Point: Postal “Reform” Bill Doesn’t Deliver for America

By Paul Steidler for InsideSources.com 

On March 8, the Senate passed the Postal Service Reform Act, joining the House of Representatives, which cleared the bill in February. And while there is a lot of talk about bipartisan cooperation in getting the measure passed and hype about what it means to the U.S. Postal Service, the bill has skirted the toughest and most important issues in postal reform.

The chief feature of the act is to wipe away $57 billion in defaulted debt that the Postal Service has failed to pay for its Retiree Health Benefits Fund since 2011. Unlike a state or local government, business or individual, the service faced no consequences for the default.

In hindsight the assessments, once widely agreed upon as part of the 2006 Postal Accountability and Enhancement Act, were far too high. But they were based on a basic principle: the Postal Service should set aside and invest some funds to meet large, looming retirement health care obligations. The service is now free of that requirement. Future postal retirees, however, will have to sign up for Medicare coverage to ensure retiree health benefits, and will incur higher costs.

By the way, despite the defaults, the USPS is not in danger of running out of cash any time soon. It had $24.2 billion in cash as of February 28, a staggering amount for an organization with $72 billion in annual revenues.

The service’s balance sheet and its quarterly financial performance will be marginally improved by the Postal Service Reform Act and the healthcare retirement benefits provisions. And act does have other beneficial features, including setting up a real-time dashboard so Americans can quickly identify mail delivery problems. It will also improve the budgetary process and slightly strengthen the service’s two key regulators — its Office of Inspector General and the Postal Regulatory Commission.

But these are not the reforms the American people need.

On October 1, 2021, the service implemented slower delivery standards for 40 percent of first-class mail. This follows another major service slowdown in 2014. As a result, it now takes longer for Americans to get the mail than in the 1970s. This bill does nothing to solve that. In fact, it takes the pressure off the service to improve as some of its debt is wiped out — or more accurately transferred to taxpayers — at no cost to the Postal Service.

The reform act also does nothing to spur the service to better understand its costs so it can cut them where appropriate and charge customers more accurately for the actual cost of the product or service being used. The service’s antiquated accounting and financial management systems and practices will stay in place.

Furthermore, this situation could get worse. Section 202 of the reform act requires the service to have an integrated delivery network. This is a solution in search of a problem as the Postal Service has had an integrated delivery network for decades and no one wants that to change. The aim of large retail special interests that have been pushing this provision is to eviscerate attempts to price mail products based on mail costs and package products based on package costs.

The reform act also punts on other basic issues. It does not define the mission, or Universal Service Obligation of the Postal Service. It fails to strengthen significantly the service’s regulators and it does not address other defaults the service has made on its pensions.

Furthermore, the process surrounding this bill in the Senate is disturbing. There were no committee hearings on the reform act, and the full Senate took up the measure along with a bevy of amendments at the height of the Ukraine crisis.

While the reform act is likely to be enacted, it is not true reform and there is still much harder work Congress needs to do to strengthen and overhaul the Postal Service.

Paul Steidler is a senior fellow with the Lexington Institute, a public policy think tank in Arlington, Virginia. He wrote this for InsideSources.com.

Counterpoint: Repair of the Postal Service Is Within Reach

By Max B. Sawicky for InsideSources.com

Fixing a sabotaged institution is not always easy. In the case of the Postal Service, relief is imminent. The Postal Service Reform Act passed in the House and Senate with bipartisan support. President Biden is expected to sign the bill into law in the next few days. All the major stakeholders — labor, retirees and management — were on board.

To set the scene, the Postal Service was originally the Post Office Department (POD) — a regular department of the federal government, funded by regular budget appropriations. The focus was on service to all residents of the United States on an equal, affordable and timely basis. Erosion of this commitment began in 1970.

The hackneyed cry of “running government like a business” provoked the separation of the POD into a separate, public corporation, the U.S. Postal Service. The intent was to create a free-standing, business-like entity that would finance its own operations.

The self-financing delusion runs against the grain of the USPS as a public service with historical benefits to the nation. In economic terms, the POD provided benefits beyond its customer base that could not be captured in fees for service. Hence self-financing would doom the service to stunted growth.

This change was not the downfall of the Postal Service. It suffered additional body blows, both from changes in the economy, and from misguided, bipartisan reforms in Congress.

The chief economic changes were the rise of the internet and the explosive growth of Amazon. The growth of email reduced the need for correspondence via “snail mail.” The Amazon model, emulated by Walmart and others, displaced package delivery that might otherwise have been provided by the service.

Even so, the growth of e-commerce and the pandemic expanded total package delivery. Although some share of it was taken up by private operators, the postal service found package delivery to be a major source of increased revenue for itself as well.

In the pursuit of self-financing, Congress set out to restrict postal revenue and increase its costs. In other words, it dedicated itself to a formula for bankrupting the service.

On the revenue side, the service was prevented from expanding its scope of business to new areas of growth that the internet would open up. Functions such as search and social media, ceded to tech giants, could be provided to USPS.

Moreover, such services could be provided with respect for individual privacy and vigilance against spam and abuse. Scope could also be expanded in areas that the POD traditionally occupied, especially postal banking.

On a more elementary level, the Postal Service has been restrained in the fees it can charge for its traditional, core services — delivery of letters and packages.

On the cost side, the greatest added burden resulted from a mandate that the service set aside a significant part of its revenue to pre-fund its employees’ retirement benefits, a requirement not pressed upon any other federal government department.

This bundle of reforms could be summarized as the product of what is called “neoliberal” economic doctrine — founded on a blind fetish for unregulated markets, privatization and a shrunken public sector. This approach became a special annoyance when the deterioration of  the service ran straight into the need for efficient support of mail-in balloting in the national elections of 2020.

It is ironic that members of Congress, with little business experience, took it upon themselves to dictate to the Postal Service how to run a business, something they are usually loath to do when it comes to for-profit enterprises. Their intervention made impossible the self-financing ordinarily required of business firms. How can something run like a business and be constantly hectored by amateur advisers?

The bipartisan fever for self-financing now appears to have broken, in the form of the Postal Service Reform Act of 2022. It alleviates USPS costs by facilitating Medicare enrollment for retirees, something available to other federal employees, and it eliminates the requirement that USPS pre-fund retirement benefits. These changes will block the push of Trump appointee Louis DeJoy, the postmaster-general, from cutting back services, including closing post offices in rural areas and eliminating Saturday delivery. It is poignant to note that decades ago, the post office was able to make deliveries twice a day.

In one respect, the DeJoy changes were logical. If your revenue is cut back, you have less money to finance services. When ample funding is secured, the fate of DeJoy, who shows no interest in resigning, will be an open question. The Biden administration has begun to fill out its appointments to the Postal Service Board of Governors. They will be called upon to dismiss the ethically compromised DeJoy.

Max B. Sawicky is an economist and senior research fellow at the Center for Economic and Policy Research in Washington. He wrote this for InsideSources.com.