Issues & Insights

Lawmakers Must Examine Real Issues Plaguing The Postal Service

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Most lawmakers and policymakers agree that the United States Postal Service (USPS) is in dire need of reform. Unfortunately, many suggestions for America’s mail carrier to get back into the black fail to address the root causes of the agency’s problems.

In a recent piece for The Nation, contributor Jake Bittle suggests direct taxpayer aid to the USPS and an end to the “prefunding” mandate. Bittle also advocates for postal banking, an idea floated (and rejected) many times. Any serious suggestion to reform the USPS must address the agency’s operational inefficiencies and bloated compensation. President Joe Biden, Congress, and USPS leadership must deliver on critical reforms to get the USPS back on the right track to fiscal solvency.

In his piece, Bittle speculates that, “lawmakers may have more appetite for direct aid [to the USPS] now that Trump is fading from view.” While this may be true, immediate liquidity isn’t really an issue for the struggling agency. The USPS reported more than $14 billion cash on hand at the end of fiscal year 2020 – more than it has had since at least 2005. Even if a taxpayer bailout delays bankruptcy from, say, 2021 to 2022, it will do nothing to solve the agency’s looming $160 billion worth of debt and unfunded liabilities.

To solve this larger, long-term solvency issue, Bittle suggests scrapping the prefunding requirement passed by Congress in 2006 that, “requires the USPS to fund retiree health benefits up to five decades in advance.” Bittle neglects to mention, though, that this iteration of the prefunding mandate ended in 2016. Now, the agency need only gradually write off these retirement health obligations (over a 40-year period) instead of footing the bill all at once. This relatively lax amortization schedule resulted in the USPS contributing about $800 million into its retirement health fund for fiscal 2020 – a small fraction of the agency’s $9.2 billion net loss that year. And, according to the USPS itself, eliminating the prefunding mandate “will not reduce our underlying liability for retiree health benefits, nor improve our cash flow or long-term financial position.”

Bittle also points approvingly to legislation that would allow the USPS to operate as a bank by providing savings accounts to the public. Postal banking proposals are nothing new and a dime a dozen, but don’t offer much hope to the USPS. Bear in mind that the agency already deals in some financial services such as money orders. Currently, consumers can stroll into their local post office and (for a small fee) send up to $1,000 to associates, friends, family members, or even themselves. But the agency has struggled to make money on these financial services in recent years. The USPS only netted about 10 cents per money order in fiscal 2019, compared to a 47-cent profit back in 2008. According to the inspector general, the agency has been behind the times in managing sales and digitizing money orders, leading to high costs and inefficiencies. USPS leadership would be wise to address declining profitability for their existing products rather than creating new products.

Overall, the agency’s operating revenue has actually been increasing over the past three years. It’s just that expenses have been increasing at a faster rate, driven primarily by bloated labor costs. From 2009 through 2014, the USPS made some progress in reducing these employee expenses, but an increased number of delivery points and package deliveries have reversed these savings. To get back on the right path, Postmaster General Louis DeJoy should work closely with lawmakers to introduce increased flexibility and allow the agency to hire lower-cost employees and contractors.

Additionally, the agency should look into expanding the contract delivery service (CDS) program, which contracts out last-mile deliveries to private parties. While the initiative has the potential to reduce labor costs, CDS contractors currently deliver mail to only about 3 million delivery points per year (compared to about 160 million delivery points overall across the country). Expanding the program could result in significant cost savings for the agency and alleviate current shipping backlogs.

Ultimately, there’s no one easy fix for the USPS. But prefunding and postal banking are distractions from the real issues plaguing America’s mail carrier. It’s time for the country’s leaders to get the USPS back on the right route and deliver real reform.

Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.

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5 comments

  • We have seven post offices in our town and surrounding area, some are seasonal. The mail delivery folks make about $50,000/year, I would guess the inside workers are paid well too. Not bad work if you can get it.

  • The USPS has trouble getting mail delivered during the Wuhan Flu. Just how well would these people handling your banking needs? Are these people on drugs?

  • The Post Office has not bought new Trucks in 24 years. Trump set them up to make a fleet purchase of delivery vehicles made in Oshkosh WI.

    Biden stepped in and changed the plans. The new Post Office Fleet will now be built in Turkey.

  • The landscape has changed for mail – I will speak from Canada. Canada Post went on strike routinely starting in the 1970s. And they had control there were no options. And they kept going on strike. Until the late 1990s when email, on-line services etc became more mainstream. I used to receive all my bills by mail and then mailed the cheques for payment – probably at least 12 first class letters a month. I switched over to on-line payment in the late 1990s and then signed up for receiving bills on-line starting around 2005. The last time time the union went on strike, no one really noticed.

    As it stands now I get maybe 1 first class letter a week. Everything is junk mail such as pizza flyers. So we now have the absurd situation of Canada Post mailman being paid probably $30 an hour (with benefits) to do a job that 12 year old boys used to do. That is not sustainable.

    They have tried to make their parcel delivery first class, but Fed Ex and UPS will still out perform them.

    Like most unions (my father often referred the Plasterers Unions that could control worksites with their demands, but once drywall was introduced, the union folded in about 10 years – how many plasterers do you know?) they over reached and ended up killing their market. The Canadian postal unions did the same and now they are crying rivers of tears to our politicians which are too wimpy to tell them to take a hike.

    At some point, a politician will emerge that will force Canada Post to get it together, but probably not of a while.

  • Post office drivers make the same circuit day after day after day, whether or not there’s anything of any substance to deliver, just in case some old lady living in the woods has her red flag up to pay her light bill by mail. The junk mail subsidizes the price of a stamp, but obviously it’s not coming anywhere close to what the actual costs are.

    The whole business model doesn’t work. Apart from Amazon and other packages, probably 10% of the printed stuff is worthwhile. The rest is all unsolicited garbage. Stack on top of that paying the last few generations of employees to not work, and that’s all you need to know. The rest is just smoke.

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