Why the Postal Service Must Be Changed

By Gerald Clarke

The Post Office, an organization older than the republic itself, went out of existence four years ago. Amid proud speeches and high hopes, the new U.S. Postal Service took its place. The Post Office's emblem, a galloping pony express rider from the 19th century, was replaced by a sleek 20th century eagle, and the Postal Service, a quasi-independent Government corporation, was expected to be equally up to date. Its assignment was not only to deliver the mail fast and efficiently but also to pay its own way within just a few years, phasing out a 200-year-old subsidy from the American taxpayer.

So much for good intentions. Instead of combining the efficiency of private enterprise and the Government's concern for the public good, as its designers had anticipated, the Postal Service is increasingly unsuccessful as a business and hurtful to the public welfare. The new eagle has no wings. Today postal delivery is no better than it was under the old Post Office, and in some cases it is worse. The Postal Service, which has a current budget of $12.6 billion, is now running a deficit of more than $820 million, over and above a federal subsidy of $1.5 billion. Unless it receives a huge infusion of cash, it could face bankruptcy. (As a corporation, the Postal Service can actually go bankrupt, though the Government, of course, is always there to bail it out.)

Postal rates, moreover, have risen and are still rising so rapidly that many users will soon be priced out of the market. Major voices in America's free press, among the nearly 10,000 magazines and hundreds of mail-delivered newspapers, are threatened with extinction. Two questions must now be asked. What went wrong? And more important: What kind of postal service does the U.S. need?

The first question is the easier. Just about everything went wrong. To begin with, the top management, recruited from business, was remarkably unbusinesslike. Elmer Klassen, who was Postmaster General from January 1972 to February 1975, always seemed uncertain about what the Postal Service should be. He let people go, and then, when operations deteriorated, hired others to take their place. The Postal Service, which spends 85% of its budget on labor, now employs 700,000, making it, after the Bell System, the nation's second largest corporate employer.

To raise its wages to the level of private industry and also to win valuable allies against congressional critics, the Postal Service in 1973 gave the seven postal unions an overly generous settlement: an increase that amounted to 23% in wages and benefits over two years. Postal employees now earn considerably more than comparable Government workers; a beginning postal clerk, for example, makes $10,898, while a Government clerk in a roughly similar area starts at $8,500. Most remarkably, if postal workers were paid at the same rate as Government employees, there would be no postal deficit at all this year. Moreover, postal employees have also written into their 1973 contract something quite unusual: a guarantee against their being laid off, a quid pro quo supposedly for their pledge never to strike. That promise, however, has not prevented them from threatening to strike when their present contract expires on July 20.

Inflation has hit the Postal Service even harder than most other enterprises. Just the increases in fuel prices--the Postal Service is the nation's biggest gasoline user--have added $162 million to its costs since January 1973. The only successful cost cutting that the corporation has managed has been at the expense of service--reducing the number of collections, for example, and putting mailboxes by the curb in new housing developments rather than by the door, so that the homeowner and not the mailman has to do the walking.

Faced with all these problems, Klassen's successor as Postmaster General, Benjamin Franklin Bailar, a former vice president for international relations at American Can Co., gives the promise of providing more efficient administration. He is young (41), analytical and decisive. Even if the Postal Service had had good management from the start, however, it would still be in deep trouble today.

The law that created it contains such glaring contradictions that the Postal Service is virtually destined to fail. On the one hand, it is expected to break even; Government subsidies are even now being phased out, with 1984 as a hoped-for cut-off date. On the other hand, it is expected to provide all kinds of public services--many of them money losing--that Americans have depended on for generations, and still depend on today. "The Postal Service," says the law, "shall have as its basic function the obligation to provide postal services to bind the nation together through the personal, educational, literary and business correspondence of the people." Yet "postal rates and fees shall provide sufficient revenues so that the total estimated income and appropriations to the Postal Service will equal, as nearly as practicable, total estimated costs of the Postal Service." The past four years have shown that no U.S. postal operation can be a true public service and at the same time break even on costs.

Until recently, U.S. postal operations were no more supposed to pay their way than were the Army, Navy or dozens of other federal departments set up to serve the people. The Second Congress in 1792 started the practice of subsidizing the Post Office, and succeeding Congresses continued it. Those early legislators realized that the Post Office was something quite different from a business: it was a means of uniting a sprawling, diverse country and holding it together.

For that reason, the Post Office encouraged newspapers by offering them low mailing rates. During Washington's Administration, a congressional committee explained: "The circulation of political intelligence is ... justly reckoned among the surest means of preventing the degeneracy of a free government." The policy worked; the Post Office's cheap rates were the most important single factor in the development of the U.S. press. From 1801 to 1830, the number of newspapers in the country increased from 200 to 1,200.

The press was not the only beneficiary of inexpensive service. Almost everyone benefited in one way or another. From the days of Daniel Boone onward, for instance, the pioneers had mail service, at great cost to the Treasury. Postal deficits--and Government subsidies--were expected as a matter of course. From 1851 until 1971, when it went out of business, the Post Office made money in only 13 years. Before the turn of the century, its subsidy was far larger in proportion to the national budget than it was in 1970, and postal officials were constantly seeking ways to extend--not curtail--services.

Today the U.S. is the only major country that expects its postal operations to be in the black. All other major nations subsidize their post offices, either directly--or indirectly by transferring funds from government-owned, moneymaking phone and telegraph operations. The fact is that the Postal Service cannot be run from its own revenues. Consider the pricing upheavals and dislocations in service that a truly "businesslike" postal service would cause:

> A letter, which now costs as much to travel only a block in Manhattan as it does from New York to Los Angeles or Anchorage, would have to bear its actual cost. The local letter might cost a nickel, but the long-distance letter might be a dollar.

> Postmen, who now deliver mail to the Havasupi Indians at the bottom of the Grand Canyon just as they do to the densely populated cities, would find it too expensive to continue such deliveries. The Havasupis, as well as Maine loggers, Wyoming ranchers, Kansas farmers and any other Americans who live in sparsely populated areas, would have to pay a great deal extra for service. Or do without mail.

> The Postal Service, which maintains 30,780 post offices --18,000 of them in small towns, hamlets and hollows--would have to shut offices wholesale.

> Residential deliveries, which used to be two a day, would have to be cut back even more, perhaps to twice a week.

A truly "businesslike" operation, in short, would serve perhaps two-thirds of the American people one-third of the time. Financially, it might break even, but politically and socially, it would break many links connecting Americans.

To provide the services that are rightly expected of it and still try to hold down its deficit, the Postal Service has instead raised its rates again and again. Since 1971, the cost of sending a letter has gone up 67%, second-class (magazine and newspaper) rates more than 90%, third-class (bulk advertising) rates 57% and fourth-class (parcel post and books) rates 6% to 39%. The rises are continuing on a step-by-step schedule. Next year, for example, the total increase for second-class service will bulge to 175%. On top of all that, Seymour Wenner, the chief administrative law judge for the independent Postal Rate Commission, recently recommended that second-,third-and fourth-class rates be raised still higher. First-class postage would be reduced from 100 to 8 1/2-c-, but the saving for the great majority of people would be more than outweighed by higher costs for everything else. If Wenner has his way, second-class rates would go up to five times what they were in 1971. Nor is that all. The new postal workers' contract now under negotiation will almost certainly raise costs and rates yet higher. TIME, whose postal costs jumped from $3.7 million in 1970 to $7.5 million in 1974, would have to pay an estimated $36 million in 1980; other publications would face proportionate increases.

The figures are particularly ominous for publishers of magazines and newspapers, from the Wall Street Journal to many hundreds of rural dailies and weeklies that depend on mail delivery, and for book and record clubs. The most prosperous publishers, such as Time Inc. and the Reader's Digest Association, Inc., would probably survive, though under great strain. To meet their costs, they would either charge their subscribers far more than they do today, raising prices beyond the reach of many, or they would try to find cheaper means of distribution.

But hundreds of smaller publications would die. Americans would be deprived of many of their sources of information: those small journals from left, right and center that vent ideas and minority points of view; religious journals; magazines for farmers, union members, children, hobbyists or anybody else with an unusual or special interest. Anything printed that is distributed by mail would suffer. The major loser would be the nation itself.

And for what gain? In dollars and cents for the Postal Service, very little. Magazines and newspapers now contribute only 3% of total postal income. If rates are doubled, the magazines' and newspapers' contribution to total postal revenues will rise to only 6% or less--and then quickly drop as many magazines and newspapers quit publishing while others lose subscribers or find other ways of delivering their issues. Already the Wall Street Journal, McCall 's, the Reader's Digest and Better Homes and Gardens are experimenting with alternative systems, including private delivery companies. TIME will soon join them. (By law, only the Postal Service can deliver first-class mail and have access to private mailboxes; with certain exceptions, the other three classes are open to competition, though private deliverers cannot use mailboxes.)

If private distributors are successful, the Postal Service will sink into much deeper trouble. The private carriers would take away business in cities and suburbs, where high volume makes it easier to turn a profit, and leave to the Postal Service the rural, low-population areas, which are gross money losers. The prospect would be a never-ending spiral of higher rates, lower volume and deteriorating service. As rates went up, more customers would flee, and rates would have to go up again.

Already the spiral is beginning. Since 1969, because of high rates and poor service, the Postal Service has lost about one-third of its parcel post business to private companies. This year, for the first time since the Depression, total mail volume--not just parcel post--is down. Reason: rising rates in a time of economic recession. Postmaster General Bailar, along with nearly everyone else who has studied the problem, warns that the vastly higher rates proposed by Wenner would shrink volume still further. Yet, adds Bailar, "the fixed costs of postal service would remain," and thus rates would have to jump even further.

What should be done? One suggestion in Congress is to turn the Postal Service completely over to private enterprise, making it either a regulated monopoly, like the telephone industry, or setting up several competing postal systems. Illinois Representative Philip Crane has even introduced a bill to end the Government monopoly of first-class mail and open it up to private competition. Such systems might work in heavily populated areas, but there would be no profit in serving the rest of the country. Congress would then have to provide big subsidies to serve less populated areas or allow the private postal systems to charge much more for mail delivery to those points.

Another proposal, put forth in a bill by Texas Democratic Representative Eligio de la Garza, is to kill the Postal Service and bring back the old Post Office under total Government control. The trouble with this idea is that it invites a return of the abuses and inefficiencies of the Post Office, which was inflexibly bureaucratic and ridden with politics. The virtue of a Government corporation is that it can make appointments on the basis of merit alone, transfer funds as it thinks best without bureaucratic controls, and plan ahead and borrow money for modernization.

Considering the alternatives, the quasi-independent Postal Service should be retained, but it must be changed--and quickly.

The solution lies with Congress. First, it should declare unmistakably that the Postal Service is in fact a service and not a business that should be expected to break even. It will always have to receive Government money if it is to do the job the public needs and wants. A bill now in Congress to provide the Postal Service with a subsidy of up to 20% of its operating expenses is a sensible recognition of this fact. Says New York Democratic Representative James Hanley, who is head of the House Postal Service Subcommittee and the sponsor of the bill: "There's no way the traditional concept and quality of the Postal Service can be maintained at a break-even level." Former Postmaster General Lawrence O'Brien agrees. Says O'Brien, who proposed the idea of a separate corporation in 1967 and who now feels that various changes have turned it into a monster: "At no time did we envision the Post Office as a profit-making entity. There has to be an equity, a balance in the service to allow communication with the American people. We had no idea that this would be inhibited or destroyed."

Second, Congress must take back the power to review rates.

Postal rates are so enmeshed with the public service role that they should be responsive to the will of elected representatives and not left simply to an administrative law judge and a commission appointed by the President without customary Senate approval.

Beyond that, while respecting the Postal Service's independence, Congress must oversee its functions much more closely. In washing its hands of postal matters in 1971, Congress abdicated a responsibility for postal affairs that was set out for it in the Constitution. The lawmakers might well refer to the words of George Washington, who spoke of the Post Office as the indispensable chain binding Americans together.

Gerald Clarke

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