As many times as the United States Postal Service has responded to Steve Pociask’s musings about the agency’s fiscal situation, we’re once again finding ourselves in the position of having to correct his myriad misstatements.
About the only thing that Mr. Pociask got right is our net loss of $2.1 billion for our most recent quarter. But contrary to his shallow take on the facts, the Postal Service’s proposal for additional authority to set prices for our market-dominant products is a necessary and rational step to addressing its current financial situation. The Postal Service has made, and is making, tremendous strides on not only service, but in right-sizing our network and infrastructure within the constraints of our existing business model and current legal obligations, increasing workforce flexibility, and establishing a more affordable, two-tiered wage system. However, despite our achievements in improving operational efficiency and growing revenue, we cannot overcome systemic financial imbalances caused by legal and other constraints.
The current regulatory structure governing our ability to adjust prices of products that produce more than 70 percent of our revenue is predicated on an austere price cap that does not take changes in Postal Service volumes and costs into account. As the past decade has clearly shown, this system is wholly unsuitable to ensuring the Postal Service’s continued ability to provide prompt and reliable universal services, and meet our other statutory obligations, in a self-sufficient manner. The Postal Service simply seeks a structure that gives us the ability to set prices at levels necessary to ensure our financial stability. The Postal Service currently charges rates that are among the lowest in the industrialized world, and posts throughout the world have used price increases as one tool to address the financial challenges of declining demand for the mail. By contrast, a policy of lowering rates generally, as Mr. Pociask suggests, would simply lead to less revenue, and hence exacerbate our financial difficulties. Indeed, this is precisely what occurred when the Postal Service was required to roll-back rates several years ago.
Equally misinformed are Mr. Pociask’s statements regarding the Postal Service’s competitive products. By law our competitive package products must cover their costs. Our independent regulator, the Postal Regulatory Commission, monitors this issue, through a robust costing system that is based on methodologies developed over decades of litigation. The Commission has concluded every year that products covered by the letter monopoly do not cross-subsidize the Postal Service’s competitive 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.
Moreover, our competitive products not only cover their cost, but provide essential support towards funding the infrastructure of the Postal Service. It is that infrastructure that 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 mail delivery no matter where they live, at an affordable rate. Last year, competitive products contributed $6 billion to covering these costs. 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. That is why senders of market-dominant mail have joined with the Postal Service in urging the Commission to reject attempts by a competitor to unfairly inhibit our ability to compete in the package marketplace.
The Postal Service’s financial situation is serious but solvable. Continued innovation and aggressive management actions together with the passage of the provisions of H.R. 756 into law and a favorable outcome in the PRC’s 10-year review of the Postal Service’s pricing system will restore the organization to financial stability and allow us to continue to provide excellent service to the American public.
America deserves a financially stable Postal Service that can continue to play this vital role in our economy and society. In a dynamic and increasingly digital, mobile- and device-driven world, the Postal Service has opportunities to enhance the way we enable commerce. However, we require the financial ability to invest in the Postal Service’s future.