Where is the 'Post Office' headed?

Published on: 4/23/2012

I came across a Motley Fool piece written by Rich Smith that discussed the dilemma our U.S. Postal Service faces.  It discussed the alternatives that the ‘Post Office’ has available to it in order to overcome the issues that beset it.

The Postmaster General has one approach while the National Association of Letter Carrier’s has a contrasting approach.  Among the really big issues confronting the postal service is the required contribution to its postal worker’s retirement fund.  That was recently reported as being some $5.8 Billion per year.

The Postmaster General believes that the best approach is to cut services that would include closing one of every three Post Offices, ending Saturday deliveries and dumping tens of thousands of employees.

The NALC (postal workers’ union) says that the best solution is to keep the services we’re accustomed to, keep the post offices open and keep the employees.  To do that, the NALC says that we ought to pay for the service we receive at rates similar to those around the world.

There are those who believe the Postmaster General’s approach would only prove a stop gap measure that wouldn’t solve the problem but, instead, lead to more service reductions while fueling the growth of private sector companies such as FedEx and UPS.

If we looked at other countries and the fees that support their postal services, we see Canadians paying some 20% more than we do today or about $.55 for a first class letter.  The French pay two-thirds more than we do, or about $.77.  Our rate of $.46 for the current Forever stamp would need to be raised to some $.60 per stamp to support the current needs of the postal service.

If we went to the $.60 per stamp today, and if costs were to continue to increase at the rate of inflation only, and if that were to be just 5% per year, we’d be paying about $.77 per stamp in five years and about $.98 per stamp in ten years.

I suspect that we would continue to see problems with the approach of ‘pay as you go’ or if we were to reduce services.  

I wonder if we are at, or very near, the tipping point where we will need to privatize the current postal system.  It seems that a combination of current electronic communications capabilities and the private sector companies that do a great job of moving materials around the country and around the world at competitive prices make that decision more imminent than some may like.

Is this something akin to what the Pony Express proponents struggled with many decades ago as more modern transportation capabilities emerged?