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267 IRET Congressional Advisory 1 (2010)

handle is hein.taxfoundation/iretcgadv0264 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. July 7, 2010 Advisory No. 267 THE POSTAL SERVICE ASKS TO ELIMINATE SATURDAY DELIVERY; CONGRESS STILL HAS QUESTIONS Executive Summary Since 1983, Congress has annually included a rider in appropriations bills requiring the Postal Service to deliver mail six days a week. This paper examines the main developments since early 2009, when the Postal Service requested authority to eliminate the sixth delivery day. * The Service has fleshed out the details of its five-day-a-week delivery plan. * It has updated its estimate of the expected net savings: $3.1 billion yearly based on 2009 data and $40 billion over the next 10 years. * The Service recently asked its regulator, the Postal Regulatory Commission (PRC), for an advisory opinion on five-day delivery, and the PRC expects to issue its findings in the Fall. * Plunging mail volume and huge losses in 2009 and 2010 intensify the sense of urgency. * Studies commissioned by the Service predict that a continuing mail volume decline and a shift away from highly profitable first class mail will produce monumental deficits over the next 10 years unless the Service implements major changes. A Government Accountability Office (GAO) study concurs that the Postal Service's current business model is not financially sustainable. * The Service has developed a 10-year business plan (the Action Plan) in which five-day delivery is a key element, expected to close about one-third of the residual 10-year deficit. The Postal Service has sensibly cast five-day street delivery in terms of trade-offs. Do the benefits of six-day delivery justify the costs? Would dropping Saturday delivery be less harmful than other policy alternatives? The Postal Service claims that five-day delivery would be among the least painful options for postal customers. Alternatives to five-day delivery are hiking postal rates or in other ways boosting revenue, cutting costs beyond the savings contemplated in the 10-year plan, deferring costs (a temporary measure), borrowing (another temporary measure), or obtaining money from Congress (ultimately taxpayers). The most attractive alternative, which would save more than enough to allow six-day delivery to continue, would be bringing postal wages and benefits more into line with those in the private sector and quickly rationalizing the Service's nationwide network of processing facilities. Congress did not allow the Service to eliminate Saturday delivery last year and will probably not permit it this year. However, unless mail volume rebounds strongly (a longshot but not impossible), five-day delivery may be a matter of when, not if.

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