New White House Task Force Must Address New U.S. Postal Service Losses and Lack of Cost Controls

After losing more than $65 billion in the matter of a decade, the U.S. Postal Service is well-known for its dismal financial mismanagement. Thus, it comes with little surprise that the Postal Service announced this week another loss of $1.3 Billion for the second quarter of 2018.

President of American Consumer Institute, Steve Pociask, emphasized that the Postal Service’s pattern of mismanagement must not be allowed to continue. “The Postal Service cannot further ignore the fundamental problems in the agency’s cost structure. For too long postal leaders have sought to advance rate increases on legacy products that would merely inject more money into a dysfunctional system without addressing the Postal Service’s underlying predicaments.”

American Consumer Institute has continued to address the troubling impacts of the Postal Regulatory Commission’s proposal to authorize substantial postal rate increases over the next five years. Such an exercise would unsuitably raise prices on products for which Congress has granted the Postal Service a monopoly. As a result, these core products have demonstrated proven profitability by generating an estimated $2.16 in revenue for every dollar in attributable costs.

The material challenges, as ACI has maintained in its filings with The Commission, remain with Postal Service’s competitive services, which account for about 30 percent of the Postal Service’s revenue. Yet, as described by federal law, competitive items are only required to 5.5 percent of the agency’s fixed and institutional costs.

Such an arrangement ultimately forces USPS’ traditional letter mail and other market dominant services to contribute larger amounts towards costly Postal infrastructure, labor components, and more, which illuminates a strong likelihood of forcing these legacy services to prop up non-essential competitive services that otherwise would not be financially sustainable.

This mismanagement and lack of transparency surrounding the Postal Service’s costs is undeniably at the root of the agency’s financial difficulties and it is incumbent upon the new Postal Task Force to investigate these elements.

Task Force leaders, Treasury Secretary Steven Mnuchin, OMB Director Mick Mulvaney, and OPM Director Jeff T.H. Pon, bear a significant responsibility to ensure that mail customers are getting what they pay for, and also guard against scenarios where taxpayers are left on the hook to settle USPS’ debts.

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