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USPS responds to Taxpayer Protection Alliance claims

Monday, November 21st, 2016

The United States Postal Service (USPS) has responded to claims made by the Taxpayer Protection Alliance regarding its management strategy and operation performance.

Following the release of the latest USPS quarterly results last week, David Williams of the Taxpayer Protection Alliance published a blog in which he claimed that: “The USPS has lost their focus on the core service of mail delivery.”

According to Williams: “What ails the U.S. Postal Service financially however is not mail service, but the other service sectors that they currently operate.

“Actually, letter mail delivery is one of their most profitable services covering costs at over 200% according to the U.S. Postal Service’s latest filing.

“While it is their most profitable service, the U.S. Postal Service has continually turned their back on postal customers, increasing rates and allowing service to decline with late mail increasing by more than 50%. Being a monopoly like the USPS means never having to say you’re sorry for poor service and arbitrarily high rates. Instead of focusing on their profitable business (First Class mail delivery), USPS has ventured into a number of other debt-driven services including grocery delivery, chocolate delivery, and package delivery services, which includes a special agreement with Amazon. The more specialty deliveries they perform, the more their debt increases.”

USPS issued a riposte to Williams’ with a long and detailed notice on its own blog. The USPS’s key argument – and it is one that it has made many times before – is that it would be achieving a net income (instead of heady losses) were it not hamstrung by “statutory and regulatory restrictions that do not apply to private delivery companies”.  These include “a rigid price cap unlike anything faced by private companies” and a law that “requires the Postal Service to participate in and self-fund an unaffordable retiree health benefits system that is not fully integrated with Medicare”.

Herewith the full text of the USPS statement: “Once again, David Williams of the Taxpayers Protection Alliance is using blog forums to spread false and misleading information about the U.S. Postal Service. His repeated misrepresentation of the facts when discussing competition between the Postal Service and private shipping companies leaves us with the impression that his concern really lies with the interests of the Postal Service’s competitors rather than those of taxpayers or senders of products covered by the letter monopoly.

“Mr. Williams’ claims concerning the Postal Service’s package business are false. Contrary to his assertions, the Postal Regulatory Commission, the oversight body tasked by Congress with reviewing the matter, 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, as Mr. Williams alleges, but because customers increasingly see the value of our predictable service, enhanced visibility, and competitive pricing.

“The Commission has also noted that competitive products help 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 what Mr. Williams rightly extols as “the invaluable service of letter mail delivery no matter where they live, 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 fact, package delivery by the Postal Service is a critical component of the Postal Service’s universal service obligation, which extends to packages as well as letters. The Postal Service has been delivering packages for over 100 years. Congress originally authorized it to do so to address concerns that the private sector was not providing affordable, high-quality service to all Americans. In 2006, Congress sought to further enhance the Postal Service’s ability to compete in the package marketplace. Simply put, the Postal Service’s package products help to ensure that all communities have access to affordable package services.

“Despite Mr. Williams’ feigned concern, inhibiting our ability to compete in the fast-growing package market would do nothing but harm customers. Nor would it serve the interest of taxpayers, because it would exacerbate the Postal Service’s financial challenges. We finance our operations through the sale of postal products and services, rather than through taxpayer funds. Ensuring financial self-sufficiency requires alignment between costs and revenues. With letter mail volumes declining due to trends such as electronic substitution, package growth is vital to ensure that universal postal service can be sustainably provided moving forward.

“By fixating on the Postal Service’s package business, Mr. Williams misses the real story about why the Postal Service has suffered a string of net losses. These losses have not been the result of management inaction or “failed leadership” on the part of the Postal Service: through proactive, aggressive management, the Postal Service has worked to offset long-term declines, especially in First-Class Mail, and we have reduced our annual cost base by approximately $14 billion since 2008. Still, we have lost approximately 28 percent of mail volume since 2006, with First-Class Mail volume dropping 37 percent, and are hamstrung from taking the necessary steps to account for that volume decline through restrictive statutory and regulatory restrictions that do not apply to private delivery companies.

“As just one example, the law requires the Postal Service to participate in and self-fund an unaffordable retiree health benefits system that is not fully integrated with Medicare. This is a unique burden that Congress has placed on the Postal Service alone. 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. If the Postal Service were permitted to follow this uniform best practice, the Postal Service would have achieved net income over the last two years. Indeed, a proposal to do just that received unanimous bipartisan approval from our House oversight committee.

“As another example, most of the Postal Service’s business is subject to a rigid price cap unlike anything faced by private companies. That cap is limited solely to changes in consumer inflation, which does not reflect the financial realities of the postal business. The price cap severely limits our ability to raise necessary revenue to cover the costs of universal service, which continue to be incurred even as mail volume declines.

“Mr. Williams also takes issue with the service declines that we experienced in the aftermath of the Great Recession. The Postal Service has acknowledged that we suffered service problems as the result of a network realignment and a change in our operating plan that the Great Recession forced us to accelerate. However, the Postal Service has worked hard to correct these problems, and recently reported record achievement in many service categories.

“Despite our overall revenue growth, positive controllable net income, and aggressive management of the business, the Postal Service cannot overcome its systemic financial challenges without legislative reform and changes to our pricing system. The answer to stopping these large losses clearly goes beyond actions postal management can take under its control. We urge Congress to make passage of bipartisan postal reform legislation a priority of the next several weeks before they adjourn for the year. By combining our ongoing 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.

 

 

Source: USPS

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USPS responds to Taxpayer Protection Alliance claims

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