The financial trouble of the U.S. Postal Service has finally begun to significantly affect the Washington political environment.
High-level meetings are taking place, press conferences will be held, new postal reform legislation is being floated, and presidential appointments are being announced. All this is being done presumably to strengthen the postal service and help it survive.
Let's begin with one key presidential appointment. The White House announced its intention to nominate Al Casey to an almost full term on the USPS' Board of Governors. Rumor has it that Karl Rove, President Bush's chief political operative, has the postal service on his “this could be trouble” list. Presumably, to get the situation under some semblance of control, the administration skirted the usual political appointee list and went for someone with a background managing large organizations facing difficulty.
Casey was CEO of AMR, the parent of American Airlines, from 1974 to 1985. He served a stint as president/CEO of Resolution Trust Corp. The RTC was created by Congress to resolve the savings and loan debacle of the 1980s. He also served briefly as postmaster general in 1986. By background and experience he should be a valuable addition to the board. His time as CEO of the RTC, in a politically charged environment, could help the USPS maneuver through the legislative minefields of postal reform.
On the legislative front, Rep. Henry Waxman, D-CA, the ranking minority member of the House Committee on Government Reform, has circulated his own version of postal reform. His legislation gives increased authority over the postal service to the regulator, the renamed Postal Regulatory Commission.
For “market dominant products,” Waxman's bill would give the PRC responsibility to “establish a modern system for regulating rates and classes.” The PRC's objectives in establishing this new system would be to create incentives to reduce costs and increase efficiency, create predictable and stable rates, maintain high quality service, provide the USPS with pricing flexibility, ensure adequate revenue and reduce the administrative burden of ratemaking.
The Waxman proposal gives the postal service the authority to establish rates in the competitive non-monopoly classes. However, the PRC has the final responsibility to determine whether products are in the competitive or non-competitive classes. Of great concern to book publishers will be his proposal to put Bound Printed Matter classified parcels into the competitive category. If this were to go into effect, it would result in a significant increase in book shipment postage rates, probably to the delight of UPS. I wonder whether Waxman is aware that the BPM classification is a favorite shipment method for book publishers.
The Waxman proposal does provide the potential for bonuses to postal employees, though it gives the PRC some oversight over the bonus program. His proposal, if it ever were to make it through the legislative process, is guaranteed to increase the animosity between the postal service and the PRC.
The USPS's own detailed views on reform, to be enunciated in its Transformation Plan, are yet to be heard. Postmaster general John E. Potter will present the plan to the House Government Reform Committee on April 4. He also will discuss it at the National Press Club on April 5.
However, on several occasions the USPS has stated that as part of any reform legislation it would seek a change to the mandatory arbitration process if the USPS is unable to reach a contract with its craft unions. The unions are against any change to the current process. And, Congress has proved unwilling or unable to touch the issue. Rather, the Waxman proposal and the almost forgotten proposal of Rep. John McHugh, R-NY, concentrate most of their efforts on revising the revenue raising, rate setting process.
The postal service's position seems to be that it would like to be given a no-hassle ability to obtain regular annual rate increases. What seems to be missing is the view of customers. With mail volume down 6 percent, customers are sending a message in this weak economy that rates are too high. They would like to see emphasis on reducing or constraining costs, and closing unnecessary or underutilized facilities.
It seems clear that Congress will be of no assistance in cost control. The best the postal service can hope for is that it doesn't impede the process. Perhaps Casey can help with the congressional interface.
However, over the longer term there must be an alternative to the current labor contract negotiation process. When faced with a similar downward spiral, the UAW and the automobile industry found a way to break out of the win/lose negotiation process.