Some Say Post Office Has Few Options

If the U.S. postal service doesn't get billions in a Congressional bailout, observers believe it will likely seek to pass on huge terrorism-related costs to consumers and businesses.

Steep increases in postage rates were in the works even before anthrax mailings inflicted unexpected new costs. The Postal Service, anticipating a $1.35 billion shortfall this year — an estimate that has since grown — on Sept. 11 filed a request to raise the price of a first-class stamp from 34 to 37 cents.

The Sept. 11 request is subject to a lengthy government approval process, and already the post office needs more money.

"The postal service is in probably the most significant crisis of the last 30 years, certainly," William Henderson, a former postmaster, told ABCNEWS.

Longer-Term Problems

Asking for $5 billion in emergency funds from Congress Thursday, Postmaster General John Potter said the direct costs to the U.S. Postal Service from the Sept. 11 attacks and the anthrax mailings will be between $3 billion and $4 billion.

In addition, even with a recent six percent postage hike, lost revenue from fewer pieces being mailed could cost the postal service almost $2 billion this year.

"While we are getting our hands around the short-term and long-term financial impact of the attacks, let me assure you that they are enormous," Potter said.

Many say an outdated quasi-governmental structure under 1970 regulations leaves little flexibility on cutting costs, eliminating unprofitable facilities or generating alternate sources of income.

And, they say, competition from rival shippers, e-mail and other modern-day communications has been costing the Postal Service customers — and money — for years.

"It was never set up by Congress to be a competitive enterprise," said Gene Del Polito, president of the Association for Postal Commerce, which represents companies that frequently use the mails. "Back in 1970, there was no such thing as … Federal Express, e-mail, the World Wide Web, so it literally had the world to itself."

Consumers, Businesses Would Pay

Several observers said the post office has trimmed some expenses through moves such as cutting back on overtime, but has few real immediate options for raising the kind of money it needs now besides postage hikes.

"Based upon the [analysis] work that we've done historically, if the postal service does not get appropriate funds [in a congressional bailout] … then the only other source they would have would be the ratepayer," said Bernie Ungar of the U.S. General Accounting Office, a congressional watchdog organization.

But one watchdog group sees other possible options, and said Congress should think twice before dispensing all the money the post office is asking for.

"The conventional wisdom seems to be they either raise rates or get a congressional bailout, but nobody seems to be considering the most obvious option, which would be for the post office to scale down its size to meet demand for services," said Rick Merritt, executive director of PostalWatch."The postal service has several layers of redundant supervisory and management positions."

Senate Opinions

In any event, senators appeared sympathetic Thursday. Several cited constituents who are concerned about their mail.

"I must work to protect postal employees and the millions of American citizens who want nothing more than a letter," said Sen. Robert Byrd, D-W. Va.

Still, Senate Majority Leader Tom Daschle, D-S.D., told reporters that Congress is looking into the mail service problems, but a blank check won't be given to help the postal service.

"I don't know that there is much enthusiasm for 'bailing out,' quote/unquote, the postal service," Daschle said. "That isn't our intention and I don't think there'd be a lot of support for that. They have ways of addressing their need for resources, and they ought to use them."

Support From Mailing Groups

Several groups representing frequent mail users support a bailout for anthrax costs. They say that otherwise, as the postal service seeks relief through higher postal rates, businesses may opt for other means disseminating their messages, or ways to cut back on the weight or frequency of mailings. Such a movement would deprive the post office of even more mail volume, and possibly feed a spiral of more rate increases, they argue.

"The business consumer is now at the point where they're saying that rates have reached the point where they can probably get a better buy elsewhere," said Del Polito, whose group supports a congressional bailout.

In addition, Del Polito speculated that consumers spooked by the anthrax scares also now may be more open to alternatives — such as online transactions.

Postal Reform?

As some businesses consider leaving, others more dependent on the mail — such as magazine publishers — fear rising rates.

"For the most part, postage is about 25 percent of the cost of the physical production of the delivery of the magazine," said Nina Link, president and chief operating officer of the Magazine Publisher's of America. "Ninety percent of magazines are delivered through the mail, so the postal service is very important to us."

Lou Mastria of the Direct Marketing Association, a mail commerce group, said catalogue companies and direct mailers also are looking for long-term changes, such as new laws that would give the postal service more flexibility on granting bulk postal rates to frequent users.

"The single biggest thing that they have in that budget is postage," Mastria added. "If you're mailing several million catalogues or several million envelopes per year, all of a sudden a small spike in your postage rate can cost millions per year. And we're not talking about small spikes."

ABCNEWS' Linda Douglass and Vic Ratner in Washington contributed to this report.