Response to op-ed by Citizens Against Government Waste

The recent op-ed by Leslie K. Paige of the Citizens Against Government Waste should be returned to sender for its false and irresponsible claims about the Postal Service and current postal reform legislation.

While it is difficult to address each of the many inaccuracies and misrepresentations in Ms. Paige’s opinion piece, we feel it important to set the record straight on some major issues. The reality is that enactment of H.R.756, along with a favorable resolution of the Postal Regulatory Commission’s (PRC) 10-year pricing system review and continued aggressive management actions to control costs and grow revenue, will enable the Postal Service to meet its financial obligations and continue to provide affordable, reliable, and secure delivery service to every business and home in America for years to come.

Studies consistently show that the U.S. 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.

The valuation by Ms. Paige of what she calls “government-granted privileges” is nonsense that is premised upon flawed methodologies and assumptions, apples-to-oranges comparisons, and a one-sided narrative from an “academic” paper that was funded by a major competitor of the Postal Service. In fact and contrary to the assertions by Ms. Paige, the Federal Trade Commission, which conducted the only real study on the issue to date, concluded that the Postal Service actually experiences a significant net burden as the result of the responsibilities that we undertake as a part of the United States Government.  Nevertheless, they are responsibilities we are proud to fulfill.

Ms. Paige’s allegations that our monopoly letter business subsidizes our package business are equally ill-informed and just as misleading.  Again, contrary to her bald assertions, the PRC  (the oversight body tasked by Congress with reviewing cost coverage issues), has concluded each and every year that they have undertaken the review, and as recently as yesterday, that our competitive products as a whole cover their costs and are not cross-subsidized by our letter mail and other market-dominant products. The reason we continue to attract e-commerce customers and grow our package delivery business is not because of unfair competition with private carriers, but because customers increasingly see the value of our predictable service, enhanced visibility, and competitive pricing.

Importantly, the revenue generated by our competitive products helps to fund the infrastructure of the Postal Service. It is that infrastructure which enables us to fulfill our universal service obligation to deliver to each and every address in the United States, six days a week, and to provide to every American, no matter where they live, universal service at an affordable rate. Absent the critical revenue provided by our package business, senders of letters and other types of mail would have to bear the entire cost burden of this infrastructure.

In addition, and contrary to the claim that Postal Service operations are “archaic,” the Postal Service has aggressively responded to the changes in our marketplace and within the constraints of our existing business model by rightsizing our network and infrastructure. We pursued an aggressive agenda of cost cutting, efficiency improvements, and targeted innovation that resulted in approximately $14 billion in annual savings. We achieved these annual savings by consolidating 360 mail processing facilities and 20,000 delivery routes; modifying retail hours at more than 13,000 Post Offices; reducing our total workforce size by more than 150,000 through attrition; negotiating contracts that control wages and benefits and increase workforce flexibility; and through reductions in administrative overhead.

Despite our achievements in improving operational efficiency and growing revenue, we cannot overcome systemic financial imbalances caused by legal and other constraints. For instance, the Postal Service’s ability to adjust prices of products that produce over 70 percent of our revenue is restrained by an austere price cap that does not allow prices to increase more than the rate of inflation. The current cap does not take changes in Postal Service volumes and costs into account, and hence is wholly unsuitable to ensuring the Postal Service’s continued ability to provide prompt and reliable universal services in a self-sufficient manner. Without legislative and regulatory reform, our net losses will continue and our financial position will worsen, threatening our ability to meet America’s evolving mailing and shipping needs.

There is a sensible path forward that depends upon the passage of provisions in the H.R. 756 postal reform bill, combined with a favorable outcome of the PRC’s 10-year pricing system review. Once enacted, and together with regulatory reform and aggressive management actions, the Postal Service can meet all of our obligations and continue to improve the way we serve the American public.

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