Economy & Budget

Latest postal reform bill should be returned to sender

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As Congress and the new administration pile up priorities and program reforms, the fiscally challenged United States Postal Service (USPS) is ripe for monumental changes.

Unfortunately, legislation that has started moving through the House of Representatives falls far short of what is needed.

On Feb. 9, 2017, the struggling agency posted its first quarter financial report for the 2017 fiscal year, detailing losses of “approximately $200 million.” Losses over the past seven years have reached $50.8 billion.

The Government Accountability Office has called the USPS business model “broken” and has included it on the High Risk List since 2009 because of its vulnerability to waste, fraud, abuse and mismanagement. The agency’s operations are woefully archaic and prevent it from being technologically nimble, effective and profitable.

{mosads}USPS officials often cite the agency’s recurring defaults on its payments to pre-fund the retiree health benefits fund as the catalyst for its fiscal woes. But shortly after the pre-funding provision became law in fiscal year 2006, the agency’s CFO called it “a farsighted and responsible action that … augurs well for our long-term financial stability upon successful completion of the payments.”


When the numbers did not work out, this concept became anathema to the agency.

The USPS’s fiscal woes continue unabated despite a raft of government-granted privileges valued at $18 billion a year, including a monopoly on the delivery of first class mail, exemption from income taxes and many fees, and exclusive access to mailboxes, all of which gives it a significant jump on its competition.

Even though each class of mail is required by law to be self-sustaining, USPS uses its monopoly letter business to subsidize its package business.

One of the USPS’s most maddening characteristics is its willingness to play both sides of the line: preening as a private-sector behemoth that should be allowed to compete with other businesses when it suits them, and as a beleaguered federal agency seeking relief from Congress and flirting with a taxpayer bailout when the going gets rough.

On March 16, 2017, the House Oversight and Government Reform Committee approved H.R. 756, The Postal Service Reform Act of 2017. Rather than overhauling the agency with bold policy initiatives, the bill rearranges the deck chairs on a sinking quasi-governmental enterprise.

The bill tinkers with the makeup of the nine-member USPS Board of Governors, reducing it to a five-member board with three political appointees; mandates more centralized mail delivery systems like cluster boxes; further complicates the already politically fraught process of closing underutilized post offices by adding the consideration of factors other than a facility’s performance, such as the “characteristics of the location, including weather and terrain, and the availability of broadband”; allows non-postal services to be provided to state, local and tribal governments, and other federal agencies; creates a new chief innovation officer to manage research and development of new products and services; and requires the Postal Regulatory Commission to conduct a one-time review of cost allocation methodologies.

The bill also includes a provision to alter the USPS benefit system so that more than 400,000 employees are transferred into Medicare. This massive shift would add beneficiaries to a program that its actuaries said will slip into the red in 2028, two years earlier than predicted in 2015.

In other words, the bill fails to fix what is broken, still allows the agency to foray into activities that are already well-served by competitive private companies, burdens taxpayers with new liabilities, and glosses over the lack of transparency and accountability by calling for a superficial report.

Properly fixing the USPS so that it will be functional for generations to come without needing taxpayer support requires looking beyond the Postal Service Reform Act of 2017. During an era of rapid, disruptive modernization of all communications technologies and infrastructure, Congress is missing an opportunity to redefine the concept of “universal service” and open the USPS to these innovations.

Keeping the agency’s outdated business model in place will only quicken its financial demise.

Congress should mandate major cost reductions; clearly bar any new, competitive non-postal businesses, like banking; provide more, not less, flexibility to evaluate and close underutilized postal facilities; and recalibrate mail delivery to meet dwindling demand. The private sector should be allowed to compete for more of the agency’s lines of business (processing, distribution, sorting and transportation). Congress should also consider moving the whole system to partial or full privatization, a business model that many other countries have successfully implemented without sacrificing universal service.

The bill currently under consideration is short on the free-market, fiscally conservative, 21st-century solutions that will lead to transparency, fiscal accountability and the efficient delivery of only essential, core postal services.

Leslie K. Paige is the vice president for policy and communications for Citizens Against Government Waste, a nonpartisan nonprofit that works to eliminate waste, fraud, abuse and mismanagement in government.

The views of contributors are their own and not the views of The Hill.


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