|EcommerceBytes-NewsFlash, Number 2635 - September 21, 2011 - ISSN 1539-5065 4 of 5|
Included in an ambitious White House plan to cut the federal deficit by more than $3 trillion over 10 years are an array of proposals to cut costs at the U.S. Postal Service, including the move to five-day weekly delivery.
President Obama presented the plan (available in PDF format here) on Monday, delivering a laundry list of proposed spending cuts and tax increases or loophole closures to the Joint Select Committee on Deficit Reduction, the bipartisan congressional panel charged with slashing the deficit by $1.5 trillion over the next decade.
While the USPS items in the White House plan may seem a footnote amid a sea of controversial tax proposals and cost-cutting measures, they mark the president's first entry into an ongoing and sharply divided debate about the future of the Postal Service that had previously been playing out at lower levels of government and among labor and advocacy groups.
Now, the Postal Service has won the presidential endorsement for the shift to five-day weekly delivery, a move that it projects would translate into $3.1 billion in annual savings.
"I would like to thank the president for acknowledging the enormous value of the United States Postal Service to the nation's commerce and communications," Postmaster General Patrick Donahoe said in a statement. "The president also recognized the urgent need for reform to ensure the Postal Service's future viability."
As it stands today, the Postal Service is awash in red ink, and Donahoe has warned that without the swift enactment of reform legislation, the organization could be insolvent by the end of the month. The Postal Service reported a net loss of $5.7 billion through the first three quarters of the current fiscal year, with losses for the full year projected to reach as much as $10 billion.
In addition to backing a legislative proposal to authorize five-day delivery, Obama outlined a host of other cost-cutting and revenue generating measures to help the Postal Service improve its financial situation. The plan calls for a restructuring of the prefunding requirement for employee retiree benefits that has been a major weight on the USPS bottom line. Additionally, Obama has proposed a two-year plan to refund $6.9 billion in overpayments the Postal Service has made to the Federal Employees Retirement System (FERS).
On the revenue side, the president's plan recommends granting the Postal Service the authority to sell non-postal products at its retail locations and authorizing a one-time increase in postage fees over of the rate of inflation. Taken together, the proposals would save the Postal Service more than $20 billion over the next several years, according to administration officials.
Several prominent Republican members of Congress wasted no time in denouncing the president's plan, particularly the elements that would raise taxes for large corporations and the highest-earning Americans. The Postal Service recommendations were not immune from criticism, either.
Sen. Susan Collins (R-Maine), who has authored legislation that would aim to address the underlying cost burdens that have contributed to the Postal Service's dire financial predicament without undercutting service, blasted the president's plan for failing to seriously address the USPS's health and pension costs.
"Unfortunately, the administration's proposals will not prevent the Postal Service from becoming insolvent," Collins said in an emailed statement. "There is little attempt to address the workforce issues that drive 80 percent of USPS's expenses."
Collins argued that the refund of FERS overpayments should be executed in a one-time payment, rather than paying incrementally over two years. Similarly, she warned that the move to five-day delivery and an increase in rates would only hasten the erosion of the Postal Service's customer base.
"Cuts in delivery and service standards are not the way to keep customers and gain new revenue," she said. "The Postal Service cannot address a loss in mail volume and revenue by taking steps that will accelerate volume loss and lower revenues. Cutting service and raising prices will only make matters worse and accelerate the Postal Service's death spiral."
Note: The PostalNews blog reports that new legislation will be introduced today "to fundamentally change the Postal Service's business model to cut costs and increase revenue."
About the Author
About the author:
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.
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