February 19, 2013

Cornell Professor Testifies Before Congress on USPS Crisis

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As the future of the United States Postal Service, wreaked by financial crisis, hangs in the balance, leading economists — including a Cornell professor — testified before Congress Feb. 13 to propose reforms that could stabilize USPS’ finances.

USPS is facing a “critical shortage” of revenue, having seen its revenues drop nearly $40 billion and its total volume of mail decline by 25 percent since 2006, according to the U.S. Government Accountability Office.

In his testimony before Congress, Prof. Richard Geddes, policy analysis and management, proposed a two-step solution to USPS’ financial crisis: corporatization and commercialization.

Corporatization would allow USPS to restructure itself to resemble a “large private corporation,” Geddes said.

“That means having a Board of Directors instead of a Board of Governors, having board members who have private sector experience rather than political appointees [and] allowing the board to compensate senior management more in line with private sector standards of compensations, which are higher,” he said.

Additionally, by commercializing USPS — abolishing its monopoly on the postal service industry — Congress could help USPS evolve and become more “entrepreneurial,” Geddes said.

Pointing to the government’s “heavy regulation” of USPS’ prices and products, Geddes said that the service is currently struggling because it is unable to make important financial decisions on its own.

“[USPS] can’t just venture into new markets the way a private firm can,” he said. “Also, its service quality is highly regulated, and it is not free to set the frequency or speed of delivery the way a private company would be.”

Geddes added that many other countries have already successfully implemented these kinds of postal reforms, including the Deutsche Post, the Dutch Post and the New Zealand Post. Additionally, all 27 countries that are members of the European Union have repealed their postal monopolies.

“Virtually every post in the world that is in a developed country that I am aware of has undertaken postal liberalization, which frees up their postal service. The U.S. is last in terms of taking serious postal reform,” Geddes said.

He said that in addition to battling heavy regulations, the USPS has also struggled to adapt to electronic communication and online transactions, which he said have contributed to a rapid decline in postal revenue.

“People aren’t sending as many letters as they used to, and I believe that this because of e-mail, phone, fax and other electronic substitutes to sending a letter,” Geddes said. “This electronic communication revolution is just as big in terms of its impact and scope as the industrial revolution was. The Postal Service either needs to adapt to that revolution, or it will disappear.”

Besides seeing a decline in the use of first-class mail, Geddes said that the Postal Service has suffered financial losses due to a decrease in billing services.

“People feel comfortable paying bills, banking, and sending messages to individuals online,” he said. “Utility bills used to be a big part of the Postal Services’ revenue, but people are increasingly comfortable to just let the utility debit their monthly charge from their accounts.”

Geddes urged Congress to help reform the USPS for the sake of the service’s immeddate survival and long-term stability.

“The U.S. Postal Service has an enormously valuable asset in its universal delivery network that has been constructed over decades. That asset deserves to be managed as effectively as possible. These reforms … will ensure that the Postal Service remains a sustainable, vigorous institution for decades to come,” Geddes said in a University press release.

Original Author: Lauren Avery