Post office wrangling could be preview of federal deficit debate

WASHINGTON–The impending fiscal crisis besetting the U.S. Postal Service is small potatoes, when compared to deficit-reduction choices federal lawmakers will have to make in the coming months. But the debate over how to shore up the mail service’s finances highlights how resistant many lawmakers are to making even small cuts to cherished programs.

The postal service faces a fiscal crisis that could put it on the brink of collapse at the end of this month if Congress doesn’t act. The agency currently doesn’t have enough cash to make a $5.5 billion payment, due Sept. 30, into its health care fund for its retirees. But even with the USPS’s future hanging in the balance, lawmakers are balking at cuts that could affect their home states.

The dilemma was on stark display at a hearing Tuesday chaired by Sen. Joseph Lieberman, a Connecticut independent. Lieberman said Tuesday that he is open to a dramatic overhaul of the U.S. Postal Service that would close 3,700 post offices, end Saturday mail delivery, and reduce the agency’s workforce by 220,000 employees over the next 4 years.

“If nothing is done, the postal service will run out of money and be forced to severely slash service and employees,” said Lieberman, the top lawmaker on the Senate Homeland and Government Reform Committee.

But some of his Democratic colleagues–including Connecticut Sen. Richard Blumenthal–have railed against key elements of the post office plan. And Lieberman’s Republican counterpart on government oversight committee, Sen. Susan Collins, R-Maine, said it is “simply not realistic” to talk about closing hundreds of small post offices. Such a move would be devastating for rural communities in her home state and around the country, Collins argued, and would “violate the universal service mandate” the USPS is required to fulfill.

The USPS’s financial crisis offers a window into the larger spending-and-deficit questions facing Congress this fall. Lawmakers eagerly say they will support fiscal restraint, but then balk when it comes to specific cuts that will affect their constituents.

As the new super committee on deficit reduction gets to work this week, lawmakers could face this same kind of dilemmas over and over again–forced to support painful fiscal cuts that could outrage constituents in their districts, or accede to home-state concerns in a nod to the fiscal status quo.

If Congress can’t agree on ways to sop up the red ink within the postal service–a small independent agency that doesn’t rely on federal tax dollars–it’s unclear how lawmakers will find consensus on the larger budgetary task of finding more than $1 trillion in savings across the federal government.

The postal service battle also has tinges of the anti-union brawl that has played out in state legislatures around the country, with public employees targeted in the face of fiscal crises. Postal service unions are looking to Lieberman to help stave off a legislative assault that could shave their benefits and reduce their ranks. And there’s little question the Connecticut independent will play a key role in trying to develop a solution to the crisis in the coming weeks.

But Lieberman left himself plenty of wiggle room at Tuesday’s session, calling Postmaster General Patrick Donahoe’s sweeping cost-reduction plan courageous, even as he talked about preserving the mail service’s vital, historic role in American communities.

Lieberman said he had an “open mind on the various proposals” that have been floated. “The bottom line for me is that we must act quickly to prevent a postal service collapse.”

The USPS is a self-funded government agency, with revenue from selling stamps and other services paying for the cost of mail delivery to 150 million homes and businesses six days a week. But the nation’s mail system has been beset by declining volume, as more consumers turn to email and the Internet to communicate.

And it faces a crushing extra cost, because Congress mandated the agency in 2006 to prefund its retiree health benefits for the next 75 years–and to do so over the next decade. That means the USPS has make about $5.5 billion in annual payments to its retiree health care fund every year.

“The conventional wisdom is that the Postal Service is broken and that nobody uses the mail,” said Jim Sauber, chief of staff for the National Association of Letter Carriers, a union affiliated with the AFL-CIO. But in fact, “it has been resilient and profitable over the past four years, despite the recession.”

The pre-funding requirement, he said, is the main thing weighing it down. And Congress could easily tweak that, while taking a more deliberative approach to questions about whether the agency needs a more thorough overhaul. He said top agency officials are “throwing all sorts of proposals out there, to see what will stick” as Congress begins to grapple with the impending crisis.

At Tuesday’s hearing, Donahoe outlined his sweeping overhaul. He has called on Congress to give the USPS the authority to cut mail delivery frequency, to shed 220,000 jobs, and to close 3,700 offices (including 15 in Connecticut).

He also wants to take postal workers out of the federal health insurance plan, so the agency can craft its own private coverage options, and to offer new workers a defined contribution retirement plan, instead of the current federal pension option.

“We need to operate more as a business does,” Donahoe said. Those changes would give the USPS needed flexibility and allow the agency to “return to sound financial footing.”

Several lawmakers have already strongly objected to that plan, particularly the 3,700 post office closings. Last month, for example, Blumenthal and Rep. Joe Courtney, D-2nd District, rallied to the defense of a small post office in Gilman on the postmaster’s target list. The Gilman post office, they argued, is key to the town’s economic viability and sense of community.

Similarly, at Tuesday’s hearing, Collins said the possible shuttering of a post office on Cliff Island, 20 miles off the coast of Maine, would be a devastating hardship for that community’s 60 or so inhabitants. “It would mean a two-hour round-trip ferry ride to mail parcels,” she said.

The path forward on the postal service’s woes is unclear. Critics say the post office closings would only save a miniscule amount of money. Eliminating Saturday mail delivery, for example, would save only 3 to 4 percent of the USPS costs, while reducing service by 17 percent, Sauber said.

Sauber expressed concern that the debate over the postal service’s future was being distorted by conservative critics who want to trim the federal workforce and undermine a key union. “Public employees are being scape-goated for these financial crises,” he said.

In the House, Rep. Darrell, R-Calif., chairman of that chamber’s government oversight committee, is pushing a bill that would allow the USPS to default on its looming health fund obligation, while creating a commission to oversee a dramatic restructuring of the agency.

Collins has offered legislation to overhaul the post office and reform the pre-funding mandate, without ending Saturday mail delivery or shuttering small postal offices. Sen. Tom Carper, D-Del., has introduced a competing plan, which would allow the agency to stop Saturday service and use projected overpayments into the federal retirement system to satisfy its pre-funding requirement on health benefits. And the Obama Administration said Tuesday it would come forward with its own plan soon.

Lieberman’s careful language at Tuesday’s hearing suggests he may try bridge the differences between Carper and Collins’ proposals. “He’s well-positioned to broker a sensible bill out of his two Senate colleagues,” said Sauber, of the letter carrier’s union.

He noted that his union, unlike many other labor outfits, didn’t abandon Lieberman in his 2006 election, even when he quit the Democratic Party and ran as an independent. “Many unions supported Ned Lamont, and we decided not to do that at the time because we had worked with Sen. Lieberman for years and years,” he said. “We stayed away from that whole controversy, and we hope he’ll be with us here.”

Congress has just a few weeks to resolve the issue before the Postal Service’s Sept. 30 payment is due, providing an early glimpse of lawmakers’ fiscal resolve as they move on to the bigger battle.