What if the lookout on the Titanic had seen the iceberg in time? I’ve been pondering that question as I read recent announcements about the pending financial crisis at theU.S. Postal Service. While the traditional mailing
community has been looking at the problem for some time, few of the articles Ihave seen make any mention of the views of E-commerce retailers, or even of the potential impact a Postal Service failure would have on that industry. To my eye, the stakes are huge. The Postal Service has lost $14 billion over the last two years as a result of the recession, the erosion of First Class mail, and a huge obligation to prefund retiree medical costs that was imposed by Congress in the 2006 reform law. Yet, at the same time, USPS parcel volumes have increased and they now carry a great many packages for the other big shippers, Fed-Ex and UPS, to rural recipients.
This model could be threatened by the actions Congress will take over the next several months. Already, proposals have been made to end Saturday delivery in legislation proposed by both the Administration to the Super Committee andby Senators Tom Carper and Darrell Issa which would be a big mistake. Giving away one sixth of its service capacity and a major competitive advantage in exchange for a small percentage of the total cost burden seems like a bad trade for the Postal Service and its customers. Even more importantly, there is strong disagreement over major funding issues for the Service, such as whether to refund billions of dollars in excess pension costs that have been paid into government retirement accounts over the years from postage revenues. The Postal Service’s Inspector General and the PRC identified as much as $55 billion in excess pension payments, but the Office of Management and Budget and Republicans in Congress have rejected those claims. Getting all or even some of it back could have a major impact on the ability of the Service to continue operating, but some Members of Congress want to keep the money.
Common wisdom suggests that Congress would never let the Postal Service go under but in these tough times, it would be folly to take anything for granted. Even more important, companies that stay out of the debate may be very unhappy with the Postal Service they get out of any reform effort. It may be convenient to think that Federal Express or UPS can pick up any slack, but Fed-Ex and UPS don’t go to every address, only the Postal Service does. Adding to that, as more and more states seek the ability to add sales tax to Internet purchases, any increase in the cost of shipping could well drive consumers to head back to their brick and mortar retailer. Clicking a mouse is a lot more convenient, but is also has been a lot cheaper too. This could easily change with the outcome of the postal legislation being considered. For anyone making their living selling on the Internet, that has all the makings of an iceberg on the horizon to me.
Established in 1995, the Georgetown Public Policy Review is the McCourt School of Public Policy’s nonpartisan, graduate student-run publication. Our mission is to provide an outlet for innovative new thinkers and established policymakers to offer perspectives on the politics and policies that shape our nation and our world.