Postal Service Reform

What will it take to reform the Postal Service (USPS)? First of all let’s take the idea of eliminating USPS right off the table. It is indispensable to the American people. While we do have package services like UPS and FedEx and email, that replaces a lot of the daily mail duties. Even faxing and texting replaces a lot of the traditional mail traffic. Because people mail fewer letters now, the postal service lost a lot of revenue from the sale of stamps. Online banking replaced the need for bill paying by mail, in many cases. However, these changes have occurred over the last 15 or more years. The postal service management has known these changes were happening. You can’t stop technology, you either adapt or die in the business world. So instead of crying about their problems, they should fix them. But there are ways the government can help the USPS survive.

The problem with the USPS was built and designed when they were the only game in town. They had unlimited funds, due to a large traffic load. Everybody used the mail for most forms of hard copy transfers of information, also they handled all shipping with the exception of maybe, freight. They did not need to be efficient or streamlined. Now with all of the competition out there today, that is no longer the case. People expect quick and cheap delivery of letters and packages. They need to streamline their operation and Cut out all the waste.

Here’s a straightforward plan for how it could work, which would only require modest changes to law and would share the burden between the biggest stakeholders: the public, USPS workers, and the mailers and shippers who pay the USPS’ operating costs.

First, Americans need a guarantee that their mail will help them get through crises like this one, and the USPS needs money to do it. The USPS should be provided with a $1 billion annual appropriation in exchange for committing to deliver medicines and other critical supplies in the event of a national disasters. Presently the agency gets no extra financial support when it serves in a crisis. Strangely, it is not actually required to do anything in a crisis by either postal law or Executive Order 13527, the Obama-era directive on national responses to anthrax and biohazard attacks.

To their credit, the USPS workers have served valiantly during Covid-19; if the country gets hit with another pandemic or anthrax attack, we need the postal service to be funded and ready to deliver test kits and medicines. As late as the 1970s, Congress gave the USPS an annual public service obligation appropriation to help it cover the costs of delivering mail to every American household, no matter how remote. The same principle applies here: public safety is a national good, so pay the Post Office for the work the country expects it to do.

Second, the Postal Service needs the liberty to fix the way it funds its retiree health benefits fund, which has a $70 billion shortfall. Although it’s expected to find a way to fund these obligations, the USPS only may invest in U.S. Treasuries, which deliver paltry annual returns. A U.S Postal Service Inspector General study made it clear that this investment strategy all but ensures the agency will default on these obligations to its workers and the taxpayers will have to bail them out. Most federal pension dollars are invested much more broadly, and the USPS should be authorized to invest some of the more than $40 billion in its retiree health benefits fund in index funds.

Third, the USPS should be authorized to raise its prices a little more — after the Covid-19 economic downturn ends. Presently the law limits price increases for most paper mail to the consumer price index. Amending the law to let the post office raise prices at the CPI plus 1 percent could bring in an additional $700 million in revenue per year. Mailers dislike price increases, but done sensibly they work. When the agency’s regulator gave it an 4.3% “exigent rate increase” in 2015 and 2016, the post office reaped an additional $4.6 billion in revenue. Congress also should direct the USPS to further increase prices on parcels, which USPS is free but sometimes hesitant to do.

Fourth, the postal service should be free to choose to stop delivering paper mail six days a week — once all the stimulus checks are in the public’s hands. Again, demand for paper mail has plunged, and it is financially irresponsible to force mail carriers to haul mostly low-margin advertising mail more than five days per week. The USPS should remain free to continue delivering parcels on weekends so long as they actually make money on them. 

Fifth, the USPS needs to further reduce its compensation costs. Paying its employees accounts for 80 percent of USPS’s budget. The reduction could be achieved through buyouts. Dropping 100,000 employees might be more cuts than USPS wants, but it can always hire new, and less expensive, replacement employees.

Sixth, the U.S. Treasury should forgive the USPS’s present debt, which is around $10 billion. Just wipe the books clean, because paying these debts is draining the Post Office’s cash, which should be invested in new delivery vehicles and overdue capital upgrades.

Seventh, and finally, postal operating costs tend to go up because collective bargaining always produces agreements that raise compensation costs. Unions are right to drive a hard bargain for their members, but they are aided and abetted by federal arbitrators who almost always side with the unions over management. The law should be amended to require that collective bargaining decisions consider the financial health of the USPS. 

All told, these reforms would cost American taxpayers around $16 billion — far less than the massive bailouts proposed to date. And unlike them, they actually would fix the agency’s structural deficit, grow USPS revenues, lower its costs, and alleviate its debt load. Compared to the more than $2 trillion in Covid-19 aid enacted to date, $16 billion is a drop in the bucket. Rstreet, “The Postal Service Is In Deep Trouble. Here’s One Way To Get It Out.” By Kevin Kosar

Other ways USPS can save money, for one they need to trying to compete with FedEx and UPS. Between the two companies they have overnight delivery taken care of. By eliminating the infrastructure they need for over night delivery, they will save billions of dollars a year.

Another way to save billions of dollars is Reverse the 2006 law passed by the Republican (Republican!) congress requiring the postal service to pre-fund 75 years (which by the way is what I estimate to be the approximate age of my postal carrier) of future retiree health benefits in the form of 10 annual payments of – you guessed it – $5.5 billion. This was, not-so-parenthetically, done over the objection of the USPS and the very employees this is purported to help. Some of these operating losses are to pre-fund benefits for employees who not only don’t exist yet, but may never actually exist. Maybe a compromise position exists – like pre-funding retiree benefits for future employees who have at least been born.

Another way to save money is to reduce the number of offices. The lines are always long; the workers always move at exactly… the … same… pace.  Now, I know there will always be some segment of the population that doesn’t have access to a computer or the internet; that doesn’t have a car; that needs to be able to walk to their post office for some reason. I know I have to go to the post office every time I receive a certified letter – because, no matter that my wife is home when the mail is delivered, the postal carrier never comes to the door to deliver anything. He just leaves the slip and drives on. So, if there were a minimal level of service in residential delivery and that level was reliably maintained – maybe the vast majority of people wouldn’t have to go to the post office except to mail parcels or the odd heavy or over sized envelope. Surely there is a way to address this, no? After all, we have banks in supermarkets with better hours than actual bank branches – why not post offices? Forbes, “How to Fix the Postal Service.” By Ted Gavin

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