The United States Postal Service lost nearly $4 billion last year and barring a miracle is likely to lose about $7 billion this year. The agency's special request to raise the cost of a first-class stamp by 2 cents to reduce the losses was rejected Thursday by the independent Postal Regulatory Commission. The decision leaves the service in a bind. Without the increase, it could soon exceed its multibillion-dollar credit limit and be unable to fund, as it is required to do, retiree health benefits. The commission decision leaves the service in a difficult position with few resources to reverse its losses.
Available options are few. The Postal Service can appeal the commission decision, which is required because the rate hike requested was higher than the rate of inflation. It can file for a new but similar rate increase. It can seek a smaller rate hike that would be automatically approved because it is within the rate of inflation. Even if one of those actions was successful, approval would provide only minimal relief. The cause of the revenue shortfall is deep-rooted, and unlikely to be reversed by raising a stamp's cost.
The problem faced by the post office is systemic. Postal Service revenues are falling precipitously because people no longer automatically use the mail to correspond with family or acquaintances or to conduct their business affairs. Other forms of communication - the Internet, for example - allow consumers to undertake such correspondence more quickly and at lower cost. An example: Postal Service losses were accelerated this year when millions more Americans opted to file their taxes online rather than use first-class mail to deliver forms to the Internal Revenue Service and state tax offices.
The Postal Service, to its credit, has attempted to improve its bottom line. It has adopted new technology, and streamlined management and operations where possible. It has employed engaging advertising and public relations campaigns to expand its user base. That's helped some, but not enough. Though it is an independent agency now, the Postal Service still must answer to regulators and, indirectly, to Congress, which kowtows to mass market mailers. It is hamstrung by the requirement to service every address in the United States, by labor contracts and by a work culture that is resistant to technology and to other innovations. A rate increase might reduce the Postal Service deficit a bit, but it can't correct the broad-based problems that contribute to it.
Fixing those problems will require a change in Postal Service mindset. It can't recoup profits by increasing the volume of traditional mail. Rather, it will have to embrace technology to build useful partnerships with consumers and businesses to win market share. Given its history, such transformation won't come easy, but if the post office as we know it is to survive well into the 21st century, such change is as inevitable as it is necessary.