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250 IRET Congressional Advisory 1 (2009)

handle is hein.taxfoundation/iretcgadv0247 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 4, 2009 Advisory No. 250 AN OUNCE OF PREVENTION IS WORTH A POUND OF CURE: A CAUTIONARY LESSON FOR THE U.S. POSTAL SERVICE FROM GREAT BRITAIN'S ROYAL MAIL Executive Summary In December 2008, the British and American governments issued major reports on their nations' postal services. The Hooper panel in the United Kingdom described Royal Mail as a behind-the-times enterprise that needs to invest more in automation but is hobbled by a massive pension debt. The panel recommended the government take over the pension liability (a taxpayer bailout) and that part of Royal Mail be sold to a private company to inject capital and provide greater business expertise. The leadership of Britain's Labour government supports the findings. In the United States, the Postal Regulatory Commission (PRC) examined the U.S. Postal Service's universal service obligation (USO) and postal monopoly. The PRC did not recommend any major changes, although it suggested that the USO remain flexible so that, if the need arises, the Postal Service can adjust the USO to keep mail service economical. Many factors contributed to the vote of no confidence in Royal Mail and the vote of confidence in the U.S. Postal Service. One major difference is that the Postal Service is not plagued by strikes. The Postal Service has also benefitted because it has been a leader among the world's posts in two key efficiency-enhancing areas: it has long invested heavily in automation, and it indirectly opened up much of upstream mail processing to competition a generation ago. The combination of global recession and electronic diversion is placing enormous strain on mail volume and revenue. A nonrigid USO will help the Postal Service cope. In addition, future mail service in this country will be stronger if Congress allows the Postal Service more flexibility in rationalizing its distribution network and more control over employees' wages and benefits. An incentive for Congress to permit this flexibility is that, as the comparison of Royal Mail and the U.S. Postal Service shows, modest reforms taken early can sometimes avert more drastic changes needed later. g~*I S I 66. 6 ~. Agg

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