the House Committee on Oversight and Government Reform, Postmaster General Jack Potter testified that the Postal Service is “facing losses of historic proportion,” and that the Postal Service’s financial position is “precarious and critical.” In addition to asking Congress for about $2.5 billion a year in relief from health benefit premium payments, Potter requested a change in the law to obtain “the flexibility to adjust our delivery frequency” from six days to five in an effort to save the Postal Service an additional $3.5 billion a year.  He quoted two surveys showing that the public would prefer five day a week service to other alternative solutions to the Postal Service’s financial woes.  And while Committee members spent some time exploring the issue of the Postmaster’s compensation package (which was defended by the Chairman of the Postal Service Board of Governors), the terms of his home mortgage with Countrywide Financial, and the Postal Service’s relocation home purchase policy, the hearing largely remained focused on the grave financial issues the Postal Service itself faces.

The combination of the most severe economic downturn since the Great Depression and rapid acceleration of the digital transformation of commerce and communications has driven Postal Service volume and revenue to alarmingly low levels.  The Postal Service could lose “more than $6 billion” this year, according to Potter.  Mail volume declined 16.3% in January and 17% in February in comparison to the same periods last year, and, as Potter testified, “looking ahead, and considering projections for the overall economy, we do not expect any near-term improvement.” This volume falloff exacerbates the Postal Service’s already perilous cash position and, as Potter said at the hearing, “[USPS] can no longer afford business as usual.”

The challenge presented to the magazine industry by the emerging crisis is clear.  With approximately 90% of magazine circulation in the United States accomplished via the mail, permitting the Postal Service to fail is simply not an option.

MPA’s Plan of Action

1. We must continue to do everything in our power to ensure that the Postal Service survives the present crisis -- most importantly, by ensuring that the Postal Service receives the short-term financial assistance on its health benefits obligations that it is seeking from Congress and the Obama Administration.
   
2. We must recognize that, even if short-term financial relief is granted, the inevitable day of reckoning about the postal system’s future will only be postponed for a brief time.  Even when the economy recovers, experts agree that mail volume (especially in the money-making First-Class Mail and Standard Mail classes) will not return to prior levels.  Volume is in permanent decline -- but the fixed costs of the postal system are not declining as quickly.  The time for fundamental restructuring of the system -- and fundamental change in the way that business mailers, like magazine publishers, use the system -- has come.  Short-term relief for the Postal Service’s health benefits obligations, though absolutely necessary, will only “kick the can” (the “can” of fundamental reform) down the road a very short way.  We need to begin the restructuring process now.
   
3. We have re-assembled the MPA Board Postal Task Force that successfully guided us through the 2006 reform effort.  The Task Force will provide policy guidance and input to senior MPA staff on a continuing basis as we deal with Congress, the Obama Administration, the Postal Service, and the industry on matters of short-term relief and long-term restructuring.  The Task Force will keep the full MPA Board fully informed on an ongoing basis. 

We need the active involvement and assistance of all MPA members in this urgently important effort.  We will apprise you of developments on an ongoing basis.