Anthrax Threatens Postal Pocketbook

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The U.S. Postal Service is taking a severe financial hit from the aftermath of the Sept. 11 attacks and the continuing anthrax scare, with declining mail use and rising costs threatening its financial viability, the Washington Post reports.

Mail volume was down 5 percent in September from the year-ago month. Revenue in the first three weeks after the attacks was as much as $500 million below projections. Costs associated with damage to a post office near the World Trade Center are at $63 million and climbing.

Postal Service officials express faith that the institution will recover, according to The Post, but others say the government-created monopoly is spending money it can ill-afford to part with to increase security, combat the anthrax threat and ensure safe and timely mail delivery. How much the fear of anthrax-tainted mail will lead to further declines in volume is anybody's guess, the Post says.

"It's unprecedented," Postal Rate Commission analyst Robert Cohen is quoted as saying. "This was a direct attack using the mail as a weapon. It is making everybody rethink the role of the Postal Service. The rate payer will wind up paying a lot more money for this. What's likely to happen is the debt will keep growing and growing, and, ultimately, it could be up to Congress to bail them out."

The Post paints a grim picture of postal fiscal health: Even before Sept. 11, the Postal Service was expecting a $1.65 billion deficit for fiscal 2001. It had announced it would seek its third rate hike in less than a year. It had cut 21,000 positions. It was $11 billion in debt, fast approaching the $15 billion ceiling set by Congress. It froze most capital projects. Its premier product, Priority Mail, was declining after years of exponential growth.

Postmaster General John Potter acknowledged costs will rise as a result of the additional security needs, but, "Money is not the object," he told the Post. "The object is to make sure people are safe and the mail is moving."

Though Potter said volume appears to be returning, the trend for the past two years has shown a net decrease in first-class, single-piece mail -- the class of mail that pays much of the freight for the Postal Service.

With the Federal Aviation Administration grounding planes for two days and then imposing restrictions on mail that can travel on commercial jets -- only first-class mail under 16 ounces -- the Postal Service has accelerated an effort to carry more mail by truck. That will slow delivery to some extent, and some fear it will lead to reduced reliance on mail.

Already, at least one newspaper -- the Arizona Daily Star -- has told readers it will no longer accept "snail mail" addressed to Letters to the Editor, its Caliente entertainment guide and its Community Calendar, the three features that generate the most mail to the newsroom. Instead, readers were asked to use e-mail, fax or the online calendar.

Military Postal Service Agency officials have recommened the cancellation of the popular "Operation Dear Abby" that encourages the advice columnist's readers to write holiday greetings to service members overseas.

Postal clerks and letter carriers across the country are nervous, union leaders say. They are trying to strike a balance between protecting themselves -- using latex gloves -- and reassuring the public. Then Thursday, news broke that a letter carrier in New Jersey had developed cutaneous anthrax; a second case was reported Friday.

"It's bad, and it's going to be worse," said Gene Del Polito, president of the Association for Postal Commerce, a trade group of heavy mail users. "Certain catalogue sales are down by 20 to 25 percent, and there's general anxiety about the anthrax threat. Between the two of them and the continuing downturn in the economy, it will press the Postal Service's resources to their absolute limit."

Just as President Bush has tried to restore the airline industry by exhorting Americans to "get on board," Potter is scrambling to reassure nervous Americans that sending and receiving mail is still a good bet, the Post says. He has been on television outlining security precautions people should take and stressing the fact that the incidents are isolated -- only a handful of letters out of 680 million pieces a day have contained anthrax.

"The American public is obviously going to vote with their responses," Potter said in an interview, referring to whether people will continue to send mail. "That's why I'm out here, sending a message that people should have confidence that their mail is safe if they take the right action."

The Direct Marketing Association, whose members use the mail to sell $528 billion worth of goods and services a year, is also trying to reassure the public. It sent guidelines to member clients, such as IBM, Amazon.com and Publishers Clearinghouse, to put a company logo on the envelope and to print a clear and identifiable return address.

"We don't see any reason for businesses to discontinue the mail campaigns they have in the works because we're seeing the mail continue to move and we are convinced that there is little danger to commercial mail," DMA President H. Robert Wientzen told the Post. "This is a huge segment of the economy that needs to go forward."

Wientzen, who also represents credit card companies, notes that there has been a movement toward electronic bill-paying. But, he said, he does not think the crisis will accelerate the trend.

If this crisis has a silver lining, it is that it is fixing a spotlight on the fiscal distress of an entity -- the only one that can reach every home in America -- that until now most people took for granted. Tragedy may beget good if national attention focuses on the Postal Service, said David Fineman, a member of the Postal Service's board of governors.

"This is a clear indication as to why there is a necessity to have some sort of reform legislation," he said. "What it shows is froa business standpoint -- forget the actual incident itself -- is that the Postal Service is unable to react in almost any way to make business decisions that a normal business could make."

The problem, according to The Post, lies with the service's odd structure, created when Congress reorganized it in 1970 as an entity financed by people who send mail, not tax revenue. It is mandated to break even over time, the Post explains, but must argue its rate-raising case before the Postal Rate Commission, a process that often takes more than a year. Critics have long decried its slow pace in preparing rate cases, its inability to shed costs and its poor management. The General Accounting Office has it on its high-risk list of government agencies.

A bill that would, for the first time in 30 years, overhaul the Postal Service has been drafted by Rep. John M. McHugh, a New York Republican. He has for six years championed similar legislation, but this year, even the skeptics say, he stands a fighting chance of success. It is a complex package of measures, chief among them is flexibility in setting rates to raise revenue. But in so doing, the Postal Service revenue growth rate would be capped at the rate of inflation.

But mailer advocates such as Del Polito say the crisis has scrambled the terms of debate. "The arguments had been more in the line of let's deregulate, increase competition," said Del Polito, who ordinarily would advocate "corporatization," a precursor to privatization. "But in this kind of environment, how many people are you willing to see stick their hand in your mailbox?"

In fact, he said, the tendency is toward greater government action to ensure safety. Already, the U.S. Postal Inspection Service has reassigned most of its 1,900 inspectors to postal facilities to be on an anthrax watch.

In the meantime, the Postal Service, which operates on annual revenue of $70 billion, is seeking $5.3 billion more in rate hikes, including raising the price of a first-class stamp to 37 cents. It pegged its request to a June economic forecast that is now obsolete, analyst Cohen points out to The Post.

The Postal Service will let Congress and the administration know what its costs are, Potter said. But "I'm not going to look to take advantage of the situation," he said. "If anything, I hope it brings to people's mind the value of the mail, how we're a vital cog in the economy."

He said it will be about two months before the attacks' financial impact is known. "The key here," he said, "is the confidence of the American public in the mail."



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  • CBSNews.com staff CBSNews.com staff

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