You've Got Mail Problems

Alarmed at the decision this month to implement a second rate increase since January, some lawmakers are demanding with renewed urgency that the federal government whip the U.S. Postal Service into shape.

Reports of inefficiency, rising prices and red tape, have prompted Rep. John McHugh to continue his quest for changes. He is targeting the 1971 congressional restrictions that he believes have tangled the Postal Service in a net of bureaucracy.

"In my opinion, Congress has turned its back for too long and I don't think we can afford to do that any longer," said McHugh, R-N.Y.

An Evolving Business Landscape

The advent of e-mail, faxes and the Internet have changed the mail delivery landscape, slicing the volume of first-class mail — the lifeblood of the Postal Service. Add to that costly labor squabbles, higher fuel prices for delivery trucks, a slowing economy and outdated business practices, and the Postal Service's financial outlook and efficiency have worsened considerably.

Money has been so tight, in fact, that the service expects to lose between $2 billion and $3 billion this year.

So last week, the Postal Service — which operates on an annual budget of $60 billion — unveiled new rates it hopes will generate new revenues.

The move won’t affect the 34-cent cost of sending First Class letters, but industries that rely on periodic postage such as banks, newspapers and magazines will have to pay more to send their mailings.

The price increase has outraged some of the Postal Service's biggest customers. "What business in the face of a soft economy would raise rates?" asked Nina Link of Publishers of America, an industry advocacy group. "In the end, it's only going to reduce volume," she said, fearing such a development would prompt further price spikes.

In another potential cost-saving measure earlier this spring, the agency — which is in the midst of a self-imposed hiring and construction freeze — threatened to cancel Saturday delivery at 15 small post offices and close other branches. But some called this a toothless warning, since Congress was unlikely to allow it.

Further complicating matters is the fact that the number of addresses to which the post office must deliver grows by almost two million annually.

Thirty-Year-Old Regulations Fingered For Blame

Critics of the agency, both on Capitol Hill and in the Postal Service itself, blame in part the 1971 congressional law overhauling the postal system for the current state of affairs. The law has paralyzed the service from keeping up with modern times, they say.

Among the regulations criticized by McHugh is one that forbids the Postal Service from offering discount rates to big customers, including the federal government. It’s a policy that has led the feds themselves to turn to other mail delivery systems.

"Because of our current rate system, the federal government uses FedEx for its urgent mail," said Deborah Willhite of the Postal Service.

"The economy is passing us by," Willhite added. "The [1971] restrictions have not given us the flexibility to keep up with our responsibilities. We still do deliver to every household in America. But as our delivery points have grown, our volume has changed and we can't really adjust rapidly to the marketplace."

McHugh's bill, which he has been pushing for more than five years, would give the Postal Service more flexibility in pricing with the goal of greater efficiency and accountability in the agency.

"I can't think of another business in America that is using virtually the same business practices today that it did even 5 years ago, let alone 30," McHugh said.

The Associated Press contributed to this report.