It Check's not in the mail for Postal Service

If things had gone according to plan, postage stamps would cost 2 cents more the day after New Year's.

But things aren't exactly going according to plan these days for the U.S. Postal Service, whose business has gone from booming to blown-to-bits in a few short years.

Just listen to Postal Service spokesman Greg Frey, a 30-year veteran in Washington, as he explains what's at stake for the venerable agency, which got its start under Benjamin Franklin in 1775:

"We have extreme liquidity issues, and in spite of our best efforts to cut costs," Frey said, pausing, "we just are struggling here."

I wondered if he was about to ask me to send down some cash.

Frey enunciated those last five words slowly, and with audible discomfort, a few days ago as he laid out the reasons the Postal Service is appealing a September decision by regulators to reject its proposed 2011 rate increases for first-class mail and postcards.

For consumers dizzy from increases that have taken stamps from 33 cents in 1999 to 44 cents in 2009, rejection of the rate increase may seem like a relief. The Postal Service was seeking to raise the price to 46 cents, effective Jan. 2.

But consider how dire things are at the Postal Service, and that smile vanishes as fast as postal revenue turns to invisible ink.

On the table now is a plan to reduce mail deliveries to five days a week instead of six. Hundreds of thousands of postal jobs have disappeared over the last few years as part of drastic cost-cutting. And government-mandated payments toward retirees' health benefits are in jeopardy in 2011 as postal officials scrounge for money.

There have been building consolidations, too, Frey said. But even emptying out a spectacular piece of Philadelphia real estate like the 30th Street Post Office in September 2008 was far from sufficient.

It's hard to forget the scene at its puny, basement-level replacement at 31st and Chestnut the week before Christmas: Forlorn faces in a snaking line, being told by only two clerks that the place would close for the day in 20 minutes, whether they had been served or not.

When you need business so badly, should you be telling your customers that?

During the next decade, the Postal Service expects a $238 billion shortfall. You can thank the World Wide Web - with such spawn as online billing and online payments for your electric and credit-card bills - for greasing the slide to Crisisland.

It wasn't too long ago, only 2006, that business was so hot the Postal Service handled 213 billion pieces of mail - an all-time high.

Then came the online assault on first-class mail: paperless billing by utilities, stock brokerages, name it.

The latest mail-volume tally, for the fiscal year that ended Sept. 30, was 171 billion pieces - a 20 percent decline from 2006. By the end of the next decade, projected volume will be 150 billion, representing a roughly 37 percent drop in first-class mail alone.

The Postal Service recorded an $8.5 billion loss for the year that ended Sept. 30. That's billion - with a B.

It's that bad.

In 2000, the Postal Service handled 103.5 billion pieces of first-class mail. In 2009: 83.8 billion. Frey said the shift to online billing was a factor.

"Every time that happens, we have 44 cents less that comes to us." First-class mail has been the "backbone of our financing," Frey said.

It's like McDonald's still selling fries but suddenly selling 19.7 billion fewer burgers.

Through the rate hikes, postal officials hoped to make $2.3 billion in the first nine months of 2011. But the Postal Regulatory Commission rejected the urgent request, which exceeded a legally mandated rate cap linked to the inflation rate. It said the Postal Service had failed to show how the economy had caused its problems.

Meanwhile, USPS has unveiled its new "Forever Stamps" - buy any first-class stamp starting next month, use it any time, even if rates go up.

A new postmaster general was recently named and has assembled an executive team. But 2011 looks to be ugly, no matter who's in charge.

The Postal Service is negotiating contracts with one of its major unions and has a $5.5 billion retiree health-benefits bill coming due late next year. It also projects a nearly $7 billion budget deficit.

"Right now," Frey said, "we are working to figure out what the next step is."