USPS responds to Townhall.com blog by Brian McNicoll
While the Postal Service always welcomes constructive dialogue regarding its current fiscal challenges, commentary brimming with half-truths and inaccuracies is not helpful. Regrettably, Brian McNicoll’s blog of the other day falls into the latter category. Contrary to Mr. McNicoll’s assertions, the Postal Service is an effectively managed and efficient entity that provides the nation with a vital delivery platform that enables American commerce, serves every American business and residential address, and binds the nation together, as it has for more than 240 years.
Studies consistently show that the Postal Service is one of the most efficient posts in the world. Moreover, the Postal Service is self-funded and postal operations are paid for with proceeds from the sale of postal products and services – not tax revenue. While it is difficult to address each of the many inaccuracies in Mr. McNicoll’s blog, we feel it important to set the record straight on some major issues for the benefit of your readers.
While Mr. McNicoll laments the current financial state of the Postal Service, he omits from his commentary the real reasons behind the Postal Service’s difficulties. With a little research Mr. McNicoll would have discovered most of the Postal Services recent financial losses are the direct result of statutory and regulatory constraints that are beyond the control of postal management, and that have made it impossible for the Postal Service to maintain financial stability as mail volumes have declined.
For instance, the Postal Service’s ability to adjust prices of products that produce over 70 percent of its revenue is restrained by an austere price cap that does not allow prices to increase more than the rate of inflation. Not many other businesses (if any) operate under a similar constraint. And, by the way, the cap applies to the “underwater” products about which Mr. McNicoll is so very concerned. As one might surmise, the rigid price cap makes it very difficult to attain cost coverage for those products – a reality conveniently omitted from Mr. McNicoll’s commentary. Moreover, it would have been nice if Mr. McNicoll mentioned the fact that the inflation based cap system is currently being reviewed by the Postal Regulatory Commission (the Postal Service’s regulator) which has the power to change or eliminate it. A more informed article might have emphasized the importance of this review given the negative impact that cap has had on the Postal Service’s ability to address its financial issues.
Mr. McNicoll’s discussion of the Postal Service’s obligation to prefund retiree health benefits is ill informed and incomplete. It is true that Congress imposed a unique burden on the Postal Service to prefund retirement health benefits and that the Postal Service has recently missed several payments due to financial constraints. Conveniently omitted (again), however, is the fact that more than $50 billion has already been set aside to finance those benefits, a prefunding level that far exceeds that of businesses that offer retiree health benefits. Moreover, the Postal Service is not shirking its responsibilities in this regard nor does it seek any kind of bailout. What the Postal Service requires is real and lasting reform that ensures its retiree health benefits program is affordable, to protect against any risk that those benefits cannot be funded going forward.
This is why Mr. McNicoll’s focus on the prefunding requirement is entirely misplaced and suggests a complete lack of understanding of the Postal Service’s current challenges. The fact is that current law requires the Postal Service to participate in and self-fund an unaffordable retiree health benefits system that is not fully integrated with Medicare. Indeed, among the commercial and governmental entities that offer and fund health benefits for their retired employees (an ever-shrinking pool), virtually every one fully integrates with Medicare. The substantial cost savings associated with this simple reform would put the Postal Service on sound financial footing going forward. A legislative proposal to do just that received unanimous bipartisan approval from our House oversight committee last year and we remain hopeful that reform will be enacted in the near future.
In that regard and in conclusion, we do agree with one point made in Mr. McNicoll’s otherwise unfortunate blog. Postal reform can’t come soon enough. Our financial situation is serious, but solvable. The Postal Service can overcome its systemic financial challenges with legislative reform and changes to our pricing system. By combining our ongoing management efforts with legislative and regulatory changes that provide financial stability and greater flexibility, we will be well-positioned to adapt to a rapidly changing marketplace and better serve the American public – that’s the art of the deal that’s required.