Even before anthrax was discovered in the U.S. mails and the economy was socked by the events of September 11, the United States Postal Service was in financial distress. It expected to lose $1.35 billion in fiscal year 2002, following the $1.65 billion it lost in FY2001. The Service had also filed for an additional $6 billion rate increase, the third increase since January 2000. Now, the Service is seeking billions of dollars in taxpayer subsidies to compensate for new security measures and lost revenues. Charles Morgan, outgoing chairman of the Direct Marketing Association, says the Postal Service needs “a $5 [billion] to $10 billion bailout right now.”
Senator Byron Dorgan, who will chair an Appropriations Committee hearing on November 8 at which Postal officials will testify, says “I don’t think the question is whether we respond to their needs, but how and how much.” Certainly the mails must be made safe, but before the taxpayers are asked to write a multi-billion dollar check to the USPS, Congress should ask tough questions, and demand assurances that Postal management will finally adopt reforms.
Questions. Postal customers and taxpayers are closely related groups, but they are not identical. The first question Congress should ask is whether taxpayers, rather than postal customers, should foot the bill for new postal security measures. A taxpayer bailout would tend to hit families harder, while funding security upgrades through postal revenues would tend to hit businesses harder, as the bulk of postal revenues come from business customers.
Government should also try to minimize distortions in the market. Subsidizing the mail to keep prices artificially low unfairly hinders technological alternatives including online bill payment, email, and private sector express shippers that more closely monitor the sources of their packages. The anthrax threat has made clear that for reasons of national security, alternative means of doing the nation’s business should be encouraged, not hindered. Congress should also ask whether the ballooning bailout estimates are being used to mask underlying management failures that have led to billion dollar losses even before the anthrax crisis.
Assurances. If Congress decides on a bailout, Congress should strictly delineate the appropriate uses of any taxpayer monies given to the Service for security purposes, and should monitor the Postal budget to ensure that funds intended for security purposes are not diverted to other uses. In addition, the USPS should assure Congress that it is focusing on its core mission of safely delivering its monopoly-protected categories of First Class and Standard A mail (advertising circulars & catalogs), rather than trying to enter new businesses like e-commerce, and competing with private sector carriers. Calling for a taxpayer bailout is easy. Making sure the money is well spent, and not used to prop up a failing management program, is much harder.
— 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.
Find Archived Articles: