The past couple of decades have not been kind to the United States Postal Service’s (USPS) financial situation. America’s mail carrier has been bleeding red ink, shedding more than $80 billion since 2017. In the past year alone, the agency lost an astounding $9.2 billion. Postal experts and logistics analysts usually point to a litany of reasons for the USPS’ decline, including maintaining an outdated business model and being hamstrung by Congress. But, instead of Congress emboldening the USPS to do better, lawmakers are insisting on provisions that would deliver further losses and trigger another taxpayer bailout. Congress and USPS leadership must work together to maintain an efficient, reliable postal system.
The many issues facing the USPS have not escaped the attention of Congress, which is currently considering the Postal Service Reform Act of 2021. Unfortunately, though, this misguided piece of legislation would do little to get the USPS back into the black. The financial provisions would eliminate the requirement that the USPS prepay for its employees’ retirement healthcare benefits, even though the agency is currently allowed to amortize (i.e., gradually write off) these liabilities over four decades. Without this requirement, and any real fear of going out of business, the USPS would almost certainly fail to put enough money away for its benefit guarantees. This “fairness” provision would almost certainly end with a taxpayer bailout once today’s young postal workers become tomorrow’s retirees.
But perhaps the most ill-conceived language of the bill lies in Section 202. The legislation would insert the following language into the U.S. Code: “The Postal Service shall maintain an integrated network for the delivery of market-dominant and competitive products … Delivery shall occur, to the maximum extent practicable, at least six days a week, except during weeks that include a Federal holiday.” This language would continue to make it impossible for the USPS to end Saturday delivery, which could save the agency at least $2 billion per year. Previous Postmaster Generals have openly contemplated limiting deliveries to five days a week, reasoning those operating adjustments are needed due to declining mail volumes. Lawmakers have repeatedly gotten in the way of the USPS crafting its own business model and will continue to do so if this bill is any indication.
Additionally, the language mandating an “integrated network” is vague and deeply problematic. Taken literally, this phrase could get in the way of agency plans to have dedicated package facilities to deal with the seasonal influx of e-commerce orders. If the USPS wants to lease additional annex facilities to deal with an overflow of packages, they should be able to do so without fear of micromanagement from Congress. That freedom, however, must come with the stipulation that first-class postage isn’t being used to subsidize low “competitive product” (i.e., package) prices. The USPS claims to base its package prices off of detailed cost attribution formulas. The problem is that these formulas are mostly hidden from public view, which means nobody outside of the USPS really knows the true cost of package deliveries.
The data that is publicly available, though, seems to suggest that package prices are not actually reflecting costs. If the agency were more transparent about its costs and had some separate, dedicated package operations, outside analysts could at least double-check the USPS’ math and veto its assumptions. A forced complete integration of letter and package delivery services would obscure this accounting, making it more difficult for anyone to correctly guess what percentage of, say, facility costs are attributable to package operations.
To its credit, the Postal Service Reform Act does include a provision prodding the Postal Regulatory Commission (PRC) to reconsider its cost attribution assumptions. But the fact of the matter is that the PRC has tweaked its formulas over the years and has received plenty of input (and criticism) for not adequately taking package costs into account. And the lawmakers behind the legislation seem not to realize how much more complicated the PRC’s job will become under an artificially “integrated” delivery system.
In nitpicking over various USPS reform ideas, Congress has failed to consider taking a step back and granting USPS leadership more flexibility in dealing with its problems. Lawmakers should allow the agency to cut costs and limit delivery days, while making sure that members of the public have full access to agency pricing decisions.
With enough flexibility and transparency, America’s mail carrier can continue to deliver.
Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.