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147 IRET Congressional Advisory 1 (2003)

handle is hein.taxfoundation/iretcgadv0144 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. February 5, 2003 Advisory No. 147 CHALLENGES AND OPPORTUNITIES FOR THE PRESIDENT'S POSTAL COMMISSION Executive Summary As a result of the U.S. Postal Service's financial problems, the President recently appointed a commission to examine the organization and offer suggestions for change. The commission will be best positioned to make useful recommendations if it recognizes that the U.S. Postal Service is in financial difficulty now - as it has been during most of its existence - because its costs are high. Proposals that concentrate on better cost management would be very helpful. Some recommendations might be directed at the Postal Service's current business practices, but the commission should also look carefully at the many political constraints that sharply raise the government agency's expenses. Although the Postal Service often cites its weak bottom line as justification for both expansion and less regulatory oversight of postal prices, the commission should be skeptical of such arguments. Trying to solve a government agency's money problems by letting it become bigger and more powerful instead of better controlling its expenses is contrary to the public interest. The Bush Administration has performed a valuable service in appointing a Presidential commission to examine the U.S. Postal Service. The commission's purpose is to formulate recommendations that will ensure the efficient operation of the organization while minimizing the financial exposure of the American taxpayers.1 As is typical of government enterprises, the Postal Service has lost money during most of its existence. Its financial and operational problems were much worse, however, before the suggestions of an earlier commission. The 1968 Kappel Commission provided a framework and helped build a consensus for reorganizing the old Post Office Department as the Postal Service. The Administration's hope is that a commission will once again offer useful ideas leading to significant improvements. In the first meeting, commission members sensibly began by asking the Postmaster General and the Postal Service's Chief Financial Officer where they thought recommendations from the commission would be most helpful. For the new commission to play a constructive role, however, it will need to focus on where the Postal Service is weakest - its costs. A telling example is that the Postal Service says its costs are 24¢ when it sells one dollar of stamps at a post office counter, but that its expenses drop to 100 when the stamps are sold at a contract postal unit and only 1.6¢ when the stamps are sold at a supermarket.2 Why is providing service at a post office counter so expensive? Here and elsewhere, the commission should look for ways to lower costs and bolster productivity. a~em A * * gg~ ~ ~gg

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