USPS Response to Lexington Institute’s “Getting the Details Right” Article

How ironic, that in his article for the Lexington Institute on “Saving the Postal Service requires getting the details right,” Don Soifer doesn’t get much right at all.

Contrary to his assertions, the Postal Regulatory Commission, the oversight body tasked by Congress with reviewing the matter, has concluded every year that products covered by the letter monopoly do not cross-subsidize the Postal Service’s competitive products. The reason we continue to attract e-commerce customers and grow our package delivery business is not because of unfair competition with private carriers, as Mr. Soifer alleges, but because customers increasingly see the value of our predictable service, enhanced visibility, and competitive pricing.

The Commission has also noted that competitive products help fund the infrastructure of the Postal Service. It is that infrastructure that enables us to fulfill our universal service obligation to deliver to each and every address in the United States, six days a week, and to provide to every American mail delivery no matter where they live, at an affordable rate. Absent the critical revenue provided by our package business, senders of letters and other types of mail would have to bear the entire cost burden of this infrastructure.

Despite what Mr. Soifer would have you believe, the costing approach currently in place is consistent with best economic practices, by only attributing costs to an individual product if that product actually caused the cost to be incurred, rather than using arbitrary methods. The Postal Service has a large amount of common costs because we provide multiple products across a nationwide universal service network. These costs are not simply “overhead,” rather, the bulk of these costs are incurred because of the universal service obligation.

Mr. Soifer also criticizes the Postal Service for not making annual payments to prefund retiree health benefits. What he doesn’t tell you is the reason why. It’s because we didn’t have the money needed to make those huge payments required by a 2006 law. These large payments would be unnecessary if the Postal Service would be allowed to fully integrate its retiree health plans with Medicare, as every private sector entity that provides retiree health benefits coverages does. This issue is something that new postal reform legislation, H.R. 756, addresses, along with other important provisions to provide the Postal Service with a more sustainable business model.

The Postal Service’s financial situation is serious but solvable. Continued innovation and aggressive management actions together with the passage of the provisions of H.R. 756 into law and a favorable outcome in the Postal Regulatory Commission’s 10-year review of the Postal Service’s pricing system will restore the organization to financial stability and allow us to continue to provide excellent service to the American public.

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