June 29, 2016

The Honorable Jason Chaffetz
Chairman
Committee on Oversight and Government Reform
2157 Rayburn House Office Building
Washington, D.C. 20515

The Honorable Elijah Cummings
Ranking Member
Committee on Oversight and Government Reform
2157 Rayburn House Office Building
Washington, D.C. 20515

Dear Chairman Chaffetz and Ranking Member Cummings,

On behalf of the more than one million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I applaud Chairman Chaffetz and Ranking Member Cummings for their commitment to reforming the United States Postal Service (USPS). I urge the committee to identify and implement reforms that will ensure the financial stability of the USPS in the near term and move the agency away from its current status as a government-owned monopoly enterprise and toward full privatization. While these comments are preliminary and abbreviated, we look forward to offering more in-depth recommendations as the legislative process unfolds.

Since 2007, USPS has accumulated net losses of $56.8 billion and reached the $15 billion borrowing ceiling with the U.S. Treasury. The agency has recorded these abysmal results even though it has an estimated $18 billion in special congressionally-conferred advantages, including preferential borrowing rates with the U.S. Treasury; exemptions from state and local sales, income, and property taxes and fees; the power of eminent domain; monopoly control of ratepayers’ mailboxes, and the legal authority to regulate its own competitors in the private sector.

CCAGW is concerned with provisions in the bill that would solidify the USPS’s ill-advised forays into competitive nonpostal ventures and establish a new Chief Innovation Officer, who would be authorized to oversee implementation of new postal and “nonpostal products and services.”

These provisions would codify the USPS’s wasteful and inefficient tendencies to dabble in areas of business where it has no expertise, and which are already well-served by private-sector companies. This trend toward chasing new revenues has needlessly distracted USPS management from undertaking the necessary steps to right-size its bloated labor force, increase productivity, and consolidate its facilities. Since the USPS has failed to achieve satisfactory delivery of mail, it should not be permitted to handle other services.

CCAGW also questions the advisability of shifting USPS’s retiree healthcare costs from its current plan to Medicare, by forcing all past and future retirees to enroll in Medicare at age 65 (or retroactively for those older now), since Medicare is the “primary payer” for retirees over age 65 and would be required to pay most medical costs for these retirees.

This provision, like the original 2006 decision to mandate that the USPS pre-fund its retirees’ healthcare benefits, appears to be nothing more than an actuarial gimmick. Not only is this a quick fix that would do nothing to address the USPS’s long-term structural instability, it would also substantially and materially place new fiscal burdens on Medicare spending, which, according to the 2016 Medicare Trustees’ Report, is expected to grow from 3.6 percent of GDP today to 5.6 percent by 2040. The Medicare Trust Fund is now estimated to be insolvent by 2028, at which point it will only be able to pay 87 percent of benefits.

While the USPS has benefitted from a first-class mail monopoly worth $18 billion annually, it has also been blocked from realizing efficiencies by congressional micromanagement and an inherently broken business model, according to the Government Accountability Office. Reform legislation should emulate the model of numerous European countries, which have modernized their mail systems through partial or full privatization.

CCAGW very much appreciates the Chairman’s and Ranking Member’s commitment to enacting postal reform. Such serious efforts are long overdue. While this draft legislation is the first step on a long road, CCAGW respectfully urges the committee to fully examine the benefits of privatization and include provisions in the final bill that will enable the USPS to evolve into a highly efficient, flexible, profitable, and innovative private-sector concern that benefits national postal stakeholders, as well as taxpayers.

Sincerely,

Thomas Schatz
President