Testimony on “Toward a Financially Viable Postal Service”

by Sabrina I. Pacifici on October 13, 2013

September 26, 2013, Testimony by Dean Baker [Center for Economic and Policy Research] before the U.S. Senate Committee on Homeland Security & Governmental Affairs:

“For the last four decades the Postal Service has been operating with a mandate under which it was expected to compete with private companies. The expectation has been that the Postal Service would be able to support its operations without the benefit of government subsidies. However, few intended for it to compete with private corporations while facing unique burdens that its private competitors do not share. In fact, this is exactly the situation that the Postal Service now faces, first and foremost because of the requirement that it invest its pension fund and the RHBF exclusively in government bonds rather than a diversified portfolio. (Arguably the Postal Service has been restricted in its ability to enter new lines of business. Given the enormous nationwide delivery system it has in place, this restriction is a considerable handicap.) The restriction that the Postal Service retiree funds be invested exclusively in government bonds puts the system at major disadvantage compared with its private competitors since it requires the Postal Service to spend much more money to provide the same benefit. One of the Postal Service’s competitors, UPS, does in fact offer retiree benefits and is able to do so at a much lower cost than the Postal Service as a result of its freedom to invest in a diverse range of assets. However even if no competitors offered comparable benefits this rule would still put the Postal Service at a disadvantage since it means that it must make payments that private businesses would not be required to make.”

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