By Alan Burkhart
The US Postal Service has been bleeding money for a number of years and revenue shortfalls are in the billions. While no one I know is predicting immediate collapse, the obvious fact is that the Postal Service is becoming outmoded. Why would I bother with "snail-mail" when I can just send an e-mail and know that the recipient will have the correspondence within seconds instead of one to three days?
From what I've seen, most younger people use the Postal Service far less than older Americans. I'm no spring chicken, but I pay all of my regular bills electronically. I've bought postage once in two years. With FedEx, UPS and of course e-mail chomping up larger and larger chunks of the Postal Service's customer base, how much longer can it be before it is rendered extinct?
Revenue is declining, and the USPS is up to its knees in red ink. In a recent article regarding new Postmaster General Patrick Donahoe, the Washington Times stated:
He takes over an agency in the midst of its worst ever financial crisis. The organization faces multibillion-dollar deficits, declining mail volume and a looming $5.5 billion bill due by the end of the year to prefund retiree health benefits that the Postal Service can't afford to pay.
Though Mr. Donahoe took the oath of office last week, he's been acting in the position for weeks following the resignation of former Postmaster General John Potter. Mr. Donahoe recently announced a move to cut 7,500 administrative positions, including 2,000 postmasters nationwide.
Free market economies function according to the laws of Natural Selection. As time passes and the economic environment changes, the economy sheds that which is no longer of benefit. If an industry can evolve and adjust to its changing environment, the industry survives. If it cannot evolve, then like the dinosaur it is eventually rendered extinct (absent a government bailout of course). The Postal Service may unfortunately be unable to adjust in the long term. Ever-increasing costs, a large part of which is rooted in generous pension and health care plans, are slowly pushing the Postal Service toward insolvency.
Also contributing to this is the fact that younger people tend to depend upon the Postal Service less than older generations. There are still millions of older Americans who have never touched a computer, and as such still use the Postal Service for much of their correspondence. But even some of these folks use snail mail less than they did in years past. My mother is pushing 90, but she's learned to appreciate the convenience of using auto-pay for her monthly bills. She likes the fact that she doesn't have to buy "those expensive stamps" or worry over forgetting to pay a bill. These options serve her better than using the Postal Service, so she "naturally selected" the better option.
In a USA Today article from last year, a USA Today / Gallup poll asked respondents how many of them had not sent a letter or paid a bill via the Postal Service in the previous two weeks. The results bear out the trend mentioned above.
While these numbers are not catastrophic, they do show a definite connection between age and usage of the Postal Service. As older generations die off, it's a good bet that the Untied States Postal Service will die with them. The Postal Service does not depend on tax revenue. But as it declines in future years, it is reasonable to expect that the federal government will prop it up with tax dollars for a time. As usage nears the zero mark, it's likely that the Postal Service will be allowed to die a quiet death.
This would not be the end of related taxpayer expense, however. Taxpayers would still be expected to fund the retirement benefits of former postal workers until all of them have died. I cannot begin to estimate the overall cost of such an undertaking (I know, bad pun), but I'd be willing to guess that costs would reach somewhere into the tens of billions overall.
Consider this bit from the Kansas City infoZine from December, 2010:
First-Class Mail volume continues to decline, with year-over-year declines of 6.6 percent in 2010, 8.6 percent in 2009, and 4.8 percent in 2008. This trend is particularly disturbing as First-Class Mail, the most profitable product, generates more than half of total revenue. Volume for Standard Mail showed improvement during the year, reflecting some signs of economic recovery in late 2010, but, in total, was flat in 2010, compared to 2009.
In its report on the financial statements contained in the Postal Service’s 2010 report, independent auditor Ernst & Young is expected to issue an unqualified audit opinion that will emphasize that questions remain about the ability of the Postal Service to generate sufficient liquidity to make all of its future payments, including the $5.5 billion [Retiree Health Benefits] pre-funding payment due on the last day of fiscal year 2011.
Not a pretty picture. It's possible of course that someday one of its competitors may buy the remaining assets and operate it profitably. But I wouldn't bet on it. Like the dinosaur, the wooly mammoth and the honest politician, it's likely the local post office will someday vanish from the American landscape.
Discussion of this post at: FreeRepublic.com
Sources:
- New postal chief looks to control costs, raise revenue
- Report on the Future Business Model of the Postal Service
- Postal Service Ends 2010 with $8.5 Billion Loss
- Poll: Most OK with 5-day mail service
Photo Credits:
- Original T-Rex in front of building (used in composite image)
- Postal Truck (used in composite image)
- Post Office sign (used in composite image)
- Oregon Post Office
- Polling data for graph image pulled from USA Today/Gallup (see source link)
