Fail and Expand: The USPS Way | Citizens Against Government Waste

Fail and Expand: The USPS Way

The WasteWatcher

In the world inhabited by rational people, when a business repeatedly falters and fails make a profit, it is slated for downsizing and a return to the basic services where it had previously operated effectively. But, in the world of government-sponsored entities, the opposite impulse occurs.

Having lost more than $46 billion since 2007, The United States Postal Service (USPS) is having a very public flirtation with expanding its service footprint to include banking. Oddly, one of the prime cheerleaders in this effort is the Postal Service’s Inspector General (IG) David Williams. Typically, IG’s are tasked with keeping a watchful and skeptical eye on their agencies, identifying and routing out waste, fraud, abuse, and bad management practices. However, Williams frequently acts as USPS’s chief advocate on matters of expansion. Last year, his office released a white paper alleging that the USPS possesses the ability to expand into the financial services sector. On May 22, 2015 another white paper was published by the IG urging the same thing.

Ostensibly, this expansion would be designed to help the “68 million undeserved Americans who either do not have a bank account or rely on expensive services like payday lending and check cashing.” His case is weak. For example, there are nearly 100,000 bank branches and more than 400,000 ATMs compared to just 31,000 post offices. Add to that, national retailers like Walmart, Walgreens, Safeway, and others provide financial services nationwide on every street corner. Finally, the onset of the digital age has given way to banking services on smart phones that don’t require customers to travel to a bank at all.

A fellow proponent of expansion, Sen. Elizabeth Warren (D-Mass.), claimed that allowing the USPS to get into banking would help it “shore up its own financial footing.” On this point, Warren and her allies reveal their warped economic logic. The USPS is clearly in financial peril. On top of its staggering financial losses, the USPS has seen more than a quarter of its total mail volume evaporate between 2007 and 2013. This can be mostly attributed to the rapid and irreversible decline in paper mail, the demise of the brick and mortar business model, and the rise of the digital era. But, the USPS, which itself is burdened by an onerous network of bricks and mortar facilities and exorbitant labor costs, has failed to rationalize and right size to deal with its changing service base. The contention that it should expand, even as the agency careens headlong toward financial calamity, is counterintuitive and fiscally ludicrous.

If such a proposal is adopted, the economic consequences would be similar to the increased federal role in home mortgages (the housing crisis of 2007) or student loans (a similar bubble poised to burst in the coming years). There should be zero appetite for adding further services to the government portfolio in this way.

So far, the primary roadblock in this effort from Warren, Williams, and others is a legal one. The Postal Accountability and Enhancement Act if 2006 bars the USPS from providing “non-postal services.” Furthermore, the U.S. Constitution only authorizes Congress “to establish Post Offices and Post Roads,” never authorizing that entity to provide financial services.

In a free market, success is rewarded by expansion and failure is punished by atrophy and extinction. The USPS, with its tens of billions in congressionally conferred special benefits, is proposing flipping this model on its head. We know the results of this kind of action because we’ve seen the failure of the postal service for years and because we know what happens when market forces are removed from an economic sector. Under no circumstances should USPS be allowed to go down this commercially hazardous road.

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