Recent momentum for postal reform gives Congress a rare opportunity to make fundamental changes to the U.S. Postal Service, and the way it serves the American public. Such changes will be essential to preserve its role of providing universal service in the coming decades. But as many of the mailing community’s big players cling to their old, rigid bargaining positions, it will be up to Congressional leaders to implement meaningful reforms that will hold up where they matter most – in the details.
If they don’t succeed, the Postal Service will likely soon require massive, ongoing taxpayer bailouts to continue operations. While legislated reductions in mandated contributions to its employee retirement fund and some recent productivity increases have improved the near-term financial outlook for now, its long-term outlook has not fundamentally changed.
At a recent hearing, Treasury Secretary John Snow called on Congress to “take decisive action” to enact legislation to restructure the Postal Service. Most notably, Snow called for greater transparency in USPS accounting procedures. One problem resulting from the current lack of transparency is that it is virtually impossible to determine if the recent productivity gains are due to permanent cost reductions, or if they are merely deferrals of necessary expenditures like building maintenance. Similarly, labor cost savings are occurring through personnel attrition, and no assurances have been given by postal management that these savings are in jobs that have been rendered expendable (for instance by the deployment of new automation equipment).
Meanwhile, Postmaster General Potter and his leadership team have expressed repeatedly that the Postal Service is over-regulated and too constrained to control its costs effectively. They seek new flexibility to adjust to market conditions with flexible pricing and new products and services. While some pricing flexibility, such as negotiated service agreements, can be permitted, the public must be fully informed to avoid unfair pricing practices.
Current Postal Service accounting makes it impossible to determine whether it is earning or losing money on specific products. Its management is thus unable to refute widespread claims that the price of first-class stamps are kept artificially high to subsidize other, money-losing products and ventures. Achieving such transparency will be a critical test of any forthcoming reforms.
As House Government Reform Committee Chairman Tom Davis noted, another postal rate increase would be a “job killer.” Controlling costs – not generating increased volume – will be the key to avoiding such increases. Secretary Snow is right to suggest that the Postal Service cannot continue to mask subsidies by attributing 42 percent of costs to general overhead. Postal management should also be required to produce regular financial reports – as though it were a publicly-held company adhering to SEC regulations.
Charles Guy, Ph.D., is Adjunct Fellow with the Lexington Institute and former Director, Office of Economics, Strategic Planning, U.S. Postal Service.
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