Reform Must Tackle the Issue of Costs

There is an old saying that is roughly paraphrased as “give a man a hammer, and everything he sees is a nail.” In my view, the basic problem in the development of the postal reform legislation relates to that saying.

The majority of the people in both Congress and industry developing the so-called reform legislation have spent most of their careers dealing with regulations, either writing them, enforcing them or running trade associations in industries with a regulated monopoly, like the U.S. Postal Service.

As a result, the legislation is just full of regulations involving the postal service’s ratemaking process. Concerns for the survival of the USPS based on rising labor costs and declining mail volume are the issues that caused the creation of the President’s Commission on the U.S. Postal Service. These fundamental issues are not dealt with in the reform legislation that has been introduced. Instead, industry and congressional staff appear focused on micro-level issues such as how costs should be attributed to the subclass level.

The No. 1 issue that reform needs to address is postal costs – not how they get attributed.

It’s often useful when contemplating legislation to ask what might have happened had the proposed legislation been in place for the past few years.

The last postal rate increase occurred in June 2002, and it averaged about 10 percent. According to postmaster general John E. Potter, the next increase will take place in 2006, probably in the first quarter. So, we will have almost four years of rate stability.

Since the last rate increase, permanent employment has been reduced by almost 50,000, and total employment, including casual and transitional employees, is down more than 100,000. This reduction results from a tough, demanding management approach and the realization that the alternative would have been a highly contentious rate increase.

Alternatively, the reform legislation would have given us annual rate increases at roughly the CPI increase level. More importantly, it would have removed any pressure on the postal service to reduce staffing and cut costs. Also, those higher rates would have driven mail volume even lower.

Is this proposed reform legislation an alternative that makes sense?

At a recent luncheon in New York, the head of the largest direct marketing trade association said they were not “completely satisfied with [the 2004 bill].” It sounded like he thought that some tweaking was all that was needed to make it a good bill.

It’s unfortunate that there has yet to be any real industry debate on the merits and demerits of the legislation. Perhaps the most surprising element of this non-debate is the relative silence coming from the USPS on reform. Sometimes it seems that the postal service is merely an interested bystander in this legislative endeavor. I suspect the USPS has been making its position known privately, but there has been little in the way of public pronouncements on its position.

Perhaps that lack of public pronouncements will change. At its most recent meeting, the USPS Board of Governors elected Jim Miller as chairman. Miller has been on the board since April 2003. He has an impressive resume of government service. Miller was Federal Trade Commission chairman from 1981 to 1985, and from 1985 to 1988 he was director of the Office of Management and Budget and a member of President Reagan’s cabinet. Miller, who is well known for his conservative political views, makes periodic appearances on TV programs to discuss various issues.

Given Miller’s almost two years on the board, he should be well versed in the problems the USPS faces and the legislation needed to help overcome them. Miller is an articulate spokesman, and it should be his responsibility to tell us publicly what the board believes to be the postal service’s problems and to give us its view of the legislative solution being considered.

Congress is now back in session, and postal reform legislation has been reintroduced, so we anxiously await Miller’s first public statement on the subject of reform.

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