Going Postal

Going Postal

It’s time to let the private sector help reform government spending.

Now that the circus has left town—the elections are behind us—it’s time for public office holders to get serious about improving things; not by playing more politics but instead by tapping the private sector’s expertise in restructuring troubled businesses.

One of the top priorities should be restructuring the U.S. Postal Service, which to most businesses is as important as reliable energy. It delivers more than 200 billion pieces of mail per year, connecting virtually every U.S. home and business. And it’s close to needing a huge taxpayer-backed financial bailout because it cannot right itself as long as Congress continues to meddle in its affairs.

The second-largest U.S. employer is losing $5 billion a quarter. By mid-October, it hit its borrowing limit for the first time in history. By early November, it had amassed $26 billion in debt—$15 billion owed to the U.S. Treasury and $11 billion in retiree health benefits it defaulted on in August and September, according to the Wall Street Journal. It’s on track to lose nearly $20 billion a year.

The Postal Service doesn’t receive taxpayer funding and through 2005 had found ways to operate profitably. Then Congress mandated that it prepay $5.5 billion a year toward future pension liabilities, the recession hit, email encroached, and first-class mail volume dropped 25 percent.

Postmaster General Patrick Donahoe has tried to turn things around, but members of Congress have opposed just about every one of his ideas, including closing 3,700 rural post offices, stopping Saturday mail delivery, and slowing delivery of first-class mail. So it’s best Congress get out of the way by taking these steps:

  • Have FedEx Corp., United Parcel Service of America, Inc., and others bid to participate in a project led by Donahoe and experts from McKinsey & Co. and Accenture; one bidder would merge with, restructure and then franchise the Postal Service.
  • This privately operated postal business could increase postage rates based on market conditions rather than today’s congressionally mandated cap at the rate of inflation. First-class postage could be increased to $1 and bulk-rate postage doubled in the next two years. Yes, this means businesses relying on today’s overly cheap rates would finally have to pay enough for the Postal Service to make money delivering it. Or they could try to come up with something more effective; I doubt they’d find anything better priced, even after these increases went into effect.
  • The 223 mail-sorting facilities identified for closure and 35,000 related job losses could instead be refocused on shipping; the service could compete more aggressively in an area that today only accounts for about 10 percent of its revenue.
  • Postal Service employees could apply for a job in the new postal operations. Most would be rehired, while weaker performers would finally be vetted out. Benefits in the new operation would be in line with the private sector (401 (k)s instead of pensions, health savings accounts, etc.).
  • Rural post offices could be franchised for up to $100,000 per location based on trailing three-year average mail volumes. Franchisees would receive revenues based on how much mail they process. They could also offer non-Postal Service products and services at their locations, such as coffee shops with free Wi-Fi and small convenience stores.

As far-fetched, rough-sketched, and harsh as this may sound, it is at least a constructive idea offered as a starting point. And I challenge the newly elected or re-elected to start doing the same, and to talk about it publicly.

It is only by thinking outside the box and bringing in creative, proven, private-sector solutions that we may finally solve our greatest government spending problems, one program at a time. Next up: the Department of Defense.

Side note:

I’m pleased to report that Twin Cities Business won Magazine of the Year and 15 other awards at the 2012 Minnesota Magazine and Publishing Association Excellence Awards last month. They include gold awards for overall excellence, cover design, feature writing (congratulations, Senior Editor Gene Rebeck), editor’s column, and website for business and trade magazines over 30,000 in circulation.

Our website won for how it looked last year, but we recently redesigned it and if you haven’t visited lately, please check it out at TCBmag.com.

It’s nicer to look at and faster to use, partly because we reorganized information (stories by industry, for example). It also incorporates more video, and soon, sound files. And stories from our monthly print magazine are now available online as web pages, in addition to the digital magazine version.

There are dozens of other changes, but the greatest difference is in the site’s purpose. The previous version, from 2006, uploaded monthly print content onto the web. The new TCBmag.com is a news and information site covering Minnesota’s business leaders, industries, companies, nonprofits, economy, and more, updated daily.

Our daily uploads provide perspective, context, and extra detail you won’t find elsewhere—in other words, the same insightful intelligence as in our monthly magazine, twice-weekly e-mail newsletter “Briefcase,” and events.

Our goal is to make TCBmag.com the one website to turn to if you’re interested in Minnesota’s business scene, players, challenges, and successes. To further this goal, we’ll be adding content from other sources in the months ahead.

Let us know what you think. We’re constantly looking for ways to improve.

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