USPS Needs Major Reforms, Not a Bailout

COMMENTARY Budget and Spending

USPS Needs Major Reforms, Not a Bailout

May 7th, 2020 1 min read
COMMENTARY BY

Former Director, Grover M. Hermann Center

Romina was a leading fiscal and economic expert at The Heritage Foundation and focused on government spending and the national debt.
Instead of a bailout, USPS needs structural reforms to return to solvency and to operate competitively in the digital age. PAUL RATJE / Contributor / Getty Images

Key Takeaways

USPS was on the road to financial collapse long before the COVID-19 pandemic.

Even though USPS is supposed to operate as a self-sustaining entity, lawmakers have politicized USPS rather than allowing it to manage itself.

The success of postal reform hinges on phasing out the universal service obligation and granting USPS flexibility to streamline its services to reduce costs. 

The U.S. Postal Service is approaching bankruptcy following 13 consecutive years of multi-billion-dollar deficits. Instead of a bailout, USPS needs structural reforms to return to solvency and to operate competitively in the digital age.

Setting the Postal Service loose to become its own private entity carries the greatest promise for sustainable and effective operations, as successful privatizations in countries such as the United Kingdom and Germany demonstrate.

USPS was on the road to financial collapse long before the COVID-19 pandemic. Its operations haven’t adapted to changing consumer preferences, and Congress carries much of the blame. Even though USPS is supposed to operate as a self-sustaining entity, lawmakers have politicized USPS rather than allowing it to manage itself.

President Donald Trump has rightfully opposed a no-strings-attached bailout for USPS, demanding that any federal aid come with conditions aimed at stopping the financial bleeding. Indeed, a bailout would be an ineffective Band-Aid on a gushing wound, fixing nothing.

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Its problems result from decades of congressional micromanagement and unsustainable spending. Foremost among these costs: The Postal Service has promised excessive retirement benefits that are unaffordable in light of actual revenue.

Congress also forces USPS to maintain unnecessary service requirements despite the rise of digital communication. As a result, postal workers deliver primarily junk mail to households six days each week. 

The service also suffers from inefficient asset management, such as maintaining branches with minimal foot traffic. Pricing practices pertaining to both letters and packages do not fully reflect operational costs.

While privatization offers the greatest potential for the Postal Service’s future, Congress can make reforms short of that ideal. 

The success of postal reform hinges on phasing out the universal service obligation and granting USPS flexibility to streamline its services to reduce costs. 

Compensation reforms are also critical to protect taxpayers against unfunded obligations. One thing is clear: Unconditional bailouts must be a non-starter.

This piece originally appeared in USA Today