Curbing Costs

The U.S. Postal Service is an agency steeped in red-ink.

The agency reported a loss of a record $15.9 billion for the last budget year and more red ink is forecast in 2013. Those deficit numbers punctuated a year in which the Postal Service was forced to default on billions in retiree health benefit prepayments to avert bankruptcy.

Drastic times call for drastic measures.

The Postal Service did just that Wednesday. It came in the form of ceasing mail deliveries on Saturdays beginning in August. Package delivery those days, however, will continue.

The move is one that has been long rumored, with the intent of easing the agency’s financial plight. Stopping Saturday delivery will do just that, saving some $2 billion annually.

That is a major bandage being applied to stop the agency’s financial bleeding. But will it be a long-term fix?

Package delivery has increased by 14 percent since 2010, officials say, while the delivery of letters and other mail has declined with the increasing use of email and other Internet services. Thus, keeping Saturday package delivery makes sense as the volume justifies it.

The agency’s biggest problem – and the majority of the red ink in 2012 – was not due to reduced mail flow but rather to mounting mandatory costs for future retiree health benefits, which made up $11.1 billion of the losses. That being said, Saturday delivery cessation may not be enough.

Postal Service market research and other research has indicated that nearly 7 in 10 Americans support the switch to five-day delivery as a way for the Postal Service to reduce costs.

That may be accurate, but Americans won’t take kindly if more postal sacrifices must be made in the future.