Postmaster General Reports Good News, But it’s a Trifle Thin

Issue Brief

The crucial issue for the Postal Service, to stem the tide of further postage increases amid mail volume and revenue loss, is to maximize its productivity. That was the message Postmaster General John Potter correctly stated in a press release following the October 8th meeting of the Postal Board of Governors. But from there the details began to get fuzzy.

The fact that the USPS has delivered more mail to more addresses, without major increases in its labor force since 1995, sounds impressive. But it is a misleading indicator of productivity. In fact, USPS productivity declined in 4 of the 6 years since 1995, due to large expenditures on non-labor resources such as advertising, contractor support, and capital equipment.

Potter also reaffirmed that the postal workforce will be reduced by 12,000 positions in FY03, and stated that $1 billion in cost savings are expected However, what he did not report is that over one-half of these “cost savings” will not appear on the bottom line: instead, they will simply be spent in other areas. With mail volume declining for most mail categories, the most beneficial results for the Postal Service and the mailing community would be: (1) to delay future increases in postage rates substantially beyond the two-year rate cycle in evidence for the last six years; and (2) for the next postage increase to be substantially below the rate of inflation in the economy.

Instead, Potter merely stated his intention to delay a postage increase until 2004. That promise is somewhat disingenuous, since it typically takes 14 months to prepare, process and implement new rates. A more meaningful gesture would be to promise no postage increase until after 2004 and for that increase to be below the rate of inflation in the economy.

The General Accounting Office has indicated the need for more forthright and clear financial reporting by the Postal Service, but the response has been limited at best. There would be far less need for postal reform if the USPS were subject to more in-depth oversight, and if it in turn provided more meaningful data. Stronger oversight by the Postal Board of Governors, and a demand for more detailed and meaningful performance plans, could greatly improve the prospect for a financially viable Postal Service.

Earlier this year, Treasury Under Secretary Peter Fisher called upon government sponsored enterprises (GSEs) to be “role models for our system of investor protection, not exceptions to it.” GSEs have shareholders, while the USPS does not. But postal customers and taxpayers deserve assurance that its numbers will hold up to scrutiny. The Postal Service should consider subjecting itself to the same rigors for financial reporting as GSEs like Fannie Mae and Freddie Mac.

Charles Guy, Ph.D., is Adjunct Fellow with the Lexington Institute and former Director, Office of Economics, Strategic Planning, U.S. Postal Service.

– Charles Guy, Ph.D., is Adjunct Fellow with the Lexington Institute and former Director, Office of Economics, Strategic Planning, U.S. Postal Service.