Issues & Insights

New Congress Must Revisit Postal Reform

The ballots are (mostly) in, and it looks like America will have a divided government for the next two years. A Republican-controlled House may not amount to the envisioned “red tsunami,” but with a shift in power comes new lawmakers keen on revisiting the mistakes of the previous Congress. One such mistake was the Postal Service Reform Act of 2022, which passed the buck on the U.S. Postal Service’s (USPS) gargantuan liabilities and set the stage for a massive taxpayer bailout in the future.

Now, it’s up to lawmakers to axe this harmful “reform” law and steer the troubled agency back into the black. Americans deserve a fiscally stable mail carrier that can deliver without breaking the bank.

Having lost more than $100 billion over the past 15 years (including $4.4 billion in 2022), the USPS is in dire fiscal straits. Unfortunately, the “reform” legislation passed earlier this year made postal problems harder to fix and even hoodwinked some center-right think-tanks and advocacy groups. Signed into law in April, the bill changed plenty about the way the agency operates.

The most widely discussed change is the “integration” of USPS retiree health benefits into Medicare. The legislation splits the existing Federal Employees Health Benefits (FEHB) program, which covers about 8 million federal and postal workers, retirees, and family members, into two. Out of this divorce will emerge a new general FEHB and a separate Postal Service Health Benefits (PSHB) Program linked financially to the Medicare program. If the law stays on the books, virtually all USPS employees will eventually be covered by Medicare, absolving America’s mail carrier of considerable health care costs.

This seismic shift in liabilities, though, does little to actually save taxpayers money. It merely passes a costly burden from one federal agency to another. Medicare expenditures now total more than $800 billion per year, and the program’s main trust fund is expected to hit insolvency by 2026. Adding postal retirement liabilities onto an already bloated program seems like an odd way to keep costs under control.

The grand Medicare “fix” receives far more attention than an even more alarming provision of the postal law, Section 103. The act authorizes the USPS to “establish a program to enter into agreements with an agency of any state government, local government, or tribal government to provide property and services on behalf of such agencies for non-commercial products and services.” The limited-sounding scope of the provision seems to rule out the possibility that the USPS will take up banking (which many agency watchers reasonably feared).

In reality, the legislative language gives the USPS wide license to dabble in banking and other problematic endeavors. States such as New Jersey and California have been toying around with the idea of opening public sector banks. In 2019, Democratic California Gov. Gavin Newsom (D) signed into law a bill allowing counties and cities to create their own financial institutions that could take deposits and facilitate certain low-interest loans. And, New Jersey has been busy studying the implementation of its own public banking initiatives.

If taxpayer-funded banks provide inexpensive financial services, that money must come from somewhere. Enter the USPS, which can grab taxpayer subsidies and low-interest Treasury loans if it fails to balance its books. Unless the law is repealed, it is only a matter of time before states and localities try and partner up with the federal agency to provide ostensibly “non-commercial” financial services. And, if the USPS’ check-cashing pilot is any indication, expect that effort to end in disaster.

Clearly, these changes are counterproductive at best and ruinous at worst. Lawmakers should take this law off the books and work toward real change at the USPS. For starters, Congress and the agency should work together to ensure that package pricing is reflecting the cost of delivery. As the Taxpayers Protection Alliance detailed in a 2022 report, the agency could likely raise more than $1 billion annually by adequately taking parcel-related network expenses into account. The USPS could likely save another $500 million per year by more efficiently scheduling its employees.

Congress can further bolster postal revenue by reminding the agency that it’s legally required to restart its customized postage program. Lawmakers should also push postal leadership to steer postal inspector dollars away from surveillance and toward crime deterrence. The list goes on and on.

There are far better alternatives to the broken status-quo. Incoming lawmakers need to revisit postal reform and get it right this time.

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

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