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Postal Chief: Delayed Service Cuts Threaten Iconic Institution

USPS carrier Jamesa Euler encounters barking dog in the Cabbagetown neighborhood of Atlanta, Ga., Feb. 7, 2013.
The head of the U.S. Postal Service has dismissed union calls for his removal, saying his controversial plan to reduce Saturday mail service is necessary to prevent one of America’s oldest institutions from suffering the same demise as other iconic industries.

Postmaster General Patrick Donahoe said in an interview Friday that cutting service from six to five days would be only a “short-term solution” to address the USPS’s $20 billion deficit, but that he couldn’t wait any longer for Congress to make long-term legislative changes to ease the burden.

Postmaster General and CEO Patrick Donahoe at U.S. Postal Service headquarters, Washington, Feb. 6, 2013.
Postmaster General and CEO Patrick Donahoe at U.S. Postal Service headquarters, Washington, Feb. 6, 2013.
“Time is money. If these issues would have been dealt with in 2008 or 2009, we would have been in much better shape financially,” he said, acknowledging it’s not a “happy decision politically.”

A witness to industrial decline

Donahoe, who grew up in Pittsburgh, Pennsylvania, once the steel capital of the world, says that industry’s steady decline left an impression on him. As the mills closed, he recounts, the newly unemployed would say, “I never thought management would let that happen to us.”

Now, as head of the Postal Service, Donahoe says he’s not going to let his postal workers suffer the way Pittsburgh’s steel workers did.

“We’re not going to kick the can and not do what we have to do and jeopardize this great organization that’s great for America, that’s great for American business, that’s great for employees,” he said. “We’ve got to make the right decision.”

Big labor weighs in

But cutting service is the wrong decision, according to some members of Congress and labor unions, two of which are calling for Donahoe’s removal.

“He did not get the stakeholders of the Postal Service together to make this decision,” said Jeanette Dwyer, president of the National Rural Letter Carriers' Association. “He let the unions know less than 24 hours before the announcement was made.”

Dwyer questions Donahoe’s assertion that his plan could save $2 billion annually, and says costs to remote communities would outweigh the benefits. Part-time letter carriers who’ve spent years doing Saturday service to in order to get full-time jobs will be cut, she says, and rural residents not connected to the Internet will be more isolated than ever.

“There are competitors out there that would like that mailbox for any of those six days,” Dwyer said. “I believe this could be the beginning of the postal service losing business.”

But the postal service has been losing business for a long time. It reported a $15.9 billion net loss for the 2012 fiscal year—three times the 2011 loss.

Changing times

The service that once tied the country together, delivering letters and news to the biggest cities and the smallest towns by pony, steamboat, rail, road and air, has lost relevance with the rise of the Internet. As more people communicate and pay bills online, the volume of lightweight letters and packages sent through the post has declined dramatically.

The organization’s problems are far more complicated than a drop in First Class mail, however. Struggling with a kind of public-private identity problem, USPS receives no taxpayer funding, yet is an independent government agency; it is expected to make money, yet Congress, influenced by the lobbying power of private shipping and office-equipment companies, can tell it how to run the business.

It’s also legally required to pay for employee health retirement benefits for the next 75 years, a law to which no other public or private entity is subject.

For Donahoe, it is this dynamic that must change if the Postal Service is to stay open.

His push to cut Saturday service, which critics say may not be legal, is a way to force the issue.

“Why don’t we fix this thing once and for all,” he said.

Political differences

While he declined to blame anyone in Congress for the Postal Service’s money troubles, he says lawmakers must own up to reality.

“When the law was decided in 2006 to require us to pre-fund health benefits: that was a good decision,” he said. “The problem that happened was, instead of spreading payments out over 25 or 30 years, they required us to pay them in 10 years. As soon as recession hit, we were unable to make the payment without going into debt.”

The U.S. Senate Committee on Homeland Security and Government Affairs will hold a hearing on the issue next Wednesday.

Donahoe will be there, as will Dwyer.

The labor leader says she shares Donahoe’s primary goal—to save the U.S. Postal Service—even if their approaches couldn’t be more different.

“If you’re a service-oriented company, what company can succeed by slashing service when service is your brand?” she said.

If Donahoe’s plan works, Saturday service will end in August.