Whither the Postal Service?

It costs 45 cents to mail a first class letter next door. And it costs 45 cents to mail a letter from New York to Los Angeles.

Is this the reason why the US Postal Service is dying?

Clearly, no private business would have such a stupid business model. The price of the product — delivering a first class letter to a specific address — should reflect how much it actually costs to pick up, sort, collate, transport, and deliver the product to where it is addressed. This would mean paying less for some letters, more for others.

But Congress, who oversees the Postal Service, has never seriously entertained allowing the USPS to alter its delivery model, nor deal with the myriad of other problems that led to the USPS losing more than $6 billion over the last two quarters.

The Postal Service gets no money from taxpayers and must survive on postal fees alone. With a 30% decline in first class mail delivery over the last 5 years, the situation has become so dire that USPS brass has recommended drastic cuts in services and employees. The cuts include closing 3,700 mostly rural post offices, cutting 150,000 from the workforce, eliminating Saturday delivery, and reforming the massive health and pension costs associated with current and retired workers.

But there are some who believe that these cuts, rather than save the Postal Service, will destroy it:

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.

People who receive government checks will also be affected by reduced services and loss of Saturday delivery. The burden on rural residents would be significant considering that many older Americans would find it exceedingly difficult or be unable to travel to a more distant location to pick up their mail.

Simply put, the current proposals for reforming the USPS represent a profound change in American society and call into question whether by saving the Postal Service, we destroy something fundamental in American life:

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.”

Neither of the big package delivery companies — UPS or FedEx — want to see the Postal Service disappear. Nor would they want to take over the unprofitable first class delivery mandate — it would probably destroy their businesses as it is killing the USPS.

Whatever is to be done must be accomplished very soon, or the USPS will be unable to fund its operations. At that point, the government must decide whether to bail them out, or let the USPS die. Neither choice would be palatable or wise.