Fix The Postal Service Before It Goes Broke

Fix The Postal Service Before It Goes Broke

John Callan

July 18, 2019

Congress often abides by the adage “if it ain’t broke don’t fix it.” The U.S. Postal Service’s (USPS’s) business model is broken. Despite this and years of accelerating losses, USPS is persevering and serving America quite well. It would be a mistake for Congress to wait to fix USPS until it is truly broke, meaning bankrupt and unable to pay wages and vendors, or make deliveries.

The Postal Service continues to fulfill its “mission” to provide the nation with reliable, affordable, universal mail service,” meeting what is known as its Universal Service Obligation (USO). And it does this remarkably well!

Absent legislative reform, USPS likely cannot continue this much longer since “it receives no tax dollars for operating expenses and relies (only) on the sale of postage, products and services to fund its operations.” Revenues are increasingly insufficient to cover operating costs. In her June 20 message to employees, Postmaster General Megan Brennan said, “Given our current business model, our operating losses will grow larger as this trend continues. No matter how you look at it, our flawed business model is unsustainable.”

Congress has made several attempts at legislation that would correct the flawed and outdated structure of the USPS as established in 2006 by the Postal Accountability and Enhancement Act. But the problem is not easy to fix.

The government’s obligation to provide “reliable, affordable, universal mail service” is subject to much interpretation and has never been specifically defined. The issue impacts every personal residence and business in every urban, suburban, and rural voting district.

To help find common ground in an environment where mail volume has been declining and e-commerce package deliveries have been accelerating, a group of stakeholders came together in 2011 to form PostalVision2020 to discuss how to “Reinvent the American Postal Ecosystem.”

Not everyone believed the business model was broken in 2011, though there is a clear consensus today that it must be fixed. Stakeholders also recognize how difficult, if not impossible, it will be for the Postal Service to continue to deliver at the service levels we have come to expect without continuing losses. Something must give. USPS simply must earn more income from operations, deliver at lesser service levels, or both.

If the USPS were a private enterprise it would cut unprofitable services, redefine product offerings, raise prices and/or move into new lines of business. Service cuts would come from discontinuing costly low-density rural routes, closing low transaction volume facilities, reducing delivery days and eliminating unprofitable not-for-profit products. Mail prices would be increased beyond cost-of-living caps, and new products would be introduced based on valuable address and delivery data.

Even though the USPS is required to operate like a business, it is hog-tied by government regulation that restricts it from doing so and is held accountable to its Universal Service Obligation “to provide the nation with reliable, affordable, universal mail service.” But what does this mean?

At PostalVision’s most recent conference on June 7, Postal Regulatory Commission (PRC) Chairman Robert Taub delivered the keynote address on the need to define the USO. He reiterated a recommendation from the President’s Task Force report to “Clearly define the USO. Provide a targeted definition of minimum, essential postal service, that due to specific social and economic needs have a basis for government protection.”

While many of the Task Force recommendations require legislation, the list of specific USO actions are mostly administrative. As such, Congress does not have to define USO issues such as geographic scope, number and density of post offices and collection boxes, model of delivery, processing standards and USO funding. Only delivery frequency was singled out as requiring legislative action as Congress has mandated that the Postal Service provide delivery six days per week.

Defining the USO is not a new idea. The PRC discussed this in reports in 2008 and 2014. But now with some exposure of the issue at the highest administrative levels, and considering that Congress is not likely do anything about it any time soon, it is time to get working on defining the USO in earnest at the USPS itself – with support from the PRC, U.S. Postal Service Office of the Inspector General, Government Accountability Office and the stakeholder community.

In Postmaster General Brennan’s June 20 letter, she reports on progress in developing USPS’s 10- year business plan, saying, “The Temporary Emergency Committee (TEC), which includes our governors along with Deputy Postmaster General Ron Stroman and me, are developing a 10-year business plan to put the Postal Service on a sustainable path forward. The plan will focus on the key public policy questions of what universal services the Postal Service should provide, and how to pay for those services” (emphasis added).

This is an encouraging step. I call for bold leadership from the TEC. No solution will satisfy everyone. It is time to put forth sound, reasonable, and responsible definitions that will anticipate and meet the needs of Americans for postal service in the next decade and beyond.

About the Author: John Callan is the Founder and Chairman of PostalVision 2020 and Co-Founder and Managing Director of Ursa Major Associates, LLC.

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