Postal Predicament

August 16, 1991

Once again, the U.S. Postal Service finds itself in a fiscal bind not of its own making. It is running a $1.6 billion deficit due to the manipulations of Congress and an ill-advised decision by the commission that sets postal rates.

Postmaster General Anthony M. Frank wanted to bring the agency's $48 billion budget into balance through a 30-cent rate for first-class mail and lesser increases for other categories. But he was rebuffed by the independent Postal Rate Commission, which devised its own plan -- 29 cents for first-class and a whopping 25 percent hike in third-class bulk mail.

That proved a mistake, just as Mr. Frank had predicted. Now the Postal Service is losing $20 million a day as advertisers, charities and magazine companies seek alternative delivery systems rather than pay the higher bulk rates. Third-class mail has plunged by 2 billion items this year; the volume of first-class mail at 29 cents isn't sufficient to make up the difference.

Compounding the problem, Congress shifted responsibility for health and cost of living payments for retired workers from the federal budget to the Postal Service. That cut the U.S. deficit by $700 million but added to the Postal Service debt.

To balance his budget, the postmaster general is appealing the 29-cent rate decision. Given the $1.6 billion imbalance the agency faces, it looks like a 30-cent first-class stamp is on the way.

Is there no end in sight to postal increases? Not until several steps are taken. First, the agency has to shrink its enormous work force -- 735,000 people -- that devours 83 cents out of every dollar. Automated machinery being installed over the next 18 months will sort mail 10 times faster than individual workers, which could substantially lower manpower requirements.

Second, the Postal Service needs flexibility to operate more like a business and less like a federal bureaucracy. A consultant reported the agency could save $87 million a year if it conducted its own borrowing, banking and investment activities independent of the Treasury Department. So far there is no sign Treasury will relinquish its power.

Third, the agency should be able to develop new products and services as a communications business, maximizing its revenues and reducing costs. So far, official Washington shows no interest in making that happen. Until it does, you can expect continuing deficits at the Postal Service -- and higher charges to mail a letter.

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