Memo to President Obama on the Possible Insolvency of the Postal Service

Introduction

The Postmaster General, in a prepared testimony that he is to deliver to the Congress, has stated that the Postal Service is in danger of insolvency. Mr. Patrick Donahoe stressed that without intervention by the Congress or express facilitation of needed funds by your administration, the Postal Service will most likely go under (Courson, 2011).

Reasons for the Dwindling Revenues of the Postal Service

Over the past few years, the Postal Service has been unable to make profits, or even break even due to a number of factors. Firstly, the rise in the use of email as the means of choice for personal and business correspondence amongst Americans has reduced a critical revenue source in mail delivery. Many other transactions that were previously done through postal deliveries are also being carried out over the Internet, depriving the Postal service another source of revenue.

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More critically, the Postal Service has had its operations, and cash flow limited by the law passed by the Congress in 2006 requiring the Postal Service to create and sustain a health care fund for future retirees. Contributions to this fund have severely harmed the Postal Service’s cash flow.

These mandatory payments, coupled with reduced revenues have contributed to the lack of operational funds for the Postal Service. Currently, much of the revenue earned by the postal service is used for payment of salaries, wages and other recurrent expenditures. Mr. Donahoe states that about 80% of revenue is used for recurrent expenses. Such high operating costs portend a bleak future for the Postal Service, especially as alternative means of correspondence such as email and text messages gain prominence.

The Postal Service also has a vast labor force that the corporation is finding increasingly difficult to sustain. According to the Postmaster General, in order for the Postal Service to make profits or even barely break even within 5 years, about 200,000 employees in career positions will have to be laid off.

Solutions

In order that the Postal Service may continue to offer its services in the face of these presented odds, Mr. Donahoe proposes a number of solutions, some of which will require direct intervention by your office. In spite of the dwindling revenues and less income options, the Postal Service is still a vital entity in the daily operations of American families, institutions and companies.

By delivering parcels and other pertinent documents for which electronic transport is impossible, the postal service continues to offer a service critical to the named entities. Your office should thus facilitate these solutions proposed by the Postmaster General aimed at preventing insolvency.

Firstly, the small post offices that are not self-sustaining should be closed or have their services merged with larger, more viable Postal Service offices. Secondly, your office – in concert with your party – should sponsor a bill that will free the operations of the Postal Service from the law passed by congress in 2006. In order to be able to operate within its means, the Postal Service should be allowed to create and maintain its own appropriate health care and retirement benefit schemes that fit within its narrow budgetary boundaries.

Conclusion and Recommendations

The concerns invoked by the Postmaster General and the relevant senate committee looking into the crisis at the Postal Service require your urgent attention. Not only is it a vital part of the American society’s existence about to go under, but also many jobs are at risk. Your facilitation of the suggested solutions will be highly welcome.

Reference

Courson, P. (2011). Postmaster General warns Congress on Default, Possible Insolvency. Retrieved from