Congress and the Survival of USPS

The United States Postal Service (USPS) is an aging federal agency that reached peak mail volume in 2006.  For more than a century, it played a constructive role by providing affordable and reliable flow of parcels and written materials to rural and urban Americans.  The USPS last received a taxpayer subsidy in the early 1980s, even though the USPS faces financial strains caused by competition and Congressional rulings.

In 2006, Congress demanded that USPS fund its retiree health care costs on a hurry-up basis.  The $5.5 billion per year pace of mandatory contribution is intended to fund retiree health costs for 75 years into the future. This congressional mandate explains all of USPS’ net income shortfall in 2013.  Competition from other carriers such as UPS and FedEx and from the internet explains longer term sagging fortunes.

Consumers generally like the Post Office even though they demand that their employers fund their retirement commitments. No one favors tossing pension burdens onto taxpayers or into the Pension Benefit Guarantee Corporation (USPS is ineligible because it is a federal agency).

Congress has imposed nothing as harsh as the $5.5 billion per year in pensions for other business or agencies.  Tragically, Congress imposed no burden at all on fellow politicians steering state and local jurisdictions into pension and benefit bankruptcy.  Silence suggests many are expecting a “too connected to fail” bailout.

USPS trudges on while delivering the mail, but it has also found some creative ways to serve the community and stay afloat without subsidies.  A proposal to halt Saturday delivery would save $1.9 billion per year, but would inconvenience some Americans, so the proposal was nixed by the Congress.   On the other hand, a Sunday delivery deal with Amazon appears to generate a small but positive net income and so far Congress has not killed it.

Rumors of retail banking are another sign that USPS is determined to survive.  Up to 36,000 local postal– offices (would-be bank branches) could conveniently serve the 68 million “unbanked” Americans.  A USPS bank could offer reasonably priced loans to these low income Americans instead of expensive “payday” loans that the unbanked routinely use.

Teller training can be conducted quickly and many current postal clerks could become dually-trained.   One snag is that tellers are paid about half the wage paid to postal clerks, so we can expect union resistance.  Dual use for the post office buildings would allocate overheads more widely.

Banking services have much appeal, especially if they have functionality that competes with PayPal – the financial advantage behind eBay.  USPS banking services may be welcomed by retailers.  Already 40% of USPS revenues come from shipping online purchases or from partners such as Sams Club or Office Depot.  USPS partnerships with existing banks should be easy to orchestrate.

USPS continues assessing 5-day a week postal operations, customer pickup and special delivery instead of customer delivery as their standard fare, and ways to streamline their operations.  Congress has been a stern task master on retirement health costs, but if anyone wants USPS to continue funding pensions and health costs, it will need the latitude to innovate and thrive in the marketplace.  That translates into taking a little risk and annoying a few of Congress’ constituents.

Alan Daley is a retired businessman who writes for The American Consumer Institute Center for Citizen Research

 

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