The middle class is shrinking. Those in power have run up enormous debts on public credit while shoveling most of the money into private pockets. The corporations that have benefitted from this borrowing binge, meanwhile, leverage the global trade system to transfer their profits beyond the reach of national governments.

Meanwhile, we have been told lies by Democrats and by Republicans, divided into artificial camps and led into debates that are either irrelevant or so dramatically scripted that we fail to realize every choice leads to the same result: the dismantling of the social framework that defined and sustained the opportunity of the last century. National mobilization of resources has given way to radical individualism under a narrative that, in the wealthiest nation in the world, we must always expect less.

In this tumultuous time, we search for a way forward - a new Square Deal for the American people.

Thursday, December 29, 2011

What's wrong with the Post Office?

As I write this, more than 3600 post offices are on the list for possible closure, part of an effort to close a massive budget shortfall as people and businesses shift away from paper in favor of using electronic means for communications and bill payment.

Rural post offices are particularly at risk, ironic because these are almost always vital to the residents their host towns and villages while larger, more successful offices in major metropolitan areas could almost certainly be closed without more than slight inconvenience to residents. 

The Postal Regulatory Commission says that the methodology used to identify which offices should face closure is flawed.  Beyond simple revenue measurement, it wants the USPS to take into account factors such as the distance that residents would need to travel to reach the next-closest location for postal service.  That makes sense. 

But it won't change the fundamental problem: the U.S. Postal Service is built on a flawed business model.

Constitutional Authority

Postal service is one of the very few Federal powers explicitly delineated in the U.S. Constitution:
"The Congress shall have power...To establish Post Offices and post Roads" (Art. 1, Sec. 8, Cl. 7)
The Post Office Department was a cabinet-level agency under the Executive Branch from 1792 until 1970.  On August 12, 1970, President Richard Nixon signed the Postal Reorganization Act, abolishing the Post Office Department and replacing it with the U.S. Postal Service (USPS).

The USPS Model

The Postal Reorganization Act established the USPS as an independent agency structured similarly to a commercial corporation.  There are five requirements to which it is subject:
  1. The USPS is required to provide service to everyone.  To meet this requirement, the USPS (like the Post Office Department before it) employs hundreds of thousands of people across hundreds of processing and distribution centers and thousands of post offices.  It makes deliveries by automobile, on foot, and even by mule in remote locations.
  2. The USPS is required to generate its own revenue to cover operating and capital expenses.  It is not funded out of tax revenues.
  3. The USPS is required to get Congressional approval for its prices, to ensure that these will not negatively impact its requirement to provide service.
  4. The USPS is required to pay the costs of its employee benefits, which encompass the standard Federal benefits package including the Federal Employee Health Benefit Program (FEHBP) and the Federal Employee Retirement System (FERS).  No appropriated (taxpayer-funded) agency or department does so.
  5. The USPS is not permitted to retain profits.  In any year when the USPS brings in more revenue than it spends, the excess revenue is delivered to the U.S. Treasury to supplement general taxation. 
So the Post Office is structured as if it were a private business, but it can neither set its own prices nor accumulate any reserves to cover future costs, requires Congressional approval to modify its service, and has no say in the benefits that it must provide to its employees even though it has to pay for those benefits.

Does that make sense?

The Private-Enterprise Illusion

Many Americans believe that taxpayers would benefit if we were to eliminate the USPS and hand over responsibility for mail service to private-delivery firms like United Parcel Service (UPS) and Federal Express (FedEx).  They are wrong, for two reasons.

The first is that, as was mentioned previously, the USPS generates its own revenue and (with very slight exceptions for things like overseas-ballot voting) is not funded through taxation.  In practical terms, the USPS has received loans from the U.S. government, but these are liabilities, not appropriations.  Eliminating USPS would not result in a lower tax burden unless the U.S. government explicitly guaranteed that it would never extend loans to whichever private carriers picked up the service -- in effect saying that it would allow mail service to collapse rather than make loans.  That's not likely.

But there is a much bigger, more important reason why private delivery can't replace the U.S. Postal Service: mail is not profitable.  UPS and FedEx do well precisely because they move rapid-speed packages and documents as well as very large packages, in all cases at premium prices based on destination.  The Post Office delivers letters anywhere in the United States for less than 50 cents.  There is nothing comparable.

Conclusion

We need to save the Post Office.  We should at least allow it to set its own prices without Congressional approval, and certainly it should retain any profits that it generates in one year to offset what may be declining revenues in future years (e.g. during an economic downturn). 

But we also should not shy away from extending explicit taxpayer support to the USPS, particularly with regards to employee benefits.  It is one thing to criticize an organization for embracing an expensive benefits package that it cannot afford, as was true for the old U.S. auto industry.  It is quite another to mandate pay and benefits by Congressional directive and then tell the USPS that it has to find the money to pay for things that its management (and even its employees) did not choose.

One thing is for certain: allowing the service to collapse or parceling it off to private enterprise would effectively deprive the tens of millions of Americans who can't afford to use UPS or FedEx from being able to send papers at all.  Yes, many of us now communicate electronically, but as surprising as it may be for the affluent, tens of millions of Americans are still without reliable computers or access to the Internet, especially in rural areas.  Postal service is a lifeline to these people, and to reiterate, it is a Constitutionally enumerated power of the Congress to provide it.

So, we must act.  We need to preserve an amazing public service that does what it does better than almost any other piece of the U.S. government (the only possible rival of similar stature is the Internal Revenue Service), and we need to accept that there are costs associated with doing so.

1 comment:

  1. Shite, the Post Office can't keep excess revenues to help offset future shortfalls? I had no idea. That alone is seriously messed up. So... even the Post Office is taxed 100% of their revenue beyond operating costs. And yet.....

    ReplyDelete