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152 IRET Congressional Advisory 1 (2003)

handle is hein.taxfoundation/iretcgadv0149 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. April 9, 2003 Advisory No. 152 POSTAL REFORM BILLS THAT WOULD NOT DELIVER Executive Summary The government-owned U.S. Postal Service insists that it can only become financially healthy if it receives new powers to set postal rates with less regulatory oversight and to move more aggressively beyond its core market of non-urgent letter delivery. Two prominent legislative proposals that would give the Postal Service much of what it seeks are a series of bills known collectively as H.R. 22 that were introduced beginning in the mid 1990s, and a successor bill, H.R. 4970, that was introduced in 2002. Would legislation similar to these bills provide a sound foundation for postal reform? Now is a good time to ask. The President created a Commission on the U.S. Postal Service last December, and the Commission is scheduled to issue recommendations by the end of July. The Postal Service's financial problems are mainly due to its high costs, not restrictions on its rates or on expansion. Unfortunately, both H.R. 22 and H.R. 4970 virtually ignore the Postal Service's costs. One of the main reasons why the labor-intensive Postal Service has high costs is that it pays its workers much more than the same workers would earn in the private sector. Both H.R. 22 and H.R. 4970, however, promise not to touch the postal pay premium. If anything, the bills would make it harder to control labor costs by placing a union appointee on the Postal Service's Board. High labor costs could be made less burdensome by easing restrictions in current law that limit postal worker productivity, but neither bill contains pro- productivity reforms. Nor does either bill include reforms for reducing the Postal Service's nonlabor costs. Expansion and greater price setting power are questionable in any case and particularly ill- advised when dealing with a government agency burdened with cost problems. A more fruitful legislative approach would be to ease various provisions in current law that push the Postal Service's labor costs above those for comparable work in the private sector, increase its nonlabor costs, and hold down its productivity. Bills like H.R. 22 and H.R. 4970 would almost certainly fail to meet their objectives of strengthening the Postal Service financially while keeping postal rates low. g~*I A3~ S I gg~ 6 Ae ~6I

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