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USPS Fails to Make Another Delivery

Pete Sepp, National Taxpayers Union on August 16, 2016

Like a misaddressed letter that can’t reach its intended destination, the U.S. Postal Service (USPS) keeps failing to deliver on promises for full transparency and accountability to postal customers. Taxpayers are waiting too, and wondering if USPS will become the next Fannie Mae/Freddie Mac bailout they’ll have to fund. Earlier this week the Postal Service reported yet another quarterly financial loss, and once again, Americans are being forced to parse numbers as well as words in USPS’s quarterly financial report.

Postal leaders say they are “well-positioned operationally for further growth” largely due to their shipping and packages line, but are far less talkative about whether their monopoly lines such as First Class Mail are subsidizing this trend. And due to USPS’s accounting practices, which don’t clearly and adequately apportion costs to each of USPS’s business enterprises, that question remains a mystery. It’s no secret, however, that when it comes to shipping and packages, USPS has been handed a competitive advantage by the government over truly private companies, in the form of regulatory exemptions, lower tax burdens, and borrowing subsidies.

Postal leaders have also been complaining that a “forced price reduction” this year is worsening the balance sheet. The reality is, prices are simply returning to a normal level because a surcharge to help USPS recover lost revenues from the recession has fulfilled its original purpose. Ironically, the Service even got a bonus out of this scheme: a court extended the surcharge last year to give USPS a $1.4 billion windfall over and above what it was expected to be able to collect.

Finally, even as USPS goes on about those costs beyond its control – such as prefunding retiree health care costs – the losses directly within management’s grasp continue to worsen. In fact, the “controllable loss” has risen faster than the overall loss this past year (180% versus 167%). No wonder the Service fought so hard to keep its surcharge. As the Congressional Research Servicerecently put it, “Without the exigent surcharge, the USPS might have had very little in profits or losses in FY 2014 and operational losses rather than narrow controllable income profits in FY 2015.”

USPS’s news release called for ‘legislative reform that provides the organization with greater financial stability.’ NTU couldn’t agree more, except that care must be taken to avoid making current problems worse. Real stability doesn’t mean shuffling around future employee benefit liabilities to look more like those of federal agencies (which should actually be working to better address their own liabilities too). Nor should it mean imposing congressionally mandated rate hikes without serious forethought, or subsidizing unfair competition. Rather, it means enacting legislation that will insist on greater transparency in how USPS’s divisions finance each other, more accountability to postal customers for service and pricing decisions, and stronger protections for taxpayers against potential bailouts in the future.

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