The Postal Third Rails

As many people know, the third rail in a subway system is the one that’s electrified to provide power to the train motors; touching it would be fatal.  In politics, a “third rail” is an issue that’s equally dangerous and that, if tackled by a politician, can be fatal to the person’s political career.  Changing the social security system is often cited as a “third rail.”

The USO

Regarding the Postal Service, the “third rail” is the Universal Service Obligation and all the issues that relate to it, including the agency’s business model, funding, and operations.  The USO is often defined to mean providing postal service to all places in the country and delivering mail to all addresses six days a week.  That shorthand reflects the opening sections of the statute (39 USC 101) defining postal policy:

“a) The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people.  The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people.  It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities.  The costs of establishing and maintaining the Postal Service shall not be apportioned to impair the overall value of such service to the people.

“(b) The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining.  No small post office shall be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services be insured to residents of both urban and rural communities. ...

“(d) Postal rates shall be established to apportion the costs of all postal operations to all users of the mail on a fair and equitable basis. ... ”

Constituencies from rural citizens to nonprofit mailers to the postal unions and advertisers all have a vested interest in the USO, so therefore do politicians solicitous of the support of one or more of those groups.  In turn, any tinkering with the USO, or one of the issues closely associated with it, risks offending a constituency, and so is seen as a third rail by politicians – one of what’s actually a whole set of third rails.

What’s becoming apparent, however, is that, while the USO is a wonderful concept, it’s somewhat outdated and misaligned with the practical reality of the environment in which today’s USPS operates and finances what people want.

1970

After labor disruptions in the late 1960s, Congress passed the 1970 Postal Reorganization Act, the source of the statutory language cited above.  It replaced the Post Office Department with the US Postal Service and established the Postal Rate Commission.  The new USPS was to support itself with postage revenue and, unlike the POD, without significant support from taxpayers.

Obviously, America then was a lot different than America is fifty years later.  Laptop computers, cellphones, the internet, email, and e-commerce were in the future; letters, catalogs, magazines – paper mail – was how people communicated.  From the ‘70s well into the next century “mail happened,” but since the peak in 2007/2008, hard copy mail volume has been deflating steadily as the Postal Service’s social, economic, and operating environment changed.

Some adjustment to the USPS was made in the 2006 postal reform law, such as changing the rate-setting process and splitting competitive and market-dominant products (as well as imposing new costs), but the USO remained unaltered, if not effectively revalidated.

Fish or fowl

There’s always been an implicit contradiction in the USO, fundamentally between a service-based mission and more business-based expectations for the cost management and efficiency that translate into postage rates.  There’s nothing wrong with thinking like a business or thinking like a service, but trying to do both is inherently conflicted and very difficult to accomplish consistently.

One reason might be that service and efficiency need objective (e.g., businesslike) evaluation – of the demand for and value of a service, of the cost to provide it and, in turn, of whether customers will see that value as sufficient to warrant covering the related costs (by paying the established price).  Of course, that evaluation is heavily influenced by not just the specific service and its costs but by who is benefitting from or using the service, and who’s paying for it.

The USO’s mandate to provide pervasive and uniform postal services – traditionally a physical retail presence and universal delivery – runs squarely into the question of whether either or both can be provided efficiently, i.e., can customers be provided those services at a price they’re willing to pay.

Reality

Surveys regularly report that Americans see the Postal Service very positively – it’s the best-liked and most trusted federal agency, saying that perhaps because they like their mailman or are satisfied that their letters are safe from being stolen or read by others.  An August 31 Washington Post/University of Maryland/Ipsos poll, reported in the Washington Post on September 28, found that 72% of respondents rated USPS service as “excellent” (22%) or “good” (50%), down from 74% (26/48) in April 2019.

Not surprisingly, respondents also want the USPS to be a service, not a business.  The poll asked “Which comes closer to your view about the US Postal Service, even if neither is exactly right? It should be run like a business, even if that limits the services it provides [or] It should be run like a public service, even if that costs the government money.”  Some (32%) preferred a business, but most (66%) opted for a service; 2% had no opinion.

Interestingly, only 59% said they mailed something at least weekly; 12% said they send mail once a year or never.  Regarding slower mail service, as has been widely decried in the media, most respondents either didn’t notice or found it only a minor problem.  Of course, these superficial questions didn’t get to the nitty-gritty questions, such as:

  • Would you object to getting mail delivery of letters and flats only five days per week, with parcels delivered seven days a week?
  • Would you be inconvenienced if your nearest post office was ten miles or more away?
  • Would you be able to conduct postal business online?
  • Would you accept a dedicated fee or tax to support the USPS?

Questions such as those would be answered very differently depending on a variety of factors related to the respondent.  Losing a delivery day would be perceived differently by an urban twenty-something than by a retiree; having no easily accessible post office would be viewed as more of a problem for people living in a rural setting than for suburbanites; and so forth.  Obviously, any change to the status quo will upset or inconvenience some constituency and, in turn, create a potential third-rail issue for a politician.

So, adding it all up, Americans, as a community, want the USPS to be a service providing essentially the same services as it does now, and to have it hardly without paying for it.

The bill

But this goes back to the original question of the USO and how its mandates can be provided “efficiently.”  Efficiency in one aspect – five-day delivery, for example – would be an unacceptable cut in service in another.

More important, aside from efficiency, is who will be paying for all of what the USO requires to be provided.  Americans only pay for what they mail; none of their taxes go to the USPS.  But, as noted above, people don’t send much mail anymore; anyone who sends even one letter per month is contributing only $6.60 per year to USPS costs, far less than it costs to provide them with delivery service and retail access.  The majority of USPS revenue is from commercial mail users – the clients of printing and mailing service providers, the same sources of most of what’s in the mailstream.

This leads to an ironic and, in some ways, unfair situation: the majority of the beneficiaries of what the USO requires are not equivalent contributors to covering the related costs.  In turn, given that those beneficiaries are typically individual Americans – voters – it’s likely that politicians’ actions (just as unfairly) reflect voters’ opinions rather than the perspective of the predominant postage ratepayers.

Avoiding the rails

Sanctioning reductions in postal services such as reducing delivery days for letters and flats or closing money-losing post offices (even if replacing them with contract operations) would be obvious third rail propositions, not to mention other actions like trimming the postage breaks for nonprofits, periodicals, and books, or mandating curb line or cluster box delivery.  So third-rail-avoiding politicians wouldn’t be inclined to go along with any such cost-reducing changes, notwithstanding their expectations for postal efficiency.

At the same time, making the federal government pay for what citizens want – which 66% said they’d accept – would be a third-rail for fiscal conservatives and any politician unwilling to be associated with higher taxes or additions to the federal budget’s list of expenses.

These circumstances support continuing the status quo: keeping citizens happy, avoiding third rails for politicians, and letting commercial mail users continue to pay the bills.

That plan might work if those users weren’t tired of paying someone else’s costs, and didn’t have ready access to avenues for content (or parcel) delivery outside the USPS – options many already are taking.

At some point, the flight of commercial mail users and the loss of their postage revenue will become so serious that the resulting financial condition of the USPS – still burdened with USO obligations and other financial mandates – will no longer be viable.  Would that mean that politicians would then, at last, have to tackle the third rails, face the hard choices to rationalize service and efficiency, and risk offending their constituencies? 

 

You’d think so, but don’t bet on it.

 

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