Why Doesn’t The Postal Service Make Money?
(By Brian Palmer,
Slate.com, 07 February 2013)
The U.S. Postal Service announced
Wednesday that it would end Saturday letter delivery beginning in August. The
change reportedly will save the USPS $2 billion annually. UPS
and FedEx post profits fairly regularly. Why can’t the Postal
Service make money delivering mail? Because
it got complacent holding a monopoly. The U.S. Postal Service has a legal
monopoly on the non-urgent delivery of letters. It used to be an extremely
valuable asset. The monopoly was so valuable, in fact, that the agency built
its future around the lucrative first-class letter business. With the profits
from first-class mail, the Postal Service priced the delivery of newspapers and
magazines at well below cost. In 2006 alone, the USPS subsidized periodicals to the tune of $273 million. The
profits from first-class letter monopoly also allowed the Postal Service to
stand by while private companies dominated the now crucial parcel-delivery
business. The Internet eventually made letters obsolete; gas prices surged; and
health care and retirement costs rose beyond projections, turning letter
delivery from a cash cow into a burden. (The true cost of delivering a letter
is likely more than twice what we now pay.)
The collapse of first-class mail was
inevitably going to damage the agency. Many observers believe, however, that
the Postal Service could have survived those challenges, and even prospered
like other delivery companies, if it hadn’t relied so heavily on the profits
from its exclusive letter-delivery business.
The monopoly is a curse in another way: When the government grants a
monopoly, it demands the right to regulate in return. The Postal Service has to
petition the Postal Regulatory Commission, and sometimes Congress, whenever it
wants to make a substantial change to its business model. Federal officials
have opposed attempts to save money by closing remote post offices and cutting
Saturday delivery in the past. The USPS also has the government looking over
its shoulder in labor negotiations. Most
postal experts believe the USPS has to behave more like a private agency if
it’s to stop losing billions of dollars every year. Competitors, however, won’t
accept deregulation of the Postal Service as long as it holds its monopoly on
first-class mail. (The USPS holds a second monopoly on access to mailboxes,
which it would also have to give up.)
As a private business with less federal
oversight, the Postal Service could respond more nimbly to market demand.
Consider package delivery, a business that the USPS is now aggressively
pursuing. Private carriers charge substantially more to deliver parcels to
rural locations. According to the UPS website, the lowest rate to deliver a
four-pound package from New York City to White Owl, S.D., is $20.51. The Postal
Service, which is under pressure from the federal government to provide
affordable service to remote locations, charges just $12.07 to deliver the same
box. A less-regulated Postal Service could also impose surge-pricing for
periods like the holidays or could rearrange delivery schedules to satisfy
periodic changes in demand. Deregulation
advocates point to European Union postal services, all of which are either
private or about to become private. Germany privatized its mail service in
1995, and it has since combined with DHL to become the world’s largest
logistics company.
Do We Really Want to Live Without the Post Office?
(By Jesse
Lichtenstein, Esquire magazine, January 22, 2013)
The letter is
mailed from Gold Hill, Oregon. The eleven hundred residents of this
lingering gold-rush town, mostly mechanics and carpenters and retail clerks in
other places, wake with the sun and end their day with a walk to the aluminum
mailbox bolted to a post at the edge of their yard. In between, Carrie
Grabenhorst heads out of town on highway 99, follows the Rogue River, and turns
right on Sardine Creek Road. She turns left at a large madrone tree and heads
up a quarter mile of dirt road, takes the right fork, goes past the sagging red
barn to a white clapboard house with green trim, where she takes a dog biscuit
from her pocket and offers it to the large golden retriever. It's a Monday,
about 2:00 p.m. The dog stops barking. This is the usual peace, negotiated after
thousands of visits over eighteen years.
Often
Grabenhorst's elderly customers are waiting at the door, or even by the
mailbox, for her right-hand-drive Jeep to edge onto the shoulder. Many of them
are alone all day. Their postal carrier is that one reliable human contact, six
days a week. Some are older veterans. Quite a few have limited mobility, and it
isn't uncommon for her to lend a hand with an errand; she's been known to pick
up milk in town and bring it along with the mail. Grabenhorst drives seventy
miles a day and makes 660 deliveries. On a typical day, that might include
fifty packages of medicine.
Her route is one
of 227,000 throughout America. On the South Side of Chicago, carriers walk
cracked sidewalks, past empty lots and overfilled projects. In the suburbs of
Phoenix, mail trucks deliver to banks of mailboxes outside gated communities.
In Brooklyn, they pushed their carts up sidewalks and ducked into bodegas on
September 11, as they always do. Residents say they were comforted to see their
postal workers still making the rounds, the government still functioning. In
rural Alaska, mail comes by snowmobile and seaplane. In chaps and a cowboy hat,
Charlie Chamberlain leads a train of postal mules down to the bottom of the
Grand Canyon, where a tribe of Havasupai Indians lives. Wearing blue trunks and
a ball cap, Mark Lipscomb delivers letters by speedboat up and down the
Magnolia River in Alabama.
Want to send a
letter to Talkeetna, Alaska, from New York? It will cost you fifty dollars by
UPS. Grabenhorst or Lipscomb can do it for less than two quarters: the same as
the cost of getting a letter from Gold Hill to Shady Cove, Oregon, twenty miles
up the road. It's how the postal service works: The many short-distance
deliveries down the block or across the city pay for the longer ones across the
country. From the moment Benjamin Franklin was appointed the first postmaster
general in 1775, the purpose of the post office has always been to bind the
nation together. It was a way of unifying thirteen disparate colonies so that
the abolitionist in Philadelphia had access to the same information and
newspapers as the slaveholder in Augusta, Georgia.
Today the postal
service has a network that stretches across America: 461 distribution centers,
32,000 post offices, and 213,000 vehicles, the largest civilian fleet in the
world. Trucks carrying mail log 1.2 billion miles a year. The postal service
handles almost half of the entire planet's mail. It can physically
connect any American to any other American in 3.7 million square miles of
territory in a few days, often overnight: a vast lattice of veins and arteries
and capillaries designed to circulate the American lifeblood of commerce and
information and human contact. Grabenhorst
sports a few blond streaks in her brown bangs, which curl over her forehead,
perfectly framing her azure eyes and chiseled cheekbones. Rural carriers don't
wear official uniforms, so today she's in shorts and an Oregon State T-shirt.
Letters arrive at the post office in Gold Hill already sequenced in the order
Grabenhorst will deliver them, but the "flats" — magazines, catalogs,
large envelopes — and packages do not, so in the back of the post office she
and her two colleagues stand at their own three-sided bank of metal slots, hundreds
of them, one for each address, and merge the separate streams — a process
called "throwing the mail."
As the junior
carrier, Grabenhorst has the peanut route. Paula Joneikis is the senior
carrier, thirty-three years on the job; she took over her route from another
lifer named Bev Washburn. That's how these jobs work — when you get a route,
you hold on to it, maybe even try to pass it on to someone in your family.
Failing that, you take a younger colleague under your wing and share your
particular wisdom: the life history of your customers, how this one is related
to that one, when so-and-so got to town, when so-and-so split up. Joneikis has
a lot of "silver foxes" on her route — she tries to remember who's
recently had an operation, and she'll come to the door with the mail.
"We're a lifeline to these people," she says.
Step 1:
Mail Pickup Carrie
Grabenhorst (inset) picks up a letter in Oregon bound for New York City around
2:00 p.m. Two hours later, she is back at the local post office, where she and
Paula Joneikis (bottom) bundle the bins and trays of outgoing mail onto rolling
carts, which are then loaded onto an eighteen-wheeler for the thirteen-mile
drive to the Medford Mail Processing Center.
"All of
these people are family," Grabenhorst adds. She color-codes all 660
addresses for her morning sort: a little pink flag affixed to a slot means the
customer is on vacation; a yellow flag means the whole family has moved; an
orange flag is for customers who don't want packages left when they aren't
home; a green flag means an individual has left the family: moved out, gone to
college, divorced, died. When she gets
to their driveway, she'll put the bundle into their box, her box. By
law, only the postal service can put mail into a mailbox. It's a monopoly that
ensures every citizen, in every square mile of the country, has the ability to
receive mail and that the government can reach every citizen. No branch of
government serves us so consistently, so intimately — a federal employee
literally touching every house in America every day but Sunday.
In mid-November,
the postmaster general, Patrick Donahoe, reported that the post office had lost
$15.9 billion for the year and was operating on just a few days' cash flow,
having reached its legal debt limit. He all but begged Congress to take action.
Mail was down 5 percent from the year before, and wages and benefits and other
worker-related costs were an unsustainable 80 percent of the postal service's
$81 billion operating expenses. But
nobody wants to hear that more than 70 percent of those losses were for
extraordinary budget obligations mandated by Congress, or that the postal
service posted its thirteenth-straight quarter of productivity gains. In a
nation obsessed with cutting budgets and government fat, there is no better
target than the federal postal worker who will have her route delivering paper
mail for life, and then try to pass it on to her daughter.
Eighty-five
percent of America's critical infrastructure is controlled by the private
sector. We let private companies fight our wars; we have 110,000 defense
contractors in Afghanistan compared with 68,000 American troops. We let private
companies lock up 16 percent of our federal inmates and instruct 10 percent of
our students. They provide our phone service and Internet access and air travel
and hospital care. Surely, many believe, private companies can deliver our mail
better and faster and cheaper than the federal government. If you work with actual pieces of mail — if
you are a carrier, a handler, a clerk, but not an administrator — it is said
that you "touch the mail." The postal service has more than half a
million full-time workers and a hundred thousand contract employees, the vast
majority of which are mail touchers. Each morning, Grabenhorst enters into a
ledger she keeps at her workstation exactly how much mail she's thrown and will
be delivering that day. In Washington, D.C., they count in billions of pieces,
but carriers talk about mail volume in feet — the width of a mail stack laid on
its edge, face to flap. On this
unremarkable Monday, she'd written 14.75 feet. She flipped the pages of the
ledger back to the previous year, to the same date: 17.5 feet. That we're sending less mail is not
debatable. Nor is it debatable that the post office as we've known it for the
past forty years, one built for speed and brute force in sorting and
distributing an ever-surging flood of paper documents, is outdated in our digital
world. This isn't a story about whether
we could live without the post office. It's
about whether we'd want to.
In they stream
from every outpost of the
postal service's territory to assess the damage for themselves. State Farm's in
from Bloomington, Illinois. Citi, Pacific Gas and Electric, and Crate &
Barrel all made the trip, as did the publishing conglomerates, Condé Nast,
Hearst, and Time Inc. The Netflix guys are mingling in the atrium near the
Hallmark-greeting-card people and someone from Western States Envelope &
Label. Orlando in early April is warm but not stifling. Patrick Donahoe emerges from the wings and
walks downstage at the Gaylord Convention Center. He's a stocky man with a
large oval face that looks perpetually worn-down and slightly unshaven, as if
he's been stuck too long in a waiting room.
"Are we old-school?!" he asks the crowd. His head is framed by
short, wavy salt-and-pepper hair. Below his tired hazel eyes, he has a slight
smudge of a birthmark on his left cheek, like a coffee stain he can't wipe
away. "I don't know about you, but
I don't want to be old-school!" The room filled with four thousand of the
postal service's best customers and suppliers is polite but largely silent.
Donahoe began his
career as a twenty-year-old clerk in his hometown of Pittsburgh to pay his way
through college. It was the definition of a steady job — $4.76 an hour, the
same folks pushing through the glass door week after week, the same stacks of
letters and money orders. After a while, you get a feel for the weight of an
ounce, a calibration, somewhere in the wrist.
After college, Donahoe oversaw postal-service fleet maintenance in
Pittsburgh. He viewed the network through the prism of gas prices and mileage.
Several posts and a master's degree from MIT later, he moved up to the national
level, overseeing human resources and then operations for the entire
postal-service network. It was in D.C. that he got enmeshed in some of the
postal service's biggest liabilities: the union contracts' no-layoff clauses,
which limited its ability to downsize. The astounding cost of administering
benefits to more than a half million workers plus retirees. While the cost of
paying workers has declined 3 percent below inflation since 1972, the total
cost of administering benefits to them has rocketed 448 percent. During the
same time, total mail volume has nearly doubled, and the number of delivery
points has exploded — more than six hundred thousand new addresses added in
2011 alone.
When Donahoe
testifies on Capitol Hill, as he has done several times over the past two
years, to describe just how dire the postal service's situation is — losing
$25 million per day! — he talks in even, polite tones. Because there he's
not telling, he's asking. Five hundred thirty-five members of Congress
ultimately decide how to run the postal service: what it can charge for
postage, which services it can offer, how it operates. Donahoe is the person
who implements their policies, despite the postal service not being a federal
agency or taking any taxpayer money; it runs solely on the postage it sells —
or lately, doesn't.
Take the most
contentious issue: the seventy-five years' worth of future-retiree health
benefits that in 2006 a lame-duck session of Congress legislated the postal
service prepay over the following ten years as part of a broad overhaul of the
way the postal service operates. No other government agency must do this, and
most private companies would have spread those payments over forty years. But
the postal service was flush at the time, and Congress figured out that since
health-care payments are counted as general government revenue, it could use
them to prop up its own books. (Five-and-a-half billion dollars a year coming
in from the postal service was $5.5 billion less Congress would have to cut
elsewhere to remain budget-neutral, as the Bush administration was demanding.)
But then the economy crashed and with it the amount of first-class mail being
sent around the country. Suddenly a law designed to keep the postal service
solvent in the long term began bankrupting it. Of the $15.9 billion the postal
service lost last year, 70 percent — $11.1 billion — was in future health-care
payments.
Today, at the
National Postal Forum, Donahoe is not beseeching, he's selling. Forget
finding new customers. He just wants to make sure he keeps those he already
has. The big mailers before him employ 8.5 million Americans. That's almost
three of every fifty American jobs. And the billions of insurance bills and
catalogs and summonses these companies send every year pump $1 trillion into
the economy. In one session, a strategic
business planner from the postal service asks for a show of hands from
"all of those who think the postal service and industry is in a death
spiral." A few honest palms dart up. The mailers want to know that Donahoe
has a plan. They want to believe that Congress is listening. They want to be
reassured that the post office won't abruptly fail. Donahoe's speech is full of optimism about
the potential of the post office in the digital age. He talks about QR codes
that drive potential customers to Web sites from mail and an iPhone app that
lets you design and send a paper postcard. He talks about growing the package
business and becoming leaner, faster, and smarter as an organization. "I
think that we've got a very, very strong Forum this year," Donahoe says.
"You're supposed to clap!" he adds. And they do.
There's a story
Donahoe tells Congress and reporters and pretty much anyone else who will
listen. It's about what it was like growing up as a boy in Pittsburgh, how
steel was king, the U.S. Steel Tower reaching higher than any other building in
the state. There was pride in that, and in the mills, and in the middle-class
jobs they produced. The steel industry built not just Pittsburgh but the entire
country. The railcars and railways, the skyscrapers that made New York the
capital of the world, the millions of Buicks and Pontiacs that rolled out of
Detroit. Hell, with three hundred thousand men and women working twenty-four-hour
shifts making ships and weapons in the 1940s, Bethlehem Steel even beat Hitler.
But there's a
second half to the story — about what it was like watching the industry crumble
in the seventies and eighties. First from new, cheaper steel developed in
Germany and Japan, where it took just five hours to smelt a ton of steel, half
the time it took in Pennsylvania. And then from waves of retiree benefits that
drowned many of the companies entirely. Even after the big steelmakers began
using some of the most efficient smelting methods, it was too late. In the
mid-1990s, they still had four retirees drawing benefits from every worker.
Unable to shoulder the burden, Bethlehem Steel declared bankruptcy in 2001.
After culling its workforce down to 11,500, it still had 95,000 dependents on
the books. Donahoe talks about steel
because it's a cautionary tale. It is about what happens when management waits
too long to make hard but necessary changes. It's about how industries that
fail to adapt die. "I've been the
postmaster general now for almost eighteen months," he says at the end of
his keynote address. "They say that you never really understand and
appreciate how things work until you try to change them. I think this is true.
Change is not easy. It's comfortable to keep things the way they are. It's
comfortable not to make tough decisions. But our future is not in today's
comfort zone... Your business depends upon a postal service that can reinvent
itself. So that's what we're doing: We are reinventing the postal
service."
A week earlier,
in March, Donahoe presented his reorganization plan to a highly skeptical
Congress. The post office of the 1990s, even of the last five years — huge,
capable of moving a piece of mail across millions of square miles in mere hours
for a nominal fee, six days a week — cannot survive, he said. He wants to get
back the $49 billion the postal service has already prepaid in health benefits,
wants to manage his employees' health care. But much more, his plan calls for
sizing the post office for today. That means cutting 120,000 more jobs, largely
through attrition; halving the number of processing centers that relay mail
across the country at often breakneck speed; and drastically scaling back the
hours of thirteen thousand unprofitable local post offices. He would stop
nearly all Saturday mail, and ease the rate at which first-class mail races
across the country, because much of the paper we do send doesn't need to get
there tomorrow or on Saturday. Give me the freedom to do that, Donahoe said,
and the postal service can make a profit of $6 million per day by 2016. His plan is to shrink the post office in
order to save it.
We still live in a physical world, we are still a
highly dispersed nation. Things — pieces of paper or pieces of plastic
or books or clothes or toys shipped in cardboard — still need to get to places
where people live and work. The letter
and other mail Carrie Grabenhorst picked up on her route is emptied into bins
and secured in carts, along with packages and brightly colored sacks of express
mail. By 4:30 p.m., the carts are rolled onto an eighteen-wheeler that thunders
down I-5 to the Medford Mail Processing Center, a large beige warehouse with a
loading dock covered by a corrugated-metal awning. Inside, there's a constant
whirring, a sonic substrate of machines and people in motion.
Last year, the
postal service delivered 160 billion pieces of mail. That's 508 letters,
packages, and magazines for every American. Much of that was delivered in two
to three days. In Medford in the early evening, men and women in T-shirts,
jeans, and work gloves roll the carts of raw mail off the trucks and dump the
contents into large bright-orange hampers, which they call pumpkins. A handler
rolls a pumpkin onto the bright-yellow hamper dumper, which flips it over like
a garbage truck, sending the mail falling like clumps of wet leaves onto a
conveyer belt. When an envelope enters
the mail chain, it does so alone, but then it's mixed, lost in a sea of other
letters of every description, cards meant for San Francisco burying envelopes
meant for Tuscaloosa and Rochester. As the mail creeps forward, spinning wands
delicately shift and topple the humps, smoothing out and thinning the stream
until no letter lies across another.
No matter where
it's headed in the U.S., first-class mail is all priced the same: forty-five
cents. Germany has a modern and efficient post office that covers a territory
about the size of Georgia and Florida, but it will cost you 60 percent more to
send a letter. Mail a wedding invitation from Tokyo to its suburbs and it will
cost you more than twice as much as sending the same item from Seattle to
Boston. Yet the 2006 law prevents the postal service from raising prices for
first-class or standard mail by more than the Consumer Price Index, regardless
of fuel prices, regardless of what the mail actually costs to deliver. For
instance, while the price of diesel used in delivery trucks has risen 60
percent since 2009, over the same period the price of sending a letter has gone
up only a penny. FedEx and UPS, meanwhile, raised rates 5.9 and 4.9 percent
this year alone. Some believe this pricing ceiling was added to the law after
pressure from the big mailers' lobby, magazine and catalog companies, which
claimed they couldn't afford to pay more. Others point to local politics:
Constituents don't like it when the price of a stamp goes up.
Onward to another
belt, on which individual letters, facing up and down and resting at all
angles, glide toward a grooved drum that the mail must duck beneath. Thin
envelopes pass; thick or bent pieces keep trying, like salmon desperate, in
this case, to slip under a waterfall. Those that don't make it are handled
separately; the rest drop onto a new belt in the Advanced Facer Canceler System,
forming a single-file line that streams through a biochemical detector that
checks for anthrax.
The AFCS is Roger
Hawkins's domain. He's bald and looks a bit like Buster Bluth from Arrested
Development. He wears gloves for grip and headphones for sanity as he
adjusts the flow. He looks for minor irregularities, envelopes that are too
large, oddly shaped postcards that might catch in the machinery. "People
are sending things through the mail they shouldn't," he says, his fingers
finding the outliers as if by anticipation. "Keys, USB drives, jewelry,
candy." Both of his grandfathers were letter carriers. Hawkins's brother
works next door at the bulk mail center, where preprocessed business mail
enters the stream in a more refined state, neatly ordered by ZIP code, one
reason businesses get a discount on postage.
There's a separate line for packages and larger parcels, one of the
brightest spots of the postal service's business, up 9 percent last year. While
we're paying more of our bills online, we're also buying much more online.
Stereos and pots, printers and shoes — $226 billion worth of goods last year,
an estimated $327 billion by 2016. Home delivery of groceries from companies
such as FreshDirect is rising, up 44 percent over the last two years. The
America we live in is one in which we like to tap a keyboard or thin piece of
glass and wait for the things we desire to appear before us.
In the early days
of Amazon, the postal service held top-level meetings with Jeff Bezos to see if
they could corner Amazon's shipping business. But according to Robert Reisner,
former vice-president for strategic planning, they soon realized they couldn't compete.
UPS could break ground on a shipping center across from an Amazon warehouse in
days, which the bureaucratic postal service could never do. And because the
postal service is supposed to serve all without prejudice, even if it offered
Amazon a better rate arrangement than UPS, it would then have to offer similar
rates to Amazon's competitors. Those special rates would then go before the
Postal Regulatory Commission for public approval, which would offer UPS or
FedEx the opportunity to undercut them.
Over the past
five years, FedEx and UPS have spent a combined $100 million lobbying Congress.
Because neither company has a delivery network nearly as sprawling as
Donahoe's, they contract with the postal service to deliver the "final
mile" of much of their cargo. For instance, more than 21 percent of all
FedEx deliveries are dropped off by a postal carrier. Meanwhile, millions of
postal-service letters hitch rides on FedEx flights every day, for which the
company gets paid $1 billion a year. FedEx and UPS don't want the postal
service to go out of business but to remain contained, out of the way — one
reason many of the addresses on packages that pass through Medford are
handwritten by mothers and grandfathers and eBay minimoguls, rather than
printed by manufacturers and retailers.
As our
handwriting has gotten worse, the technology to decipher it has gotten better.
Once the letters pass muster with Hawkins, they blur into the interior of the
machine. The AFCS detects the invisible, phosphorescent ink within the stamp or
postmark in order to find the "face" of the mail, so a digital camera
can take a photograph of each address. Later down the line, an optical
character reader will take a scan, ten envelopes per second, which a computer
compares with a continually updated database of 151 million American addresses.
It takes a second for this reading and recognizing, so the letters zip through
a delay loop. The computer recognizes more than 96 percent of the address
scans, but the worst cases — the ink-blurred, the coffee-stained, the
hieroglyphic — are shunted to a tray, where they idle like airplanes on the
tarmac, waiting for permission to take off.
Holli Apodaca
works at the Remote Encoding Center in Salt Lake City. There, in a
warehouse-sized room that operates twenty-four hours a day, she sits in a beige
cubicle, staring at a flat-screen monitor upon which the addresses appear, a
constant stream of broken communications that she must fix. Eight thousand
addresses per shift, ten thousand keystrokes an hour, doing her part to wade
through the four to five million addresses that flash across the center's
screens each day. The third grader whose 3's look like E's, the ninety-year-old
pensioner whose right hand shakes violently. Apodaca zooms, rotates, squints, deciphers,
then fires the information back to the machine in Medford, where the once
rudderless letters, now matched to an address, are pulled back into the main
stream and rejoin their easy-to-read brethren for their ultimate baptism: a
2.75-inch bar code sprayed along the envelope's bottom edge. The city, state,
street, house number, and ZIP-plus-four — the local post office, carrier route,
and sequence within that route.
Ron Bloom is unequivocal in his view of the postal
service. "I've seen this movie. I saw
it in the steel industry. I saw it in the car industry. Management can just
decide to give up." He's sitting at
a large conference table in a large office on the eighth floor of a building
near Union Station in Washington, D.C. The office belongs to Frederic Rolando,
the president of the National Association of Letter Carriers, the largest
postal workers' union. There are bookcases of leather-bound volumes, stuffed
animals, a Godzilla action figure, and a yellow sign announcing a letter
carriers' food drive. Bloom flew in this morning from Pittsburgh to testify
before a House subcommittee about the bailouts that he pushed through as part
of Obama's auto task force, which he eventually took over. One Republican
congressman made a show of holding him after the session for extra questioning,
but Bloom seems pumped up by the confrontation. A part of him, chomping on his
sandwich, giving the blow-by-blow as if describing a bar fight — shots landed,
punches missed — seems to have enjoyed it. He's tall, in his mid-fifties, with
a buzz cut and an expression poised between irritable and mildly amused.
In July, the
sixty-five hundred delegates in the union — representing its 270,000 members —
unanimously passed a vote of no confidence in Donahoe. They believe he's the
worst of disappointments, a company man who has lost faith in the company and
the people whose job he used to share. So they hired their own man to help fix
the postal service. Like Donahoe, Ron
Bloom lives in Pittsburgh and likes to draw parallels to the steel industry.
But rather than framing the collapse of big steel as a lesson in management
being too slow to recognize a change in the marketplace and downsize, Bloom
sees what happens when management no longer has the stomach to innovate. He
focuses on what happened to Bethlehem Steel after bankruptcy, because he's the
guy who rebuilt it.
After an early
career as an investment banker at Lazard, where he focused on mergers and
acquisitions, Bloom left with a colleague to start his own boutique firm specializing
in labor issues and bankruptcy restructurings. He was instrumental in an
employee buyout of a Canadian steel company, and later the employee takeover of
United Airlines. He became a special advisor to the United Steelworkers union
in 1996, then seven years later pushed workers at Goodyear Tire to make major
concessions in return for saved jobs and a reinvestment in the company's
factories. It was Bloom's reputation as
a hard-nosed negotiator who starts from a principle of shared sacrifice that led
President Obama to hire him as the point man for the federal bailout and
restructuring of Chrysler and GM in 2009, and later as the manufacturing czar.
In a failed business — and Bloom is in the business of failed businesses — he
has a talent for getting both sides to give in far more than they expected.
He's been able to persuade unions that they need to accept change, sometimes
radical change, in dire situations; and he's gotten management to accept that
it is not just the workers who are going to take it in the neck. "Bethlehem Steel really believed that
their job was to die slowly," he says of that company's former executives.
When the company finally tanked in 2001, it was Bloom, acting on behalf of the
union, who convinced financier Wilbur Ross to take on the mess and restructure
it. "They fundamentally believed
you couldn't make steel in America and make money. I think the postal-service
management believes, in their heart of hearts, that the day of the postal
service has come and gone, and their job is to give it a decent burial. And to
not hurt people more than they need to and still do a certain amount of what
they do. I think they believe that. And if you believe your company is fatally
broken... " he trails off.
Sitting around
the table, three others nod in agreement: Jim Sauber, the union president's
chief of staff; Bruce Simon, the NALC's longtime legal counsel; and Jennifer
Warburton, its principal lobbyist. At
Bethlehem, Bloom pushed the unions to make extremely hard concessions in return
for a massive investment into the retiree-benefit trust by the new owners.
Bethlehem was rolled up with other bankrupt steel companies into International
Steel Group, which just a few years later was turning a profit. "If you watch Donahoe in public,"
Bloom says, "if you watch him kowtow to Darrell Issa [chairman of the
House Committee on Oversight and Government Reform], it really is like he's
a..." He pauses. "Fuck you!
This is a great institution and we can grow it!" Bloom says. "That's
what you want someone to say to the Congress, 'Fuck you! Let me win. I will win
if you just get out of my goddamn way.' "
"And that's what the employees have wanted," Sauber says. He's
a large man, a steady presence behind his rimless glasses. "Someone to
pound the table and say, 'You screwed us on these pension funds.' Fight for
'em. Donahoe says, 'They'll never give them to us. I know it's unfair. They'll
never give it to us.'"
The NALC feels
like it found that fighter in Bloom. No one disputes that first-class mail is
in decline, and no one really thinks it's going to return to pre-2006 levels.
But Bloom doesn't believe that the postal service is in as dire shape as
Congress and the media — and even Donahoe — have portrayed it. The first thing he did when he agreed to
consult with the union was have Lazard study the books. If you pulled out the
pension prefunding payments and an accounting loss on worker's compensation
liability, the real operating loss, according to Lazard's projections, was only
$900 million a year. In a $60 billion company, that's just 1.5 percent, and
holding fairly steady in a flat economy. "That is not a hemorrhage,"
Bloom says, handing copies of the report to the union officials. "That's a
bleed."
So for a
turnaround guy, the question is how to grow based on the assets you have. Or,
to put it another way, "Is there a brown pony in it?" This brings puzzled looks from the other
people at the table. "You look at a
pile of shit," Bloom says. "Is there a brown pony in it?" And then laughter. "You find the brown pony and you
construct a business plan around the brown pony. You say, 'In this very
troubled situation, there actually is a company in there. Here's what it takes
to make it viable: You've got to have this sacrifice from labor, this sacrifice
here, this sacrifice there.' " While
Congress and Donahoe have refused to consider raising postal rates across the
board, which is extremely unpopular with the public and the big mailers' lobby,
and which Donahoe believes would simply drive more customers away, Lazard
estimates raising postage by 1.5 percent — just a half cent per letter — would
bring in enough revenue for the postal service to break even.
Bloom doesn't
offer any specific examples of concessions the unions might be willing to make,
but downsizing and benefits would be likely targets of negotiations. Postal
workers pay 8 percent less toward their insurance premiums than other federal
workers, which typically comes out to about forty dollars less per paycheck for
those on family plans. They also pay nothing for life insurance, while other
government workers pay two thirds of their premiums. If carriers were to pay
the same rate as other federal workers, the postal service would save more than
a half billion dollars per year. In
terms of growth, the brown pony could be a number of things, but particularly
the burgeoning package industry. The postal service's parcel division was
robust — last year, volume was up 7.5 percent over the previous year, despite
the limping economy. The brown pony is
also the network itself — its size and scope. Just at this moment, when
e-commerce is booming, weakening the network seems like a terrible idea to
Bloom. This is why cutting Saturday service, which would mean no Amazon or eBay
deliveries over the weekend, and slowing down the mail are, in his estimation,
more likely to kill the postal service than make it stronger. "If you
degrade the network and your customers leave and you get into the death spiral,
you can't have it back," he says. We've
seen what austerity does, he says: It kills countries and companies.
Of course you
could just sell it. The
whole thing. The thirty-two thousand post offices and the prime downtown real
estate they occupy. The sorters and machines. The fleet, all
two-hundred-thousand-plus trucks. The mailboxes, 151 million of them. The lucky
buyer would get a direct link to every citizen.
In one swoop, you would cut almost a quarter from the 2.8 million
federal workforce. And the sale itself could raise an estimated $100 billion,
according to people like Kevin Hassett of the American Enterprise Institute and
others who have been pushing for the privatization of the postal service for
decades. FedEx and UPS would take over, maybe even a new player. And because
they wouldn't be bound by the postal service's federal-union contracts, they
could spend far less on benefits. Prices might even go down. The DIOSS machine
Warren Mee is manning in Medford would be operated by somebody else for less
money, or perhaps to cut inefficiencies the entire sorting plant would be
shuttered.
DIOSS stands for
Delivery Bar Code Sorter Input/Output Sub-system. Mee stacks letters, lined up
on the edge, front to back, on a table that agitates the mail, nudging the
addresses on gas bills into those little plastic windows in the envelope, and
then feeds them into a fast-spinning wheel, which shoots them one by one down a
narrow slot with a blistering clickity-clack-clickity syncopation, like
a jazz drummer on speed. As the letters whiz by, lasers read their bar codes,
shifting their course accordingly — down this slot for Detroit, up that way for
Little Rock, a sharp right for Honolulu — until they exit the dark maze into a
bin, joining other letters headed to their destination. The machine can sort
for every destination in the country and even sequence letters in the right
order for a particular carrier's route. But here, with letters picked up on
Grabenhorst's route less than six hours ago, Mee is doing a broad, regional
sort, southern California, Denver, New York.
Mee is in his
twenties, tall with close-cropped hair and a wide smile. He went to high school
and community college nearby, studied criminal justice, but prefers the postal
service to law enforcement. He's been a mail handler, a carrier, and a clerk,
but he likes running the machines best — feeding the mail in, watching the
console for errors, sweeping sorted letters from the DIOSS bins into labeled
trays of mail bound for Minneapolis and Miami.
But if someone else were to take Mee's post running the DIOSS machine,
the open question is whether some bins would cost more to deliver to than
others. It's expensive to get a letter to rural Mississippi and through the
deep snow of the North Dakota plains and across the ocean to Martha's Vineyard.
It takes manpower, but also gas. Some areas are so sparsely populated that a
postal route, public or private, may never turn a profit.
In 2011, Delta
airlines announced it would stop flying to twenty-four small-market
destinations in the Midwest and South, despite being eligible for millions in
federal subsidies through the Essential Air Service program — the whole point
of which was to keep service available for smaller communities following
airline deregulation. For Delta, the routes were simply too expensive. It's the
same with high-speed Internet access. Despite the best efforts of Congress and
a $7.2 billion stimulus investment, between 5 and 10 percent of Americans,
mostly in rural areas, still lack broadband access. The federal government can
encourage private companies to offer universal service, but they cannot compel
them to. The cost of building infrastructure is often deemed too high, the
savings from cutting unprofitable services too attractive. Since its founding, the post office has been
in the business of building and supporting infrastructure. The official
designation "post road" and the requirement that postal roads be kept
up spurred a national good-roads movement in nineteenth-century America. The
government declared that railroads were post roads and bolstered the early
railway lines of the 1830s with land grants and tariff relief. The telegraph
first made history under post-office supervision — Samuel Morse's famous
"What hath God wrought!" message traveled along a postal wire from
the Capitol to Baltimore in 1844. Seven decades later, when the War Department
showed no interest in the Wright brothers' airplane, the forty-third postmaster
general launched the modern airline industry by conducting a demonstration mail
flight.
In the 1980s,
well before Mee began working the DIOSS machine, postal carriers would receive
all the mail for their route in a tub and sort it by hand into pigeonholes.
Over the next twenty years, the postal service invested $13 billion in
developing an automated system. In 1990, by keying each ZIP code into a
computer, a crew of eighteen could break down five thousand pieces of mail in
an hour. Today, using DIOSS, a crew of two can carve through more than
thirty-six thousand pieces in the same hour. And the postal service is rolling
out an even newer "intelligent mail" platform, which will scan items
throughout the process, allowing the postal service to do pinpoint tracking,
whether a letter is being sorted or five blocks from your door, awaiting
delivery.
While Mee works
the DIOSS, a computer checks the cargo space available on outgoing flights from
Portland. If Delta has room on its nonstop to JFK, that might be the best
option. Or perhaps there's room on a FedEx plane to Memphis. Once a flight is
selected, Mee prints out a bar code with its number and affixes it to the
trays, which are stacked in carts and rolled onto semitrucks that ferry them
275 miles through the cool Oregon night to the Air Cargo Center at the Portland
Airport, a huge concrete hangar the size of a football field. Inside, contract
drivers unload their trucks and postal workers push a portion of those loads
onto smaller trucks headed to commercial-flight gates and the rest onto sorting
conveyers, which divert packages into bright-orange sacks waiting to be cinched
tight and packed in a large metal container bound for the belly of a FedEx
plane waiting on the tarmac outside.
"Every
single piece of mail has to be out of the building by 4:00 a.m.," the
facility manager, Marc Kersey, says. A sizable section of floor space is
devoted to live animals — birds, snakes, a shocking number of baby chicks. A
hundred thirty thousand pieces of mail move through this Air Cargo Center per
day. Sometimes a package breaks or leaks and the conveyors shut down, the air
circulation shuts down, everyone stops while the HazMat team jumps into action. The postal service also has its own federal
police force, the USP Inspection Service, with fourteen hundred detectives and
seven hundred armed personnel, to protect the system against contraband and
violent crimes. They investigate drug shipments, mail fraud, child pornography,
terrorism. In Atlanta, there's a separate division with the special authority
to redirect the truly undeliverable mail, letters whose return address is as
impossible to decipher as their destination. Under bright lights, they
carefully open the orphaned mail and packages and look for clues — a personal
check, a business letter with a return address — so that it might find its way
home. Working with someone else's name, some clothes, and a dry-cleaning
receipt, the sleuths at the Atlanta Mail Recovery Center once returned the
World Series ring of major league pitcher Pedro Borbon. None of these divisions
make money. But the point of the postal service was never to make money. It was
to serve all Americans. 4:15 a.m. As
Kersey promised, the warehouse is all but silent, the mail vanished along with
the birds and snakes, the trucks departed, the dispatchers finalizing the
entries in their logs, the letters and parcels bound for New York City buried
deep in the gut of a Delta jet speeding 560 miles per hour toward the Atlantic.
Across the
river from the jockeying
congressmen and angry unions, the lobbyists for the big mailers and the
lobbyists for the private shippers, Mohammad Adra dreams about the future of
the mail. Not what it could be next month or next year, but what it should be
ten, twenty, fifty years from now. "This
is the time collectively to think about the postal service," Adra says
from his office in Arlington, Virginia. He's an assistant inspector general and
heads the postal service's internal think tank, the Risk Analysis Research
Center. "This is a transformative moment. We're like Kodak, Polaroid, IBM
with mainframe, and if we don't plan for this disruptive technology, if we
ignore it, we'll be in trouble." An economist and a mathematician, he
wears his suits well-tailored and his head shorn. He has sharp, handsome
features, blue eyes, and the trace of a hard-to-place accent — maybe French,
maybe the Levant, maybe both.
The point of the
post office was never paper, or even simply mail, he says. It was binding the
nation together — connecting people. So what he and his twenty-person team do
in their cubicles and workrooms, surrounded by papers with titles like
"The Cost Structure of the Postal Service: Facts, Trends, and Policy
Implications," is study how the postal service might best fulfill that
goal in the digital world. The
investment in the shipping and trucking and sorting infrastructure has already
been made, so they're exploring whether there are ways to get more value from
it. Postal carriers already deliver one million packages of drugs and contact
lenses per day. For an aging, longer-living, and ever-more-medicated
population, Rx by mail could be vastly expanded. Delivery is confidential,
tamper-proof, and utterly dependable. In the aftermath of Hurricane Sandy, when
subways and many drugstores in the Rockaways and elsewhere were shut down, the
postal service was still delivering medicine to many of the elderly in the
worst-hit areas.
But there may
also be other opportunities outside of mail and packages. The main battle in
retail right now is over the "last mile." Amazon, Walmart, and eBay
all want to be able to deliver their goods almost instantly. The postal service
is uniquely suited to offer this. The idea would be that if you order a new
toaster or jacket in the morning, your mail carrier would bring it to your door
by dinner. According to Leon Nicholas, an analyst at consulting firm Kantar
Retail, there have been high-level discussions between the postal service and
Walmart over such an arrangement. Adra
says that to truly thrive in the future, the postal service must also leverage
its ability to track every piece of paper sent through the mail, so you know
precisely where mail is at any time, whether in a sorting machine, in flight
far above Indiana, or in your postal carrier's bag. Right now, some companies,
such as AT&T, are already exploiting real-time tracking to their advantage.
By using special bar codes, which the postal service worked with them to
create, they know the day a customer receives a bill and they know the moment
the returned bill — with an assumed minimum payment — enters the postal stream
back to them, so their accountants have an hour-by-hour estimate of future cash
flow, which they can invest and utilize today.
But it isn't all
about things — there are digital options for a post office that moves
beyond paper. The idea would be for the postal service to create authenticated,
government-issued e-mail accounts, linked to our physical addresses, that
people would keep for life. Americans should be able to compose electronic
documents that the postal service would deliver as physical objects, and
receive scanned images of incoming mail, along with the option to choose which
pieces you actually want delivered to your house and when. You could use Gmail or Yahoo! for your
everyday messages, but you would send the most important e-mails via the postal
service, which would authenticate them and guarantee delivery. The account
would come with a digital lockbox for wills and medical records, and would be a
trusted digital portal for notices and documents from Social Security or the
IRS. As with a physical mailbox, tampering with a postal-service e-mail account
or reading someone else's e-mail would be a felony. "If anybody hacks it,
I have law enforcement, six hundred people with guns here," says Adra.
"I don't know if Google would want to spend time with that."
Then there are
the more traditional ideas for raising revenue and making the postal service
once again a bigger presence in our daily lives. In Germany and the
Netherlands, post offices have been franchised and moved into flower shops and
food markets. Rather than competing for business with packaging companies, they
merged with DHL and TNT. Farther south, in Italy, the post office offers
banking and a suite of government services, from paying taxes and health-care
fees to checking property records. In America, this role of town center has
largely been ceded to big-box stores like Walmart and Target. You go there for
groceries and clothes, but also for gas, lunch, banking, and to meet a friend
or business associate at Starbucks.
From his
eighth-floor office, looking across the Potomac to Washington, D.C., Adra asks,
"Who are we? Society needs to tell us. The political thinkers, the
communication theorists, the politicians, whoever — they need to weigh
in." And they must decide soon. On
October 1, the postal service defaulted on its second $5.5 billion health-care
payment for the year. Around the same time, it reached its federal debt limit,
meaning it can no longer borrow any money. According to CFO Joseph Corbett, if
Congress does nothing, the best-case scenario is that the postal service has
enough money to last until October 2013.
After that, it will be unable to pay employees or purchase gas or keep
the lights on in its sorting facilities.
It will be no more.
If you want to understand what the postal service
once meant, take a driving tour of the thousands of post offices that dot the
country, walk through their rickety doors, and look at the murals. On the east
wall of the post office in Seneca, Kansas, above the postmaster's door, is a
twelve-by-five-foot oil painting of two farmers harvesting wheat while a storm
churns threateningly on the horizon. They stare down at the fields, focused,
defiant. In the same spot in the colonial post office in Mount Hope, West
Virginia, Michael Lenson, a Russian immigrant who studied art in London and
Paris, created a wall-to-wall mural of miners, picks in hand, drills whirring,
arms bulging. These murals, eleven
hundred of them painted in post offices across America between 1934 and 1943,
were part of President Roosevelt's New Deal art projects, which he hoped would
help reinvigorate faith in the institutions of government. According to New
Deal documents from the time, post offices were chosen specifically for the
project because they were "the one concrete link between every community
of individuals and the federal government." In their permanence, in their
architectural beauty, in their central place on every Main Street, they were
uplifting symbols of hope and strength. This is the same reason the Capitol was
built to look like an unbreakable and shining temple to democracy. We build the
architecture we hope our government will mimic.
"Perhaps
what was most remarkable about the 1930s was the optimism," Marlene Park
and Gerald E. Markowitz write in the introduction to their seminal book, Democratic
Vistas: Post Offices and Public Art in the New Deal. "Despite the real
suffering that Americans endured because of the Great Depression, the belief
grew that an energetic and expanding government could work for the individual
and the local community to alleviate misery, restore political faith, and
improve the very structure of society."
There is no such
optimism on Capitol Hill today. In April, the Senate passed a bipartisan bill
that would have reduced annual health-care payments, returned $11 billion in pension
overpayments, and cut Saturday delivery after a two-year waiting period. But it
left in place many of the restrictions on pricing and services that have
crippled the postal service's ability to compete. The House countered by
holding committee meeting after committee meeting in which they discussed all
the reasons why the postal service was a failure — and then did nothing. Since
presenting a plan in September 2011 that would have allowed the postal service
to cut Saturday service and have more flexibility with pricing, President Obama
has remained mostly silent on the issue. He had a debt crisis to manage and an
election to win.
The just-ended
112th Congress had a 9 percent approval rating, the lowest of any Congress in
history, largely because it passed fewer laws than any other Congress in modern
history. Its members are bitterly partisan, frustrated, and seemingly
overwhelmed. This is the legislative body that must decide the postal service's
fate. Whether they offer Donahoe the ability to cut unprofitable services and
consolidate, or bet on Bloom and the union's plan to make shared sacrifices and
grow. Whether they loosen the legislative strings and allow the postal service
to pursue any of Adra's dreams, or in their inaction drive it into insolvency
for good. Their divided, dysfunctional cynicism is a mirror of our own. Which
is perhaps the greatest argument anyone can make for the postal service.
Five hours after
the mail leaves Portland, twenty-two hours after Grabenhorst picked it up in
Gold Hill, it arrives on Delta 2258 at JFK. Once removed from the cargo hold,
the mail is transported to Bethpage on Long Island, where the automated
shuffling begins anew. The addresses whose first three ZIP-code digits are 100
are routed to New York City, to the Morgan Processing and Distribution Center
in Manhattan. Here, the differentiation by DIOSS continues the next day — the
10003's sent to Cooper Station in the Village, the 10036's to Times Square
Station. By the time Tony Mitchell picks
up the 10001's at the James A. Farley Post Office in midtown — about sixty
hours since it left Gold Hill — they've been refined even further, by local
post office, carrier route, and delivery order. Outside, above majestic
Corinthian columns, the building is inscribed with the most famous of postal
quotations: "Neither snow nor rain nor heat nor gloom of night stays these
couriers from the swift completion of their appointed rounds." During the
blackout following hurricane Sandy, when New York City was paralyzed below Thirty-fourth
Street, Morgan operated at 25 percent capacity by using a generator.
Inside, at route
booth 36, Mitchell organizes his route for the morning, merging his letters
with magazines and other flats, updating his calendar with information about
which residents want their mail held or forwarded. In Gold Hill, where
Grabenhorst sorts, there are three route booths. Here there are seventy-one. Mitchell has a shaved head that might
intimidate if not for his wide, gap-toothed smile and an easy laugh that seems
to spill out after every other sentence. He's friendly from the start.
"Hey B," he might say to a Brian the first time they meet. He wears
gold rectangular-framed glasses. A matching gold-link chain connected to a
master postal key hangs from his belt. Once the side satchels of his mail
trolley are packed, he grabs the handle to make sure it's balanced, wraps his
postal blue scarf tight, grabs his postal blue earmuffs, and heads to the
industrial elevator, which has room for five carriers and all their mail. Out toward Ninth Avenue, the mail carriers
walk in a line, then disperse. It's hard when you first start a new route,
Mitchell says. You don't know where you're going, you don't know the residents,
and people aren't always so patient. Mitchell takes a left on Twenty-ninth
Street, then a right on Eighth Avenue.
Inside the lobby
of the first co-op, Mitchell pushes his cart to the side, opens the first of
four banks of mailboxes. When he first started this route, he was very quiet
and kept his head down. The residents, perhaps unfairly, had a reputation for
being a bit difficult, and he just wanted to make sure he did a good job. You work a job like this one long enough and
you develop your own system. Like the notes Mitchell writes to himself about
his customers' travel schedules and bundles with their mail so that he doesn't
forget. He sandwiches each customer's mail between a lightly folded bill so
that it's easy to tell where one person's deliveries end and another's begin.
After he finishes a bank of mailboxes, he rests a small plastic sign on the
bank's metal lip: MAIL IS FINISHED. He made these signs so that residents know
when he's passed through for the day.
Over time, he
went from working silently to exchanging pleasantries to eventually being sought
out for advice by the building's residents. They call him "the
psychiatrist." "Hey, Tony," they yell as they enter. "Oh,
he's the best," says another as she passes through the lobby. Like
a village bartender, there isn't much he isn't asked about. Sports, religion,
health, gospel music. And throughout, there's his ever-present disarming
laughter. Since 1990, Mitchell's worked
this route, stood in the lobby of this sixties-era apartment building,
unbundling mail and stuffing metal mailboxes. You see a lot. Residents who once
greeted him downstairs now greet him at their doors when Mitchell brings up
their medication. He's seen spouses divorce and pass away. He's seen babies
born, hundreds of them, and watched them grow up and leave the building in their
soccer uniforms and then their graduation suits. He's been invited to baby
showers and barbecues, and sometimes he'll invite a resident to a football
game.
He's seen a lot
and he's learned a lot, he says. He's learned to say hello to every resident he
sees, his smile always open, ready to connect. And he's learned to listen. "Hi, brother," shouts a man passing
through, balding and wearing a loose-fitting sweatshirt. "Take care, take care," Mitchell
shouts back, his tall frame and broad shoulders bending down to reach into his
mail trolley for another bundle. When he
finishes this building, he'll go on to the next one, then the next, as he's
done nearly every day for two decades, touching every mailbox on his route, the
final link in a network that binds us all.
1775: Benjamin Franklin is appointed the first
postmaster general.
1811: Fast-moving steamboats replace rafts and
rowboats for mail transportation.
1833: Abraham Lincoln is appointed postmaster
of New Salem, Illinois, at the age of twenty-four.
1847: The first U.S. postage stamps are issued,
featuring Ben Franklin on the five-cent stamp and George Washington on the
ten-cent stamp.
1860: The Pony Express is contracted as a mail
carrier until the transcontinental telegraph line is finished.
1933: President Roosevelt's New Deal sponsors
the placement of more than a thousand public murals and sculptures in post
offices to boost morale during the Great Depression.
1957: First semiautomatic sorting machine
installed in Silver Spring, Maryland, doubling the sorting capabilities of
clerks.
1958: Harry Winston sends the Hope Diamond to
the Smithsonian Institution via first-class mail from New York City to
Washington, D.C., for $2.44.
1963: ZIP codes introduced. 1970: President
Nixon changes the postal service from government Cabinet department to
independent federal agency.
2006: The last year the postal service turned a
profit — $900 million.
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