The Postal Service Responds

To the Editor:

Recently an opinion piece by a self-styled critic of the postal service appeared in your publication. It was written by Don Soifer who pitches flawed views whenever something significant occurs regarding the postal service. In this piece, it was the two-cent increase in the price of stamps. As usual, his writing tries to create the impression that the government is really messed up because it is in the delivery business and only the private sector can do more for less.

He uses the rate increase as an opportunity to disparage the postal service’s successful initiatives to reduce costs by $5 billion from the national delivery system and reduce the career work force by 100,000. He does it by lamely challenging our latest Transformation Plan, saying its 87 pages should not be taken seriously. Perhaps if the number of pages were greater, Mr Soifer would give it more serious consideration.

Postmaster General John E. Potter inspired our Transformation Plan in 2002. It is a blueprint for the organization to keep it focused on our core business and strategies that produce results. The current version continues to be our roadmap through the year 2010. In 2002, we set a goal to remove $5 billion in costs from our system by the end of 2006. We met that commitment a full year ahead of schedule. It’s our goal to cut another $5 billion through 2010, continuing to make mail a better value than ever.

Contrary to what Mr Soifer believes, lowering costs is a major part of our plans. In 2005, for the sixth consecutive year, we offset a portion of our cost inflation with significant productivity gains. In fact, since 2000, our annual productivity gains have averaged almost six times more than those achieved annually from 1972 through 1999. It is critical to understand that these productivity gains, which reduce costs, are not automatic — they result from sound governance, sold management, engaged employees, and the effective use of technology.

Mr Soifer says the postal service has turned to advertising mail to make up the difference in the decline of first-class by offering discounts to bulk mailers. He says it is unclear as to the value of these discounts to the bottom line. Unclear to whom? Last time I checked there are not too many successful businesses that put all their eggs in one basket. While it is true that single piece first-class mail has been declining, last year bulk presort first-class increased, offsetting the decline in single piece. All classes of bulk mail have been underwriting a universal postal service for a long time. Worksharing discounts are an essential element of the mail and have been since the early days of postal automation. They are the primary reason, along with sound management and automation, that we now have essentially the same number of employees as we did in 1985 even though we are delivering 57 percent more mail.

The rate increase that became effective January 8 was necessitated by a $3.1 billion escrow payment that was the result of legislation enacted in 2003. If not for that requirement, which has nothing to do with costs under our control, there would be no need for a rate increase.

We’re dealing with the rising cost of employee benefits, fuel, etc, just like all other employers. Our delivery network also continues to grow by more than two million new homes and businesses each year.

We were able to absorb these increases and hold postage rates steady for more than three years. Postal efficiency continued its upward swing, with an unprecedented sixth consecutive year of growth in productivity — the equivalent of more than $700 million in cost savings.

Further, were it not for the $27 billion transfer of military service obligations from the Treasury Department to the postal service, there would be over $22 billion in the Postal Service Retiree Health Benefit Fund at the end of 2006, according to the Congressional Budget Office. In our Annual Report for 2005, our calculations show the postal service currently having a $5.3 billion surplus on total retirement program benefits of $266.3 billion.

At some point, Congress and the President might approve legislation to have the postal service become the only agency of the government to fully fund retiree health benefits. But the fact remains that without the need to continue to generate the $3.1 billion for an escrow account for a yet undetermined purpose, we still would have been able to maintain steady rates for a fourth year because of sound postal management.

I don’t expect Mr Soifer to take any great achievements of the postal service seriously. I say be “wary” of pundits like him who appear to be championing the cause of consumers.

Sincerely,

Azeezaly S. Jaffer

Vice President

Public Affairs and Communications

US Postal Service

415 L’Enfant Plaza, SW, Washington, D.C.          February 9, 2006