It's no secret that the U.S. Postal Service is in financial trouble. Its business is shrinking, with first-class mail revenue down 25 percent since 2006. It has lost $25 billion in the last five years.
To stem the tide, the Postal Service is pursuing a wide range of cost-cutting measures. Among them: closing underused post offices. It has so far identified about 3,700 for possible closure, ranging from Pony Express Station in Fallon, Nev., to the U.S. Capitol Station in Washington. The plan has caused an uproar, leading the Senate to vote on legislation that, among other things, imposes new limits on the Postal Service's ability to close its retail outlets.
Closing post offices has never been politically popular. No one wants to lose the perceived benefits of a local post office. And for members of Congress, post offices are perhaps the oldest form of pork. Many members have been reelected for bringing home post offices — which often end up bearing their name.
Nevertheless, Americans are using post offices less than ever. Electronic alternatives such as stamps.com, as well as sales at supermarkets and other stores, have meant fewer trips to the post office. Traffic at post offices dropped 21 percent from 2009 to 2010. Fully 80 percent lose money.
The Postal Service's ability to make sense of this system is limited. It is, for instance, barred from closing any small post office because it is losing money. Closure decisions are also subject to a lengthy and cumbersome review process.
Typical of the post offices facing closure is the one in Hope, Minn. During an average business day, it sees eight customers who require a total of seven minutes of service. Last year, the Postal Service announced plans to close it and serve the 90 residents of Hope from the adjacent town of Ellendale, 10 minutes away. Still, the closure was actively opposed, ending with an appeal to the Postal Regulatory Commission, before it was cleared.
Given the bureaucratic and political barriers to restructuring, it's no wonder past postal reform efforts have failed. Despite the precipitous decline in business, the number of postal retail facilities has dropped only 1.5 percent since 2007.
The latest effort to trim the network includes many rural facilities, but also many in urban centers. New York City, for instance, has 34 post offices on the list.
More than three-quarters of the offices involved are minuscule, garnering less than $27,500 in customer transactions a year. The remainder are those with at least five alternative facilities nearby.
The expected savings from these closures, $200 million, are small compared to the agency's losses, which are expected to top $20 billion a year if left unchecked. But, as any businessman can tell you, small savings can add up to big savings.
Moreover, the facilities identified so far are only the low-hanging fruit. The Postal Service will be considering 15,000 more closures by 2015.
These would doubtless involve larger, busier facilities. But few postal services require an owned-and-operated facility; there are a host of alternatives, including automated postal "kiosks," stamp sales at supermarkets and other stores, and "village post offices," in which postal services are offered by existing small businesses in partnership with the Postal Service.
For the Postal Service, the status quo is not an option. Without changes, it will soon fail, sticking taxpayers with the bill. Better to let it restructure now — even if it does mean fewer politicians will get their names on buildings.
James Gattuso is senior research fellow in regulatory policy at the Heritage Foundation.