The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Clarity on Costs Essential To Postal Reform

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


USPS is posting one thing very well; losses.

The USPS is hemorrhaging money.   It ended its last quarter with a $2 billion net loss, as compared to a $740 million net loss for the same period last year.  The revenue that was generated came as a result of a very anemic increase of 0.9 percent in standard mail volume, as well as an increase in the price of stamps in January, 2014.  The agency reports that it saw a 1.4 percent decline in first-class mail volume and it has sustained losses in 21 of the last 23 quarters.  Overall, the USPS has lost about 30 percent of its first-class mail volume to the internet over the last ten years, a trend which is expected to continue unabated.  In fact, that shrinkage might even accelerate as USPS frantically grabs for rate increases to fill its financial holes.  Some people call this a death spiral.

USPS officials have been trying to grapple with the staggering losses through changes around the margins, but in the final analysis, Congress will need to enact sweeping postal reform in order to truly address its broken business model.

And here is where trouble begins.  Congress has been the biggest stumbling block to the USPS's attempts to address inefficiencies in its infrastructure.

On August 4, 50 senators from both sides of the aisle crafted a letter to Senate appropriators requesting that the USPS be prevented from taking any further action to close or eliminate postal facilities during fiscal year 2015.  USPS management, in the absence of postal reform, has been painstakingly and haltingly closing and consolidating its facilities; 141 mail processing facilities have been consolidated since 2012.  Postal management has announced that it intends to continue to winnow the workforce by 15,000 and merge another 82 physical plants in 2015.

Congress also stymied their attempt to ratchet back to a five-day delivery schedule.

Senate Homeland Security and Governmental Affairs Committee Chairman Tom Carper (D-Delaware) responded to the latest congressional interference by saying ""If my colleagues want to address these concerns for the long-haul, I urge them to join me this September as we continue our efforts to fix the serious, but solvable, financial challenges facing the Postal Service."

Both chambers took up postal reform last session, but the bills never made it to the floor of either chamber.

Large postal unions are determined to block any reforms that lead to explicit winnowing of the bloated postal workforce.

Sen. Carper's bill would kick the can down the road on transitioning to a five-day mail delivery schedule, but allow it nevertheless, and would countenance more facilities closures.  House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) has a bill that would eliminate  Saturday mail delivery, phase out to-the-door delivery in urban areas, and rejigger the funding formula for the USPS's future healthcare and pension liabilities, which the USPS has argued is unfair and has contributed to its fiscal mess, and allow for the continued shuttering of facilities.  Though both Carper and Issa publicly express optimism and determination to get something done during the current session, given the time constraints and the uncertainty surrounding a lame duck session, postal reform is unlikely to occur until after the new Congress is sworn in in January, 2015.

Of serious concern to proponents of free-markets and anti-waste advocates are provisions that either directly or indirectly allow the USPS to begin competing or expand current lines of business against private-sector companies in sectors where they have no previous expertise or where they may be leveraging their quasi-government status to undercut competitors.

Sen. Elizabeth Warren (D-Mass.) has suggested that the USPS could expand into financial services to the "un-banked"  (the irony of having a nearly bankrupt federal government entirety offering financial services seems to be lost on the rather obtuse Warren).  The USPS OIG, who apparently doesn't have enough postal service, waste, fraud, abuse and mismanagement to track, meandered off into Elizabeth Warren territory with a report he issued on the same subject...so it's apparently a "thing" that needs to be carefully watched.

Postal observers have long noted that the USPS is using its monopoly on first-class letter mail to cross subsidize its other postal products, including its parcel services.  Not a surprise; Postmaster General Patrick has stated it explicitly, saying "We've been focusing a lot of efforts on package growth, because that's the biggest opportunity for us," said Postmaster General Patrick R. Donahoe.  He also stated that he intends to pour another $10 billion into facility and vehicle upgrades designed to help grow the parcel line of business.  How he does this with a multi-billion dollar gaping annual deficit, a $15 billion cap on borrowing from the U.S. Treasury (which the USPS has already reached), and unfunded liabilities that stretch out as far as eye can see has people scratching their heads.

In fact, many are beginning to question the math on the USPS's parcel delivery costs.  Getting a sight line into the true costs of all the USPS's products is a key step in keeping the USPS from forcing first-class mailers to cross-subsidize the USPS's parcel delivery, leveraging its government-granted monopoly against private-sector businesses, and to implementing workable postal reforms.  The USPS should not be permitted to foray into the private sector seeking new revenue in any sector until taxpayers and consumers get a clear sight-line into the USPS's accounting methods or before it has made the necessary adjustments and changes to its own business model.

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