A free-market fix to the Postal Service’s wasteful spending

The great eclipse of 2017 was a unique nationwide astrological phenomenon enjoyed by tens of millions of Americans. It was so significant that the United States Postal Service (USPS) engineered a ground-breaking stamp to commemorate the event.

The stamp contains thermochromic ink, which allows it to transform from an image of the moon into an image of the total eclipse, complete with corona, when the heat of a human finger is applied. It then reverts back to the moon when the heat is withdrawn.

{mosads}A USPS spokesperson said that the stamp’s release was meant to enable “a new generation to bridge the gap and tighten the connection between physical mail and the digital world.” If only long overdue reform of the USPS itself, which is swimming in red ink and being dragged down by a slew of decidedly earthly problems, could be as simple, innovative, and transformative as the 2017 eclipse stamp.

USPS reported a net loss of $2.1 billion in the third quarter of 2017, an increase of more than $570 million year over year. It has more than $120 billion in unfunded liabilities, mainly for retiree health and pension benefits. And it is poised to default on another $6.9 billion in payments for future retiree health benefits, its fifth such default. The Government Accountability Office has included the financial condition of the USPS on its “high risk list” since 2009.

Since the enactment of the last comprehensive postal reform bill, the 2006 Postal Accountability and Enhancement Act, Congress has made several attempts to address the ongoing problems at the USPS. Unfortunately, almost every iteration of postal reform, especially those put forth by the USPS itself, tend to be predicated on searching for new postal revenue.

The USPS’s reform proposals lean heavily on allowing the agency to leverage its government-granted monopoly (worth $18 billion annually) on first-class mail to compete in new areas of non-postal business, provide unfettered flexibility to raise prices, and shift its unfunded liabilities onto taxpayers or ratepayers. So far, few of the congressional reform initiatives have seriously grappled with the biggest problems facing the USPS, which is its broken business model of excessive costs (mainly labor costs) and inflexible operations.

The Postal Regulatory Commission (PRC), which oversees the USPS, is currently undertaking a statutorily required 10-year review of the postal rate system. The report, which is due at the end of September, is limited to reviewing the USPS’s financial operations, but its findings could form the basis for comprehensive postal reform in Congress in 2018.

USPS management and its unions want the PRC to lift its statutorily-imposed rate cap for setting stamp prices, which is based upon the consumer price index. They are also questioning the value and effectiveness of postal worksharing. The price cap was established in the 2006 postal reform bill as part of an effort to reinforce cost discipline on USPS operations. Postal worksharing allows USPS to outsource many of its activities, including presorting, barcoding and transporting the mail to Postal Service facilities closer to the final delivery destination, to the private sector, which performs them more efficiently and at less cost.

Removing the price cap and putting the brakes on worksharing agreements would be the worst of all possible outcomes. Loosening the cap will give the USPS a free hand to double down on rate increases, which will exacerbate mail volume declines and thus fail to increase revenue, which then creates additional exposure for taxpayers. And worksharing agreements should be expanded, rather than reduced, since they provide discounts to mailers that perform those tasks and help reduce USPS’s costs.

Once the PRC’s report is made public, the focus will shift to Congress. Rather than moving ahead with lackluster bills that mostly preserve the status quo, they should adopt the bold, free-market approaches that have worked extremely well in other countries to reduce mailing costs and improve services.

The burden of the USPS’s inefficiencies, operational ineptitude and runaway costs ultimately cast a long shadow on postal ratepayers, or even taxpayers, who would be forced to provide a bailout if USPS’s financial position sufficiently deteriorates.

The great eclipse of 2017 may be over, but the opportunity to enact formative postal reform that will right-size the agency, move it toward more innovative, free-market, private-sector solutions and forestall an exorbitant taxpayer bailout is still on the horizon. Congress must get this done well before the next total eclipse in 2024.

Leslie K. Paige is vice president of policy and communications for Citizens Against Government Waste.

The views expressed by contributors are their own and are not the views of The Hill.