The United States Postal Service and some of its biggest customers are calling for a taxpayer bailout of anywhere from $5-$20 billion dollars to finance security upgrades and to compensate the Service for lost revenues following the September 11 attacks and subsequent anthrax attacks. Of course, even before September 11, the Service expected to lose $1.35 billion in fiscal year 2002, following the $1.65 billion it lost in FY2001. Now, mail volume is even weaker.
At a Senate h earing earlier this month, the USPS received a lukewarm reception to its bailout request, particularly with regard to taxpayer payments for lost revenues. The White House also rejected any further appropriations at this time beyond $175 million already pledged for security upgrades. But with the idea still alive, we should consider alternatives to a taxpayer bailout.
Cut costs. Missing from the Postal Service’s Hearing testimony is any consideration of cutting costs elsewhere to free up resources to finance security upgrades and to offset any lost revenues caused by terrorism’s impact on our economy. This is a continuing problem for the Postal Service. As we have seen in the past, even when faced with declining revenues, the Service has declined to cut its costs aggressively. Why not cut costs-made easier by reduced mail volume-to finance these security upgrades?
Let Postal customers pay for Postal upgrades. As we have written previously, Postal customers and taxpayers are closely related groups, but they are not identical. [See our November 7 Issue Brief, “Beware a taxpayer-funded postal bailout,” https://lexingtoninstitute.org/postal/postalbailout.htm] To the extent the Postal Service is unable or unwilling to reduce costs to offset new expenses, the Service can look to its customers to close the gap. Why should a taxpayer, for example, who often uses private sector express shippers, and who pays a premium to pay his bills online, also have to finance Postal Service security upgrades for Postal customers? What’s more, why should that taxpayer subsidize the Postal Service because its revenues came up short? It would make better economic sense to have those who use the Postal Service pay Postal costs in proportion to their use of the mails. In other words, Postal customers should pay through postage rates. It avoids government interference in the marketplace, and keeps the pressure on Postal management to find a way to deliver a piece of mail safely at a reasonable price.
Add conditions to any taxpayer bailout. If the taxpayers are ultimately asked to foot the bill for a Postal bailout, Congress should link management reforms to any such taxpayer funds. For example, Congress could require reductions in management rolls, suspension of controversial management bonuses, an end to “image” advertising, improved financial reporting, and a host of other reforms that the General Accounting Office has identified to rout out waste, fraud and abuse. In short, the worst thing that Congress could do for a struggling Postal Service is give them a blank check that would divert attention away from solving persistent Postal problems. Postal Service management needs more accountability, not less.
— Charles Guy, Ph.D., is the former Director, Office of Economics, Strategic Planning, U.S. Postal Service. He and Michael Paranzino are currently Adjunct Fellows at the Lexington Institute.
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