01 May 2018

Postal Profitability?

Early in April in a variety of his tweets we learned that not only is POTUS upset with the coverage of his administration by the Washington Post, he believes that the contract between Amazon (of which Jeff Bezos is CEO and who not-coincidentally purchased the WaPo in 2013) and the US Postal Service is "losing a fortune." You can read a nice summary of the fact-challenged remarks of POTUS in CNET here. But lack of facts in support of the tweeter-in-chief is not news and would have generated little note outside the Beltway.

A few days later, however, POTUS issued an executive order creating "task force" to review the financial stability of the USPS. You can read the full text of the order here. This is a bit strange given that all large vendor contracts must be approved by the Postal Regulatory Commission, an independent federal agency that has exercised it independence by on occasion rejecting requests for rate increases from USPS.

Even assuming good faith on the part of POTUS, there's no likelihood that this task force will uncover anything worthwhile. The principal reason the USPS loses money is--drumroll, please--Congress. Ownership of the USPS was turned over to an independent agency back in the Nixon days, after Congress passed the Postal Reorganization Act. Congress does not--I repeat, does not--fund the USPS with tax dollars (apart from some subsidies for the disabled and overseas voters). The USPS does have a statutory monopoly over first-class mail but in return it must deliver it to everyone in the United States including small, isolated bergs like Wells Tannery, Pennsylvania. Eliminating the cost of maintaining post offices in remote locations would save substantial amounts but Congress kept its fingers in the pie so the USPS continues to fund little-used senior citizen centers across the United States.

But back to how Congress causes the USPS to lose money. Back in 2005 Congress mandated that the USPS--alone among federal agencies--prefund 100% of its retiree health benefits. Prefunding long-term liabilities is not necessarily a bad idea but if Congress really believed it should be done you'd have thought they would have started closer to home with, say, Medicare. Thus, while the USPS operates profitably, its net revenues are inadequate to prefund retiree health benefits. This does not mean that its retirees aren't getting their promised health care but does mean that in future retirees--like future Medicare beneficiaries--are at risk. This risk is significant but it is also significant that the competitors of the USPS, like FedEx and UPS don't have this liability.

How might POTUS or his task force help solve this problem? And how could Congress be part of the solution? First and most simply, appoint and confirm members of the Postal Board of Governors. When turning the postal system into an independent agency Congress provided for a Board of Governors comparable to the board of directors of a private corporation. Of the eleven slots on the BOG precisely zero are in office. That's ZERO. In other words, the body charged with the overall oversight of the USPS has no bodies. And the the BOG is where the large-scale policy questions of services and benefits can be weighed and perhaps resolved.

Why, you might ask, are there no members of the Postal Service BOG? Equal (dis)credit goes to the Executive and the Senate. President Trump has nominated three qualified members (Why not eleven? I don't know.) but they are being slow-walked through the Senate because of Democrat gamesmanship. And why might Senate Democrats oppose filling the BOG? Well, start by asking the darling of Millennials, Bernie Sanders, who blocked President Obama's efforts (here and here) to get folks on the BOG.

There's more to be said about all this but this post should be enough to confirm that the recently-appointed task force will be largely irrelevant and that the long-term solution to fully profitable postal operations requires actual political leadership. In other words, don't hold your breath.

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