Outlook 2005: Why Will This Year Be Any Different in Reform Battle?

An informal survey of mailers and postal managers shows that an alarming number think that Congress’ failure to enact postal reform last year meant the death of postal reform for the foreseeable future.

They are wrong. There are several reasons why it may pass, and why the issue remains the biggest factor determining the financial futures of everyone in the mailing industry.

First, within 48 hours of the Nov. 3 election, Treasury Department officials, speaking on behalf of the White House, notified many mailers to say that postal reform remained a high priority. These same individuals also met with key lawmakers from the oversight committees that passed bills last year and articulated the changes they want in reform legislation introduced when the 109th Congress convened.

Second, the members of Congress who will consider postal reform bills at the committee level have made reform their single biggest priority. This is in large part because of the fact that these same committees worked successfully during last year’s lame-duck session to enact legislation reforming the nation’s intelligence operations.

Without that action, postal reform bills would be postponed indefinitely. Also, the same experienced majority and minority leadership is running the oversight committees in this new Congress.

Third, the U.S. Postal Service is going to file a rate case this year that has the potential to devastate many categories of mail unless Congress quickly passes reform legislation. That’s because mailers must have some relief from PL 108-18, the Postal Civil Service Retirement System Funding Reform Act of 2003. It created a pension escrow account and moved responsibility for military pension costs from the taxpayer to the ratepayer. Those provisions will virtually guarantee a high double-digit rate increase in 2006.

The next rate increase, even before it is implemented, is oddly the best reason for optimism about postal reform. A whopper of an increase will tell mailers with options, such as online delivery of invoices and receipt of payments, whether they should move quickly to encourage more customers to conduct business online and perhaps penalize those who refuse to do so.

A big rate hike also will tell those in the mailing industry who are tired of marginal profits that this is an industry with a very short future. Magazine publishers won’t publish new titles and will be more likely to get rid of those showing little circulation growth or small declines. Catalogers will cut their lists and the frequency of their mailing as will many others who rely on direct mail to expand their customer base.

The bottom-line result, which the Treasury Department understands, is inescapable: mail volume will drop. We cannot predict how quickly, but the USPS’ revenues will decline. We will be well on the way to seeing a postal service that today is practically debt-free become a federal agency with enormous long-term costs and a very expensive infrastructure and a very dim future.

Does all this sound terribly familiar? Much of it should, but in Washington some folks have a hard time hearing or believing warning signs the first few times they are uttered. They have to hear it often and from the right individuals. That’s why mailing industry CEO visits to Capitol Hill and the White House, like those that occurred late last year, are important and are starting to pay dividends.

Of course, there are obstacles. Most notably, postal competitors such as the politically well-connected United Parcel Service and FedEx could oppose legislation favored by most mailers. But last year a number of business organizations began talking with lawmakers about the need for postal reform and asked them to keep competitors from being an obstacle to meaningful change. Also, the strong coalition of mailers and the postal employee organizations has proven a considerable counterweight.

Meanwhile, mailers also are preparing for the rate case. We have encouraged the postal service to help mollify its effects by continuing to increase productivity. Recent productivity gains were accomplished primarily by eliminating 100,000 postal jobs – an impressive number, certainly, but one that must increase. As for the case itself, mailers continue to push the USPS for better quality data. Mailer complaints about outdated and inadequate data have been heard in Washington, and the Government Accountability Office has begun a new study of this problem.

This year may be the last opportunity for reform before the much-predicted postal crisis occurs. Last year we saw real progress, notably because more individuals got involved and talked with members of Congress and the White House. To reach our ultimate goal, this choir could use a few more voices. How about yours?

Robert McLean is executive director of the Mailers Council, the nation’s largest coalition of mailers and mailing associations. His e-mail address is [email protected]

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