Senate staves off postal Armageddon with USPS reform bill

Postal bill averts 3,700 post-office closings for at least two years, but fails to address deeper, structural problems in how the postal service manages a vast operation, rivaled only by Wal-Mart in total employment.

In a rare bipartisan vote, the Senate on Wednesday passed a postal reform bill to head off a potential shutdown at the struggling US Postal Service, which now owes $13 billion to the Treasury and is expected to run out of cash as early as this summer.

The Senate bill aims to ease postal service deficits now approaching $23 million per day by refunding $11 billion in USPS overpayments to a federal retirement system. If Congress fails to act, the postal service could begin closing some 3,700 post offices and as many as 325 mail processing centers beginning May 15.

But the bill’s detractors argue – and its supporters concede – that the legislation does not offer comprehensive solutions for many of the postal service’s long-term challenges, such as a surfeit of facilities and an inability to innovate and find new businesses.

"How to change the postal service to save it is complicated and challenging but together we came up with an answer," said Sen Joe Lieberman (I) of Connecticut, one of the bill's sponsors, to reporters after the vote.

The Senate bill, sponsored by a group of moderate legislators including Senator Lieberman, Sen. Susan Collins (R) of Maine, Sen. Tom Carper (D) of Delaware, and Sen. Scott Brown (R) of Massachusetts, passed 62 to 37 with 13 Republicans voting for the measure and four Democrats voting against. Both Democratic members of the West Virginia delegation voted against the measure after Sen. Joe Manchin's amendment to forbid post office closures for two years came up well short of approval during a marathon session in which the Senate voted on more than three dozen amendments.

The legislation aims to cut costs by funding buyouts and early retirement for its employees from the $11 billion refund, a move expected to cut the postal service's nearly 600,000 employees by about 20 percent, for a savings of about $8 billion a year. More cost savings will come through reducing the amount that the postal service contributes to its retiree health program and capping salaries for top postal executives at $199,000, at the level of Cabinet officials.

The bill also largely slows proposed structural changes in the strategic plan offered by the USPS in February. Where the postmaster general would like to eliminate Saturday delivery, the Senate legislation would block such a move for two years. Then, it will allow it only if postal regulators and the Government Accountability Office agree the postal service needs to cut Saturday delivery for its long-term health.

Likewise, the bill requires the USPS to meet more requirements or offer more avenues to appeal the closure of post offices and mail processing facilities. It requires, for example, that the postal service develop “retail service standards” to ensure all Americans have access to postal services in evaluating the 3,700 post offices that are candidates for closure.

While there is broad agreement that the bill’s financial provisions avert a near-term disaster, the structural changes to the postal service’s operations aren’t enough for the bill’s critics.

Sen. John McCain (R) of Arizona, for example, thinks not enough is being done to cut excess facilities. In a nod to the political pressure on members of Congress (and particularly members from largely rural states) to avoid post office closures back home, Mr. McCain offered an amendment that would have created a process similar to the Base Realignment and Closure Commission (BRAC) instituted by Congress to handle the sensitive matter of closing military bases. It was defeated 69-30.

“If we don’t do that, we’ll be back in two years, absolutely,” McCain said in an interview Tuesday. “There’s no objective observer who believes that this proposal addresses the issue fundamentally."

And while the legislation will allow the USPS to enter some new business, such as shipping alcoholic beverages or offering services on behalf of state and local governments, such changes are only incremental, critics say.

“Congress is not giving the postal service the commercial flexibility it needs to adapt to the market reality,” says Richard Geddes, a professor at Cornell University and author of “Saving the Mail: How to solve the problems of the U.S. Postal Service.”

Mr. Geddes, who is broadly in favor of the Senate bill, believes the postal service has the potential to be a profitable enterprise if the organization was corporatized with a single shareholder: the US government. In such a format, the postal service would shed the needs of its multiple current masters – Congress, large mailers, postal unions, to name three – for the pure mission of earning income for the US Treasury.

“Congress has no special skills in running a business, and so they should just let the management of the postal service be undertaken by its managers,” Geddes says.

“This is the time. It’s hard to make the argument that the physical mail continues to bind the nation together. I believe it did many years ago but I believe that time has come and gone.”  

The bill’s defenders argue that making deep cuts to the postal service’s infrastructure would initiate a death spiral for the USPS, leading fewer and fewer Americans to make use of it and ultimately dooming the business.

“This is Congress saying you’re not going to have a healthy postal system unless you have first-rate delivery. We’ve got to have timely delivery,” said Sen. Ben Cardin (D) of Maryland on Tuesday. “You’ve got to maintain quality service or less and less people will use the postal service.”

Lieberman put it more bluntly: “We don’t allow for shock therapy for the postal service because we don’t think it will work... If you cut service, you may kill the whole thing off.”

The implications of changes to the postal service reach into every American community. It’s 32,000 locations are greater than Wal-Mart, Starbucks, and McDonald's combined. In terms of employment, it trails only Wal-Mart.

“Only the Postal Service – for the price of a stamp – will go that ‘last mile’ to ensure delivery to out-of-the-way addresses – using burros in the Grand Canyon and snow shoes in Alaska,” Lieberman said on the Senate floor earlier this month. “And what federal agency could process some 6.7 million passport applications a year if the Postal Service was forced to stop?”

The House version, sponsored by Rep. Darrell Issa (R) of California, has yet to receive a vote and offers much steeper cuts to postal operations than its Senate cousin. That sets up a potentially grueling showdown between the two chambers should the House move on the measure -- something the Senate legislation's sponsors said they hoped would happen very soon.

"Instead of finding savings to help the Postal Service survive, the Senate postal bill has devolved into a special interest spending binge that would actually make things worse," said Congressman Issa, who chairs the House Oversight and Government Reform Committee, in a statement after the vote.

"The Senate's approach is wholly unacceptable," he added.