The Treasury Department issued a report Tuesday calling the U.S. Postal Service “unsustainable” financially and calling for extensive changes to its operations.
The recommendations include eliminating certain delivery services, allowing the Postal Service to set prices without Congress’ consent, and eliminating collective bargaining over wages for USPS employees. The report suggests privatizing the USPS as a possible solution.
“The USPS is on an unsustainable financial path, which poses significant financial risk to American taxpayers,” said Treasury Secretary Steven Mnuchin.
The Treasury report states that over the last decade the USPS had net losses totaling $69 billion and is forecast to lose tens of billions of dollars more in the next decade. It blames the shortfalls on the service’s business model, which it said “must be updated in light of its current operating realities.”
Created by the federal government, the Postal Service is a quasi-private entity. It remains under congressional authority but is required to operate as an independent business. Contrary to widespread belief, it does not receive any federal funding and must instead rely on the sale of postage and related products for its operation. Declining mail volume has hit the service hard. The USPS reported a $2.7 billion net loss in 2017, a $5.6 billion net loss in fiscal year 2016, and a $5.1 billion net loss in 2015.
Tuesday’s report suggested that the Postal Service be allowed to develop a “new [economic] model that can be used to both set rates and control costs to achieve sustainability.” Currently, price increases must be approved by Congress. While the report does not endorse privatization directly, it does note that “many industrialized countries have pursued privatization of their postal systems — either completely or in part — to lower costs for consumers while improving service quality.”
In general, the report calls for greater flexibility to determine mail and package delivery frequency. If necessary, the report says, the USPS should be able to set price increases, reduce service costs, or simply stop providing “any mail products that are not deemed an essential service and do not cover their direct costs.”
Another reform it proposes is eliminating unions for USPS employees. The report argues that the USPS’ unique status as a quasi-private enterprise makes full collective bargaining rights a problem. “USPS’s dual-labor model — combining private sector collective bargaining law with government employee compensation law — creates unsustainable labor costs. USPS employee rights should be more closely aligned with other federal employee rights by eliminating collective bargaining over compensation.”
