Postal Service Financial Problems and Stakeholder Proposals

Publication Date: March 2002

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Transportation

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Abstract:

Even before the September 11 terrorist attacks and discovery of anthrax in the mail on October 5, the U.S. Postal Service (USPS) was in deep financial trouble. Although USPS froze 800 capital projects and instituted a second rate increase during the year to cut its losses for FY 2001 to $1.7 billion, there is a growing consensus that USPS faces a longer-term set of problems that place the preservation of universal service at risk. Some mailers foresee an "economic death spiral" of price rises leading to reduced mail volume, and requiring yet further price increases to cover the huge operating costs of the vast postal network, with 800,000 workers.

While there is widespread agreement that USPS has long-term problems, there is no consensus on their underlying causes. Some say that the business model of USPS is becoming outmoded as electronic communication grows. The board of governors blames an outdated regulatory regime and the lack of authority for USPS to control its prices, its wages, or its facility locations. Mailers point to low productivity, questioning whether USPS and its workers have appropriate incentives.

Previous attempts to "modernize" the postal enterprise through legislation have foundered on profound differences of interest among such stakeholders as large mailers, employees, competitors, and oversight bodies. It is likely, however, that any bills that do emerge will draw to at least some extent on proposals that have been maturing for a number of years.