What's wrong with the US Postal Service?

It spends more than it brings in, and it's on track to hit its debt limit. Why can't it pull itself out of this mess?

By Kim Peterson May 31, 2011 4:53PM
The U.S. Postal Service is a disaster in the making. A recent BusinessWeek cover story showed just how big the Postal Service's problems are, and they are huge.

How is it that UPS (UPS) and FedEx (FDX) can run profitable, successful delivery services while the U.S. Postal Service blunders its way into insolvency? That's an easy question to answer after you read the BusinessWeek article.

The USPS brought in $67 billion in revenue last year, not nearly enough to cover its costs. It's nearly $15 billion in debt and will hit its debt limit this year. If this continues, the Postal Service will collapse.

Post continues after this video interview with BusinessWeek's editor about the article:
Here are the biggest nails in the Postal Service's coffin:

1. Its union is too strong. The USPS cannot lay off employees due to union contracts. And in the next four years, union members will get a 3.5% raise and seven (yes, seven) uncapped cost-of-living increases. That's a shocking commitment.

2. It spends too much on salaries and benefits. About 80% of its budget goes to salaries and benefits, writes BusinessWeek's Devin Leonard. Can you even imagine that? Compare that with the 43% spent at FedEx and the 61% spent by UPS.

3. It hasn't raised prices enough. It costs the same to mail a letter to your neighbor as it does to deliver it by snowmobile to the Alaska wilderness. (Yes, the USPS actually does that.) The Postal Service should charge higher prices for longer travel distances.

4. It relies too much on junk and first-class mail. Total mail volume fell 20% from 2006 to 2010. The USPS relies too much on first-class mail for money, and when mail volume falls, its revenue falls as well.

5. It has too many post offices. Most of the post offices around the country lose money. What if the USPS took a page from Starbucks (SBUX) playbook and opened mini post offices at supermarkets, gas stations and retailers like Target (TGT)? Still convenient but with lower overhead. Even better: Nonunion workers can staff those offices, Leonard writes.

6. It hasn't embraced the Internet. Email has been a killer. But maybe the USPS has taken the wrong approach to the Internet. In other countries, Leonard reports, postal services let people pay bills online and even scan mail and send it to customers online.

In Sweden, people can take pictures on their phones and turn them into postcards. People can use their phones to send letters without stamps.

The USPS is incapable of owning up to its problems. And the revenue picture is just getting worse. The service predicts total mail volume will fall from 171 billion pieces a year now to as little as 118 billion by 2020, Leonard reports.

So far, the postmaster general wants to stop delivery on two days a week instead of just one. And he thinks that attrition will shave 20% off of the USPS workforce over five years. That's not going to be enough to stop the bleeding. The USPS needs to change dramatically, and that doesn't look like it's going to happen anytime soon.

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301Comments
May 31, 2011 6:30PM
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quote: "how is it that ups and fedex can run profitable, successful delivery services while the u.s. postal service blunders its way into insolvency?"

 

while there are some good points listed in this article, the elephant in the room isn't mentioned: prefunding mandates by congress.  the postal service's pensions are by the most conservative standards 100% funded, and are probably overfunded -- by tens of billions of dollars (with the us treasury holding the surplus, big surprise).  also, the usps has to prefund a 75 year liability for future retiree heathcare -- literally funding healthcare for retirees who aren't even born yet.  ups and fedex don't have these congressional mandates.

 

answer: if ups and fedex had these requirements, they too would be broke (on paper).  if the usps had pension and healthcare funding requirements that matched its private sector competitors', the usps would also be profitable.

Aug 12, 2011 6:39PM
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I had worked for the Postal Service for 30 years and I can write a book on why they are failing as an organization. Technology, decreased first class mail, blah, blah. I've seen so many poor decisions made over my time it's unbelievable. I'm speaking of just the Colorado/Wyoming District and it wouldn't surprise me that it's all over. The Postal Service has played the good old boy system for so long that they have the most unqualified executives running the organization it's no wonder it's failing. Promotions are not the best qualified it's how well you know someone and many in the biblical sense.  The last couple of Postmasters of Denver were unable to lead 26 units to success, amazingly they have both been promoted to higher level positions, how does that happen. Mmm lets see you can't run 26 units, so now I'm going to promote you to District Manger so you can screw up the entire district of 600 post offices and that he has successfully done. What executive address his subordinates with an introduction like this, "I'm here to look at the whole picture, oh I don't mean ho I mean whole, hole!"  This district carries so many people in higher level positions that have no business being there. These are the same people that have been on special route inspections teams for the past 10 years, because they don't know what to do with them. Maybe I should write a book Smile
Aug 12, 2011 7:33PM
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You people go right ahead and send your packages that you pay good money for by Fed-ex and UPS. I am a rural carrier and I just today stopped in the middle of the road to pick up one of my customers Fed-ex packages that the carrier had laid at the bottom of the mailbox instead of taking to the door. I am not saying that all postal carriers are perfect, but I will say that I treat all 650 of my customers mail and packages as I would treat my own! The problem in our area and I'm sure it is the problem all over is that they can't keep the managers in their own offices and doing their own job. They get paid to do a job and that is what they should do!! Just look around and see who is working in the 100+ temps....we sure don't have a suit and tie on. The postal service is "Top Heavy" and as soon as someone gets in there and figures it out, we will survive. There is still plenty of mail! They need to ask the carriers....not the ones sitting behind a desk just looking at numbers that have been adjusted to suit their needs!
Aug 12, 2011 6:21PM
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There are many ways to save money.  Stop the route inspections every 6 months.  Stop giving management over 200 million dollars in bonuses.  let the carriers do their routes the way they know best not what's mandated from an office 500 miles away.   stop the micro management and let each office run itself.  
Jul 23, 2011 6:12PM
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I find it interesting how many people have so much to say, but do not know what they are speaking about.  First, if UPS and FED EX. had to prepay $5.5 billion like the Post Office has to for retires, they would not be here.  So you are comparing apples to oranges.  Next, UPS and Fed EX. does not guaranty delivery six days a week to every house in the country.  In fact, they drop off packages to to Post Office for delivery because it it not profitable for them to deliver.  Also, the unions of the Post Office is not any stronger the the one UPS has. 
Jul 23, 2011 3:25PM
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There are five things wrong with USPS:
1. Congress requires it to lend the US Treasury $5.5 billion per year. That payment is then credited to future retiree health benefits that will accrue up to 75 years in the future. The retiree costs are for people not yet hired and, some, not yet even born. (I would like to see UPS or FedEx stay out of bankruptcy with even HALF of that burden).
2. Congress will not allow it to reduce expenses by closing money-losing facilities.
3. Congress will not allow it to cut expenses by ending Saturday delivery.
4. Congress will not allow it to end money-losing services, i.e. Nonprofit and Periodicals.
5. Congress does not allow USPS to price its services in a manner that would generate profit or even working capital. Even the new pricing rules, allowed by the Postal Accountability and Enhancement Act of 2006, cap the prices based on the old laws that did not allow USPS to make profits. Hence, most of its products are either break-even or money-losers.

That "80% of expenses are employee related" factoid is a canard designed to fool clueless imbeciles who were unable to pass Business 101 (about 90% of the public and 99% of Congress). FedEx and UPS are the two largest cargo shipping airlines in the world. USPS provides manual delivery to 150 million delivery points every year. Anyone who doesn't expect the expense profile for a manual delivery service to differ from that of a cargo airline does not have the right to claim an informed opinion. Stupidity is not a virtue and the author of this article needs to realize that.


Aug 12, 2011 7:50PM
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I love when a reporter only picks and chooses what he or she wants to write and not report the whole atory.  A 3.5% raise for the next 4 years.  To clarify, that is 3.5% for the life of the contract, not for each year.  That comes out to less than 1% a year.  And 7 uncapped cost of living raises.  Who knows what that would be, but the last 6 they had were a total of $0.00 (Zero Dollars).  Of course not mentioned in the article were the increases in health costs.  When one is paying over $400 a month with $35 co-pays and deductibles on top of that, I don't see that as any great benefit.   80% of $$ goes to wages.  Where do you want it to go?  They already have a ton of wastefull spending.  If mail volume is said to be going down so low, why are they spending millions upon millions on flat sorting machines that put magazines in delivery sequence, if there aren't that many flats out there for the machines to sort?  Would it be better if all the brass got the huge bucks and the workers got minimum wage like a lot of companies?   The problem with the mistakes that people mention is that management (which is way way excessive) push and harass the employees to hurry up, as management only cares about their numbers and not the quality service that there used to be.  Management gets bonuses on making numbers, not on service.
Aug 12, 2011 8:07PM
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The USPS is a great company with many fantastic employees that truly care about processing and delivering mail, and serving customers at the retail window. There is not a person out there who doesn't find joy in opening their mailbox and finding a cute card or maybe a package for the kids. The problem with the USPS is the number of "Support" people. If you have a Postmaster in an office, the PM and the carriers and clerks can adjust routes, adjust schedules, and work together to make the office efficient and productive. If they can't they should not have the job. We don't need 5 people in an office 50 miles away deciding what a route is worth or what changes to make by looking at a map. Another 5 people producing reports from information that is already available, another 5 micro-managing everything you do. Eliminate most of the "support" jobs that offer no support. Eliminate the wasteful reports and processes that really cost time and money. Let those folks out in the field do what they know how to do.
Jun 1, 2011 12:46PM
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I'm sick of people talking so negative about the postal service.  How many of you actually worked in one?  You have NO IDEA what's it like.  So you have LIMITED information and therefore NO right to judge.  The unions are not the problem.  Most of you probably don't remember what it was like to work in the sweatshops and s***holes owned by people who didn't care about the employees, only the bottom dollar.  Wanna work at Walmart?  The problem with the postal service, is the government.  If ANY part of the word GOVERNMENT is used, it is automatically associated with wasted $$.  It's got it's hands in everyone's pocket.  The Postal Service is no exception.  We are forced to follow wasteful government rules and are almost powerless to change them.  It takes an act of CONGRESS to do it, and we all know what that is like; corruption and red tape abounds.  The postal service does a great job and I'm proud to work there.  I do my best every day, and there have been many days I've had to deal with unruly people who's primary objective is to pick a fight with someone.  Most of the time it's due to the ignorance of the general public, like I said, if you never worked there, you have NO IDEA what's it's like.  Get educated, then make an EDUCATED statement.
Jun 1, 2011 3:25PM
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OK, Big No for Hillary, you prove my point, that people shouldn't talk about what they don't know about.  We haven't received ANY tax money for YEARS (since the 70"s) and we are not ASKING for any.  Taxpayers do NOT pay our salaries, but CUSTOMERS do.  We ALSO  pay close to 75% of our own healthcare.  So once again, we may have benefits, but we also PAY for them.  Look at the benefits in the private sector, then complain.
Aug 12, 2011 6:59PM
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OK, First of all you can't comapre the USPS to Fedex or UPS. When fuel prices go up UPS and Fedex charge a fuel surcharge, the Postal Service can't. The Postal service has to deliver to every house in the country six days a week, which adds up to exorbitant fuel prices. Every penny increase in gasoline prices costs the USPS 8 Million dollars a year. Fedex and UPS can skip whole neighborhoods if there are no deliveries there. As for the people who say the gov't gives the USPS money that is so wrong I don't even know where to begin. The USPS is reqiured to prefund retiree beneifts to the tune of 5.5 Billion a year. They can't raise prices or make any business decisions without congressional approval, which Fedex and UPS don't have to worry about. If you were to privatize the Postal Service rates would go up ten fold guaranteed. No way Fedex or UPS are going to deliver a letter to rural areas were there are less than 1 house a square mile. The USPS needs to be freed from the prefunding the retiree benefits and be allowed to raise prices more than the rate of inflation.
Aug 12, 2011 8:44PM
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Why doesn't FedEx and UPS share the same woes as the Post Office?

 

You are comparing APPLES to ORANGES!!

 

The mailman comes by my door for free every single day, 6 days a week, even if I don't have any incoming or outgoing mail.

 

You only see the FedEx and UPS man if you get a package which is rare.

 

PLUS UPS & FedEx ONLY deliver on Saturdays for a HUGE premium!!

 

Did you know that Fed Ex and UPS charge you to let the Post Office finish delivering your packages to you if you live outside of the city ?  Every single day UPS and Fed Ex comes to the post office (yes, even the small ones) and drops off skids and skids of packages that the Post Office delivers the next day for them.  Then FedEx and UPS charges the mailer a "residential surcharge".  Don't believe me? - pull out your bill and read the fine print and add on charges, oh yeah, right next to the "fuel" surcharge - no hidden costs with the Post Office - it is what it is!!

 

 

 

 

Jun 1, 2011 12:40AM
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first off let me say that the post office was never intended to be a for profit business, with that said let me also say that the only reason the the post office can't break even is because every year they are required to make a 5 BILLION dollar payment to the feds to pre fund their retireries health benefit plan, and they are the only company in the entire U.S. that is required to do this, the federal government does not even do this,  and by the way that fund is already over funded by almost 25 years worth of funding, without this requirement the post office would be exactly what it was set up to be and break even and in some years actually turn a profit, maybe the people in washington should take a much closer look at where the P.O. funds are really going.
Jun 1, 2011 5:24PM
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Although, I have been a past critic of the USPS, one thing that should be noted from reading all the E-Mails is that the USPS is mandated to provide mail delivery services to all 50 states and all US Territories, while UPS and FEDEX is not.

 

That has to factor in with respect to costs which the USPS has to pay, for if as a requirement for FEDEX and UPS to stay in buisiness as a regulated entity (which they are currently not regulated as a mail delivery entity) that they would have to deliver to the same territory as the USPS, either FEDEX/UPS would have to raise rates, and/or cut costs. Furthermore, FEDEX and UPS do not have a low cost letter mailing option like the USPS (nor do I think that FEDEX or UPS want that option, since they are making too much money on overnight delivery services right now).

 

One thing that can possibly be done to bolster revenues for the USPS also is to raise the rates that the USPS charges to deliver FEDEX and UPS packages to remote locations. If elther or both FEDEX and UPS don't like the rate increases, they can build their own remote outposts to deliver these packages. The USPS gets way too little in this regard from FEDEX and UPS (about $ 2.00 on average for each package), and the USPS should look at this service as a profit center.

 

Finally, in terms of service, myself, being a Communications Engineer, I did see a situation similar to this  with the old Ma Bell (AT and T), and more recently with the Cell Phone companies. Under various Telecoms regulatory acts passed through Congress over the years, the old AT and T actually, through their monopoly rate structure to subsidize their remote rural customers from then high long distance revenues until that long distance monopoly was broken up by MCI. Basic Rural Telephone service never made money for AT and T, and is similar to the USPS losing money on many of the rural areas that they serve. Again, in the areas of Telecoms deregulation, the new Telecoms companies that showed up on the block focused building their infrastructure on the high density Metro areas, and avoided Rural areas which needed service like the Plague. Unfortunately, the USPS by its charter cannot do this, and does have to serve underserved rural areas (where FEDEX and UPS can avoid these places like the Plague).

 

But as I have said before, more cost cutting will have to be done at the USPS to make it at a break even or even profitable stage, since their primary competition is from the Internet. I wish the Postal Service a lot of luck on this one.  

Jun 1, 2011 10:21AM
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So many people are misinformed about the USPS. Yeah the pay is great and the benefits are good. There are way too many people in management at USPS. The postmasters all get bonuses even if their installations lose money. But, the biggest problem of all is that our elected officials in Congress are forcing the USPS to prefund employee retiree health benefits for employees that will not draw against it for years. No other industry (government or private) does this. This has cost the USPS over $65 billion since Congress began to force the USPS to pay into this fund. This money is NOT just sitting there waiting to be used. Congress has already spent it. Congress was asked by USPS to curtail the prefunding until USPS became liquid again and they flat out refused so they can keep spending until this country is bankrupt. If USPS did not have to send this payment each year it would be financially stable. But the press is not allowed to make this point.
Jun 1, 2011 9:23AM
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As usual.....by the ignorant comments from people on this site.....people have NO IDEA what the hell they are talking about. The US post office is the only Business in America that by law is FORCED to PRE-FUND their FUTURE retirement for people who will work for the post office that are now 11 years old. Thats right people...11 year olds. If the post office was NOT FORCED by congress to pre-fund FUTURE retirement(which congress is stealing....I mean using for other things)the post office would be profitable EVERY YEAR for eternity! The post office also has over payed on those payments by 14 billion dollars....and they want(and should)get it back! Its not the unions, which are payed lower pay rates than non-union fed/ex and way lower pay rates than unionized united parcel service....it is their TOP HEAVY mangement being payed huge sums of money for jobs that require almost NO real work!
Oct 5, 2011 4:30AM
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After retiring from the military with 25 years of service, I then decided to seek employment with the Postal Service, and worked there for better than fifteen years.  I remember how I was dumbfounded by the way the Postal Service did things.  Coming from a military environment, where discipline, moral, and esprit d corps, was a way of life, and a darned good one at that, I couldn't believe the chaos in the Postal Service.  Over time, I came to realize that management was a big culprit.  Add the Union to that equation (you know, protect the union member's job, no matter how sorry they were) and you have big problems, along with the fact, that the managers (that I knew) were usually the sorriest employees while they were on the work floor, and sought out management to escape having to do physical work.  Many of the managers couldn't supervise themselves, much less other workers, so many of the sorry employees were allowed to do as they pleased, simply because the managers didn't want to go up against the union.

 

One male employee I knew while there, spent his tour going around visiting the ladies, or he was in the break areas nursing a hangover.  I never ever saw him do any work during the sixteen years I was there.  Finally, justice was served, when he stole a good bit of money, was caught, and fired.  There were others doing similar things to avoid work and were allowed to get away with it.  The good employees, and there were many, had to pick up the slack and carry the load, so to speak.  That affected morale and created attitude problems throughout the processing plant where I worked.  The overall result was a decline in production, resulting in the need for overtime, thus creating the situation that the Postal Service is currently in.

 

There was a need for the Union while I was there, to prevent employee abuse and misuse, but I feel that the Unions were too powerful, spending too much time protecting those sorry employees that should have been escorted out the door long before I got there.

Jun 2, 2011 10:21AM
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3. It hasn't raised prices enough. It costs the same to mail a letter to your neighbor as it does to deliver it by snowmobile to the Alaska wilderness. (Yes, the USPS actually does that.) The Postal Service should charge higher prices for longer travel distances.

The USPS is regulated by the US Government as we are required to offer mail services for a reasonable price. The Government does not help fund anything for the USPS, although the Government DOES PREVENT the USPS from raising prices in order to stay out of the red tape. The USPS is doing the best they can with the government pounding them down and the Union letting the most ridiculous employees keep working at the Post Office.
Oct 5, 2011 4:23AM
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In a letter to Senator Joseph Lieberman and Congressman Darrell Issa, Mr. Nader proposed simple solutions to fix the U.S. Postal Service's financial hole. Mr. Nader noted, however, that the financial "crisis" facing the USPS was completely manufactured.

Mr. Nader identified several drains on the U.S. Postal Service's financial resources, including a Congressional mandate that the USPS prefund its future retiree health benefits for the next 75 years by 2016 and $82 billion in over payments that the USPS has made to federal pension systems which have yet to be refunded.

Mr. Nader points out that the $103.7 billion prefunding mandate is something that, "no other government or private corporation is required to do and is an incredibly unreasonable burden." He continues by revealing that without this onerous prepayment provision, "the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion."

Mr. Nader ended by calling on Congress to take action that would have a minimal impact on the patrons of the USPS and prevent further post office closings, deterioration of service, or job cuts.
Sep 24, 2011 1:27AM
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At my station our routes are constantly being evaluated. We recently lost a route because of lower mail volume so all the remaining routes received an addition. We still have to be done in 8 hours regardless of this extra street time. Another item I have not seen addressed here is something we call "downtime" or "under-time", this is a situation where on a day where the mail volume is lighter than normal our supervisor will come to us and give out additional street delivery assignments from a route that is empty due to vacation or a sick call. We are expected to do this additional time within our normal 8 hour day, thereby saving the P.O. from having to pay overtime. By the way, with 11 years of service I currently get 4 weeks of vacation. After 15 years I will get an additional week. That is it, 5 weeks tops. As for calling in sick it is a sad joke. We are treated as if we are all lying about being sick. Between dependent care for taking care of my sick kids, doctor and dental visits and my own sick time I have used 22 hours this year and get questioned by management about it. I also do not know if many of you realize that the Letter Carrier is "the last mile" for many of the parcels you think you are receiving from UPS and/or FedEx. They drop off pallets of parcels for us to deliver since it is not economically worthwhile for them. If the P.O. is disbanded many people in rural or even lower class urban areas simply will not be served. UPS and FedEx would just cherry pick the profitable areas for delivery. Universal Service is the P.O.'s mission to deliver to everyone everywhere even if it doesn't make economic sense, not everyone has a computer or broadband access. I will have three sources of income for my retirement. A very small monthly pension, Social Security if it is still around and the Thrift Savings Plan or TSP which is basically a 401K. I put 15% of my salary into the TSP and have taken a significant beating over the last few years with the fluctuations in the stock market. I have a B.A. in History and was certified for Secondary Social Studies by the State of NY but the P.O. called before I could start a serious search for a teaching job so here I am. I have about 600 deliveries on what we call a park and loop route. I drive my vehicle to an intersection and get out and walk a loop, I then get more mail from the truck and do another loop, drive to the next intersection and do it again. I have a city route where each of my houses have about 5 steps. That would be 5 steps up and 5 steps down multiplied by 600 which is equal to 6000 steps a day over a 6 mile route carrying up to 40 pounds of mail in whatever weather the day happens to bring. I and the other carriers I know take great pride in our work and our work ethic and it really saddens me to see all the negative comments being posted here. I believe in an honest days work for an honest days pay and feel I work very hard for my compensation. At the end of most days my feet, knees and back let me know that they are not very pleased with my actions over the course of my 8 hours at work but I realize that these aches are a part of the job and I am being compensated for them. As for the loss of billions of dollars it basically comes down to a pension surplus of between 50 and 75 Billion that the USPS overpaid and would like back that could then be used to take care of the pre-funding of future retiree health costs. This pre-funding is where the current problem has come from. The Post Office would be in the black without it. I apologize if I have bounced from topic to topic but there was a lot of misinformation posted so far. Hope this helps set the record straight although from most of the comments I doubt it.

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