The American Post: Where From Here

August 3rd

“It’s time to rethink the mission and meaning of the United States Postal Service. The old model is breaking, if not broken.Kansas City Star Editorial

With these simple words the Kansas City Star took on the issue of the future of the Postal Service.
The point that has been lost in many conversations about the future of the Postal Service – and there have been many in the past 2 decades – is that the basic business model of the USPS is not working any more. The postal reform debate has focused on pensions and retirement costs (we will get to that). But the issue of first principles is

  • How will the postal business model be sustained in a world in which customers are choosing to communicate differently?

The question facing the USPS – that is currently urgently imploring Congress to address the issue of a pending multi-billion dollar payment that it cannot make – is simply how can future revenues exceed future expenses? Without an answer to this, there is no sustainable business model and someday soon there won’t be a Post Office unless something changes.

The debate over arcane pension and retiree health benefit topics is about whether the law should be changed to reduce the expenses that the USPS is required to pay. The costs are simply too high.

The discussion over regulation, monopoly, universal service and a host of questions that economists like to discuss is all about what rules should guide the generation of revenue? The revenues are too low.

Television ads from the American Postal Workers Union say that no taxes support the USPS, only stamp revenues. There are three reasons why they are presenting a misleading picture. First, the Postal Service receives “implicit subsidies” as Congressman Darrell Issa points out. The Federal Trade Commission recently detailed the way in which the USPS has advantages that a private competitors do not enjoy. (And, to be fair, it has unique burdens too.) Second, the USPS does actually receive appropriation support, although it is admittedly in the form of “reimbursement” as apposed to classic “appropriations”, and in permissions to charge customers. But most importantly, the USPS is running in the red. It’s losing more than $8 billion and stamp revenues are not going to pay for all of the current costs.

So the post office and Congress are going to have to do something because stamp revenues are not enough to afford the labor costs and the current infrastructure. This is why the Kansas City Star is right on target.

The business model is broken and must be fixed. But to do this, America is going to have to face difficult choices about the mission of an institution that is historically at the core of our culture and our economy – but not so much any more.

The law says that the mission of the Postal Service is to “bind the nation together with the correspondence of the people”.

But in an age of electronic communication and social networks its reasonable to ask whether this is a mission that it can fulfill. (Whether it should extend its reach with electronic services like secure email is another question. But the law would have to be changed to permit it to do so. This was put out of reach in 2006, just as the recession and the electronic invoicing and bill payment was about to hit.)

So what should Congress do? Change the business model or change the mission? Something is going to have to give. In an electronic age in which America’s oldest communications infrastructure is now prevented by law from offering electronic services it is not possible to be “businesslike”, to sustain the old ways of doing business, and to bind the nation together – something is going to have to give.

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