The coronavirus pandemic and the subsequent expected spike in mail-in voting in the 2020 election have made the question of a bailout for the Postal Service (USPS) a much more contentious issue than it otherwise would be, with even Taylor Swift weighing in. But while it isn’t possible to completely separate the matter of USPS funding from the need to have a functional infrastructure in place to transport and collect mail-in ballots, such electoral concerns should not be allowed to overshadow the fact that the Postal Service badly needs reform.
The Postal Service was designed to fund itself through postage fees and other revenues. Up until recently it had done so, but it seems to have forgotten this fact over the last decade. Since 2007, USPS has lost $78 billion, and had racked up a staggering $161 billion in unfunded liabilities and debt by the end of the 2019 fiscal year.
Supporters of a USPS bailout often claim that the crisis is “manufactured,” as the Postal Service’s losses coincide with a 2006 law requiring the agency to pre-fund its retiree health benefits. While the pre-funding mandate could stand to be adjusted, as it currently requires the USPS to pre-fund 100% of future retirement health benefits, it’s inaccurate to claim this as the sole cause of the USPS’s financial woes.
After all, the pre-funding mandate does nothing more than require that USPS plan for the future, something that more government agencies could stand to do (the most recent data, from 2017, shows state governments are $1.28 trillion behind on pension obligations). In all likelihood, eliminating the pre-funding mandate completely would just leave taxpayers on the hook somewhere down the line. The USPS itself states that eliminating this mandate “will not reduce our underlying retiree health benefits liability, nor improve our cash flow or long-term financial position.”
Another common source of blame is the growth of e-retail businesses such as Amazon, which often rely on the USPS for the last few miles of delivery. But USPS has actually been making money off these ventures — last year alone, shipping and package revenue grew by $1.3 billion, or 6.1 percent.
Rather, the USPS is suffering from a bad case of an outdated business model. Though Americans may appreciate mail delivery six days a week, it’s an expense that makes little sense given the rise of the internet. Cutting mail delivery back to just five days a week would save the USPS as much as $1.4 to $1.8 billion annually.
The Postal Service also maintains a massive labor force of about 630,000 that could easily be streamlined while limiting the impact on service. Cluster mailboxes, particularly in urban areas, could cut down on the need for mail carriers. Meanwhile, paring down the Postal Service’s labor force through natural attrition and hiring freezes would preserve the jobs of current USPS employees.
Post office locations could also stand to see cutbacks. The USPS currently operates over 31,000 post offices, many of which are made redundant by other, nearby post offices. Cutting back on the number of physical locations could help to rein in out-of-control costs.
As the matter of USPS funding becomes far more politicized than most probably imagined it ever would be, taxpayers should not allow the forming of battle lines to distract them from the reality that USPS badly needs reform. Preserving the USPS means reforming it, lest it become another line item that taxpayers are expected to cover.
Read Full Article »
