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Postal Service closings? System faces cash crunch. Again.

Postal Service closings could mean longer lines and possibly slower delivery if Congress doesn't move to alleviate the system's cash crunch. But the alternative to Postal Service closings would mean using tax money. 

By Business editor / April 23, 2012

Postal worker Menda Doria stamps envelopes of tax returns outside the US Postal Service Oakland Processing and Distributing Center in Oakland, Calif., Tuesday. Postal Service closings loom if Congress doesn't ease the system's looming cash crunch.

Stephen Lam/Reuters

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You won't notice it when you mail a letter or buy a stamp. But the post office is in crunch time.

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It will run out of money in August if Congress doesn't act. Even if lawmakers come up with temporary fixes, the long-term outlook is stark. In the Internet Age, regular mail service can't continue as is.

"We're going down an unsustainable path," says Robert Carbaugh, an economist at Central Washington University in Ellensburg, Wash., and coauthor of a 2011 post office study.

The squeeze puts postal customers in a difficult spot. Do they want a leaner system? Postal Service closings? And possibly slower delivery? Or do they want one that relies on taxpayer funding?

The future of the US Postal Service (USPS) might not seem like a burning issue to many Americans, whose mailboxes are stuffed with unwanted catalogs and credit-card solicitations. But the network lies at the heart of a nearly $1 trillion mailing industry that delivers materials, packages, and bills for businesses large and small and reaches into virtually every corner of American life. It delivers almost 40 percent of the world's mail, maintains nearly as many retail locations in the United States as McDonald's has restaurants worldwide, operates one of the world's largest civilian fleets, and generates annual sales that outrank all but 34 Fortune 500 companies.

How do you reform such a gargantuan institution to ensure profits? You shrink it.

If postal officials have their way, the network would shrink rapidly. Since 2006, its peak year of mail delivery, the USPS has already cut operating expenses, consolidated nearly a third of its processing locations, frozen salaries, and shrunk its workforce by 140,000. There are now fewer postal workers than at any time since 1965.

Despite these cost-cutting moves, revenues have fallen even faster: down more than 12 percent – a whopping $9 billion – since 2007. The USPS's debt has tripled, and its finances are sketchy.

"Declines in mail volume have brought the U.S. Postal Service (USPS) to the brink of financial insolvency," the US Government Accountability Office warned in a November report.

The USPS wants to slash its annual costs by $20 billion or more by 2015, half of which would come from providing a cheaper health-benefit plan and five-day delivery. Such moves require the OK from Congress, and many lawmakers are loath to let post offices close in their district. "Members' phones light up when you start talking about the Postal Service," says one congressional staffer.

Instead, many in Congress want to slow the consolidation. Late last year, Democratic and moderate Republican senators and postal officials negotiated a six-month moratorium on cuts while they forged a bipartisan rescue bill. A key provision would give the USPS nearly $11 billion that it has overpaid into the federal retirement system to cut the USPS payroll by 100,000 employees through buyouts.

The bill would also ease the burden of health-care payments. In exchange, the USPS would have to continue six-day delivery for at least two years and face tougher hurdles to cut rural post offices. A rival House bill from Rep. Darrell Issa (R) of California would give the USPS more freedom to shed jobs, close post offices (under the guidance of an oversight board), and (after six months) eliminate Saturday delivery.

Will such moves be enough? Mr. Carbaugh is skeptical. "Down the line, it's going to take more fundamental changes" to get the Postal Service on a sustainable path, he says. "In a market system, with a company like the Postal Service, you'd try to find a merger partner…. But who's going to purchase the post office? Realistically, I don't see that in the cards."

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