Understanding the USPS Situation - Granite Grok

Understanding the USPS Situation

Understanding the USPS’s Situation

Before we spring for a $75 billion bailout perhaps we should take a few minutes for understanding the USPS Situation. Last Friday the US Postal Service made a financial disclosure. It reveals the postal system has sufficient resources to continue operations for at least an entire year.

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This means Congress has time to put together well thought out reform legislation.

Postal reform is necessary. A bailout is not.

The issue of USPS solvency came to the forefront in March. The Postal Service began telling members of Congress it faced a reduction in revenue and increased costs. As a result, Congress included a $10 billion loan to the Postal Service in the CARES Act relief package.

Congressional Democrats and a former postmaster general claimed that was insufficient.  The call then came for a massive taxpayer-funded bailout package of cash grants and loans. Much of the media coverage focused on tenuous claims from House Democrats. The cry was USPS could go bankrupt as early as this summer.

Unusual as it may seem with all the credible claims coming from D.C. The narrative was false, yet it persists. The reason it hangs around because of the lack of public data on the financial state of the Postal Service. The lack of information even extends to Congress.

Quantifying the situation, clarifying the timeline

Sen. Ron Johnson, chairman of the Homeland Security and Governmental Affairs Committee oversees the Postal Service. He issued a letter last week requesting weekly financial updates from the Postal Service.  In recent weeks, postal analysts had begun to counter the doomsday narrative.

The Lexington Institute pointed out a sharp increase in package deliveries was compensating for lower mail volume. That means the Postal Service is not experiencing the type of steep revenue drop businesses such as restaurants and hotels are facing. The latest USPS quarterly financial report made this reality crystal clear.

The report covers the period from January through March. It shows a 2% increase in revenue over the year before. If USPS revenue had collapsed as a result of COVID-19 the expectation would be at least a modest decrease for the quarter. Instead, the report says the service has “sufficient liquidity to continue operating through at least May 2021.”

GAO putting the history in perspective

The USPS has debunked the union-backed push for a big postal bailout.  However, there is one thing that everyone can agree on: The Postal Service is in trouble. The nonpartisan Government Accountability Office highlighted this fact yet again in a new report just last week.

It details the long-term decline in first-class mail. There are increasing liabilities fueled by the costs of retiree pensions and health benefits. Additionally USPS has expensive service mandates by Congressional imposition. As a result, the USPS has lost money each of the past 13 years, totaling $78 billion since 2007.

The situation is serious, reform is required

The problems are serious. But, there are plenty of solutions available to legislators wanting to modernize mail service and protect taxpayers. There are long-term structural issues threatening the viability of the USPS. Heritage Foundation has suggested there are approaches to fixing them including:

  • Restructuring the USPS and mail service to free both from congressional micromanagement.
  • Reducing the frequency of mail delivery to fit the reduced volume of mail.
  • Auditing the pricing of package and mail services to ensure that the Postal Service is prioritizing sustainable levels of revenue.
  • Reforming employee compensation to better fit best practices from the private sector.

Many of those reforms were included in the fiscal 2021 budget proposal from President Donald Trump. Even if Congress balks at the best and boldest ideas, there are plenty of commonsense ideas available to legislators. If Congress can pass meaningful reforms in the next few months, USPS and its new postmaster general would have sufficient time to implement the reforms and stanch the financial bleeding.

Conclusion

Cutting a big check to the USPS with taxpayer money merely passes the problem onto future generations. The Postal Service’s own financial report shows that there’s no justification for an immediate bailout. Congress has known about the unsustainable finances of the Postal Service for years. Now, the problem has come to a head. When it comes to postal reform, there’s no more time to waste. We have an understanding of the USPS’s situation. All that remains is: What are we going to do about it?