Forty-one years ago Congress told the U.S. Postal Service tostart acting like an independent business and pay its own way.Every time the Postal Service tries, something stands in the way:Congress.

Facing annual losses of $18.2 billion by 2015 and a possibledefault this year, the Postal Service has a five-year plan forprofitability. It wants to end Saturday mail delivery, closehundreds of letter-sorting facilities and thousands of post officesand consider breaking union contracts to fire employees. It alsowants to set up an independent health plan, raise postal rates andenter lines of business such as delivering wine and liquor.

Each element of the plan has an opponent. Postal worker unionsare fighting the closings and job cuts. Direct-mail advertisers andmagazine publishers demand Saturday delivery and low rates. Ruralconstituents — for whom the post office is their strongest link tothe rest of the world — and their representatives in Congressprotest post office closings.

“It's the politics, but it's also a belief that perhaps radicalsurgery is not needed to save the patient,” Rob Atkinson, presidentof the Information Technology and Innovation Foundation, said aboutlawmakers' reluctance to allow bigger cuts. “Tinkering here andthere might work, it is hoped, and the hard decisions and hardvotes can be avoided. But it's only delaying the inevitable.”

Today, the service is scheduled to release its plan for what todo with the nation's smallest post offices. Tomorrow, it willrelease financial results for the first three months of thisyear.

Congress is “not focusing on the Postal Service at all” andinstead is concentrating on the November election, said MauriceMcTigue, vice president of George Mason University's MercatusCenter, a public-policy institute in Arlington, Virginia. Becauseof that, he said, “the solutions they're coming up with won't helpat all.”

If Congress doesn't let the service make the cuts it wants orrestructure, postal management will be coming back to lawmakersafter the election for more relief, said McTigue, a former memberof New Zealand's parliament who helped overhaul that country's postoffice.

Postal Overhaul Measure

Senators who voted for an overhaul bill, which passed 62-37 lastmonth, maintained that the prohibitions are reasonable to give theorganization's employees and customers time to adjust.

“Our bill doesn't prevent the Postal Service from making changesor streamlining operations, but it ensures that it rolls outchanges in a deliberate and responsible manner,” Senator ScottBrown, a Massachusetts Republican who co-sponsored the Senate bill,said the day before it passed.

The U.S. Constitution gives Congress the power to establish postoffices, and federal law promises mail delivery to every address.When the nation was founded, mail was the sole way to communicateabsent face-to-face conversation. In 1971, the Postal Service wasstripped of its Cabinet status and reborn as a self-fundedgovernment entity.

Now, the service, which is allowed to borrow only from the U.S.Treasury, has hinted that a taxpayer bailout may be necessary ifit's not allowed to make changes.

The service was self-sufficient until the U.S. recessioncoincided with a shift to electronic communications. Mail volumedeclined as digital commerce and correspondence increased.First-class mail volume has fallen 25 percent since 2006 and 4.5percent in the six months ending March 30, according to the PostalService.

Its mandate to serve even the most unprofitable customers —including mail recipients on the floor of the Grand Canyon inArizona — hasn't eased, even as Congress has increased otherfunding requirements.

In a February cost-cutting plan, the service highlighted theU.K.'s Royal Mail, where the government assumed $16 billion inpension liabilities; Germany's Deutsche Post, where the workforcewas cut in half; Belgium's Bpost, where 40 percent of employeeswere replaced by part-time workers; and Canada Post, which cut itsdelivery to five days a week.

Health Benefits

Postal workers' unions including the American Postal WorkersUnion and the National Association of Letter Carriers say deep cutsaren't necessary. They blame the Postal Service's losses on a 2006congressional mandate that the organization pre-fund 100 percent ofits projected health benefits liabilities to ease concerns of apotential taxpayer bailout. The Postal Service is seeking areprieve from $11.1 billion in those payments due in a fewmonths.

The Postal Service drafted its own medical plan, saying apriority is health care costs, which consume 20 cents of everyrevenue dollar. Democratic and Republican lawmakers are skepticalwhether the plan would be more affordable and concerned that losingthe service's more than 1 million employees and retirees wouldincrease costs for other government workers.

The Senate measure didn't grant a new health plan and would makeit more difficult for the service to close facilities soon enoughto staunch its financial crisis. The bill's passage capped morethan five months of debate about how to prevent closings of as manyas 3,700 post offices the Postal Service has deemed inefficient orredundant.

Some of the same lawmakers calling for quick action on postallegislation are asking Postmaster General Patrick Donahoe to extenda facility-closing moratorium they helped broker, which is set toexpire May 15. The service wants to save $2.5 billion a year byclosing mail-processing plants and $200 million annually in laborand operations costs by closing up to 12 percent of postoffices.

“You have announced your intent to close hundreds of postoffices and processing facilities beginning May 15,” four senatorswrote to Donahoe in an April 30 letter. “However, as last week'sdebate demonstrated, there is considerable concern in the Senatethat this approach will unnecessarily degrade the infrastructure,which is one of the Postal Service's most important assets.”

Senators signing the letter included Brown. He won election withbacking from the Tea Party, which supports cuts in governmentspending.

'Just a Process'

“It's just a process one goes through,” Donahoe said of theletter in an interview after a May 4 postal board meeting inWashington. “There are many different opinions.”

The U.S. House, which hasn't scheduled debate on its postaloverhaul bill, drafted a measure that would create an independentcommission to oversee closings modeled on the Defense Department'sbase realignment process. Even if the commission — which wouldreduce the congressional role in closing facilities — wins Housepassage, analysts say its enactment is improbable this year.

Representative Darrell Issa, the California Republican whosponsored the House overhaul bill, called the Senate measure a“special-interest spending binge” that would require the PostalService to keep excess facilities open and would delay itsfinancial collapse “for two years, at best, when reforms will onlybe more painful.”

The House measure would create a control board that couldoversee operations in the event of a Postal Service default, aprovision Donahoe has said he's “very uncomfortable with.”

Politics come into play especially in rural post officeclosings, said Atkinson, who served on presidential advisorycommissions during the Clinton and George W. Bush administrationsand founded the group he now leads that studies innovationpolicy.

“Rural members don't want to alienate the few but vocalconstituents who'd be inconvenienced by post office closings,” hesaid.

The Senate bill would block the Postal Service from endingSaturday mail delivery for at least two years. The service hasestimated $2.7 billion a year would be saved by that cut.

“It's an election year, so they're trying to delay the painhere,” said Elaine Kamarck, a Harvard University lecturer who ledgovernment modernization efforts during President Bill Clinton'sadministration and who the Postal Service commissioned for a 2009report on its business model. “It would be pretty easy for somechallenger to go out and start drumming up complaints about theirpost offices being closed.” “There is going to be job loss,” shesaid. “The job loss is going to be fairly difficult, and soCongress is trying to just sort of delay the inevitable.”

Bloomberg News

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