We Have Been Misled About Reform

We have been misled in the current debate over postal reform.

There are several ways to have been misled. One is to have been led in the wrong direction. Another is to have been deceived. Both of these occurred during this summer’s postal reform activities.

First, let’s review the mislead that amounted to pure deception. Postal reform legislation got a kick-start with last year’s submission of the report from the President’s Commission on the Postal Service.

When postal legislation was proposed, the mailing industry made clear to congressional representatives that though it favored reform legislation, it had two more immediate concerns. One dealt with the need for a reduction in the overpayment that the U.S. Postal Service was making into the federally controlled Civil Service Retirement System pension plan. The second was that the USPS was being held liable for pension liabilities that postal service employees accumulated while they were members of the military.

Mailing industry concerns prompted a bargain. Industry and congressional representatives would do all they could to get reform legislation through the committee(s) and on to the floor of both houses of Congress. They further agreed that if the legislative process should falter, both sides would shift gears to resolve the pension issues. These pension issues are financially significant. Without a successful resolution to both issues, an estimated 5 cents could be added to the next postal rate increase, which is expected in spring 2006.

It has been obvious for several months that reform legislation was unlikely to pass Congress. First, Sen. Don Nickles, R-OK, has refused to let a bill reach the Senate floor. His reasons: The bill would increase the federal budget deficit, and he has been fighting with Sen. Susan Collins, R-ME, chair of the Governmental Affairs Committee. In addition, as an election year, it is a shortened legislative session, leaving less time for bargaining and reconciliation.

When it became clear that final legislative action was remote, mailing industry representatives, instead of reverting to the original strategy of pursuing pension reform, kept pushing the reform legislation.

Why did they stubbornly keep pursuing reform instead of trying to solve the more immediate mailing industry problem of a higher-than-expected postal rate increase? Some are even still trying to push the reform agenda. Why? Beats me. But this is a question that the mailing industry needs to ask its representatives.

Now on to the second major instance of being misled, in this case by being led in the wrong direction.

From the start, it was clear there were different thoughts as to what reform legislation should contain. Concepts were put forth by the president’s commission, the mailing industry and postal labor unions. Ultimately, each house of Congress produced its own bill. As is usually the case, negotiations began among Washington-based mailing industry representatives, labor unions, postal service representatives and congressional staffers.

The goal was to see whether all parties could agree on a common bill to move it forward in the legislative process. Many meetings were held. But what emerged is a compromise bill that from this reader’s perspective would do little to help ensure the postal service’s future. It contains no relief from the $1 billion-a-year workers’ compensation expense. No weapons to address the continued loss in First-Class mail. No incentives, in terms of salary or bonus provisions, to motivate senior management. On whose behalf were mailing industry representatives negotiating?

The major element of the consensus bill lets the USPS raise rates annually up to an inflation index with minimal regulatory oversight. This component won’t be of much help if First-Class mail continues its slide. Indeed, the Federal Reserve seems to think the reduction in check-based financial transactions will continue.

These transactions are the underpinning of USPS volume. The Fed has announced that by early 2006 it will reduce its check-processing sites from 45 to 23. According to the Fed, check-processing volumes fell 7 percent last year, are down more sharply this year and are expected to continue to decline in coming years.

Clearly what is needed is a bill that actually accomplishes something. The current bill is not it.

It appears Congress and the administration have lost interest in the USPS. For example, Dawn Tisdale, the Democratic Party’s nominee for a seat on the Postal Rate Commission, is clearly unqualified, given his lack of regulatory experience. Furthermore, the Board of Governors at full force has nine members. With the death of Albert Casey, membership is down to six. David Fineman’s term is up in December, and James C. Miller III is serving via a recess appointment. If no appointments are made before the end of the year, we’ll be down to four appointed members. Does anyone care?

If a tree falls in the forest and no one hears, does it make a noise? If sometime in 2005 the USPS proposes a 45-cent First-Class stamp, surely noise will be heard.

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