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194 IRET Congressional Advisory 1 (2005)

handle is hein.taxfoundation/iretcgadv0191 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. October 20, 2005 Advisory No. 194 DISAPPOINTING NEWS (IN A HAND-DELIVERED LETTER) FROM THE POSTAL SERVICE Executive Summary In a September 13 letter, the Postal Service's Board of Governors informed Congress that the government-owned enterprise objects to H.R. 22 and S. 662 (both entitled the Postal Accountability and Enhancement Act) in their current forms. The bills would significantly change the laws under which the Postal Service operates. Ironically, the legislative effort had been spurred on by the Postal Service itself, which claims it needs more discretion and less regulatory oversight in setting its prices. The letter came as a surprise because the Postal Service is only now objecting to an important component of the bills after years of debate. The bills would give the Service greater flexibility in the rate-setting process, while opening up to regulatory oversight other aspects of the Service's operations. The Postal Service now declares that, for good governance, the regulator's authority should not extend beyond limited rate regulation. The Postal Service also believes it should not be held firmly to an inflation-based rate cap. For comparison, private-sector businesses in regulated industries are normally subject to broader regulatory oversight than the Postal Service wants, and when rate cap regulation is instituted, the cap is usually firmer than what the Postal Service deems acceptable. The changes the Service claims are essential are not needed and would violate important reform principles. The broadened scope of regulatory oversight contemplated by the drafters of H.R. 22 and S. 662 is one of the bills' best features. In contrast, the weak and narrow regulation that the Postal Service desires would largely undo the checks and balances built into H.R. 22 and S. 662, and would offer less transparency and accountability than does current law. The Service strongly disagrees with the Administration's position that when the escrow fund created by 2003 postal pension legislation is abolished, all the monies released should be used to begin paying down the Postal Service's unfunded obligation for retiree health-care costs, which is now about $65 billion. The Administration's plan, however, would better serve the long-term interests of mail users and taxpayers. One vital point on which the Service is correct, and probably should have been more forceful, is that it needs better cost-control tools from Congress if it is to succeed in its mission of providing high-quality mail service throughout the nation at reasonable cost.

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