Give the USPS an Incentive to Succeed

THESE ARE CHANGING-and sometimes troubling-times. The grand scheme of postal things that we’ve come to know since the 1970 legislative reorganization is evolving at an unparalleled pace. The way America does business is being transformed by an electronic communications revolution that has had an impact no one could have predicted.

Just five years ago, the primary means of networked communications among computer users was the bulletin board system. Most e-mail was exchanged by PC users via a voluntarily operated internetworked system of bulletin boards called FidoNet. Five years ago, Mosaic-the first graphical World Wide Web browser-didn’t even exist. Four years ago, Netscape Navigator made its first appearance. Today, Web-related software is an integral part of desktop computer operating systems.

Businesses are no longer dallying with the Internet as a plaything. They’re in a race with competitors to turn the Web into a viable and profitable tool of commerce. Banks, mutual fund companies, stockbrokers, insurance companies, mortgage lenders, real estate brokers and other financial intermediaries are moving to make the Web a secure place to conduct sensitive financial transactions among businesses as well as consumers.

But despite all this, mail still is an important part of the American economic infrastructure, and will probably remain so for the foreseeable future. We can talk about wiring America all we like, but such a scenario still won’t match the mail’s universal reach.

Unfortunately, some people take solace in a statement like that. They tend to misinterpret it to mean the U.S. Postal Service faces no crisis because mail will always exist.

What these observers forget is that the USPS is a government institution that operates within a legislative and regulatory framework that never provided the kinds of incentives driving competitive, private sector businesses. As a result, postal employees aren’t motivated to contain costs and maximize gains.

Since the USPS is structured by law to operate on a break-even basis, maximizing gains isn’t even possible. Furthermore, while former postmaster general Marvin Runyon had some success in moving his people to really think about costs, encouraging economically rational behavior can be difficult when the financial rewards for cost-efficiency are inadequate.

Unless there’s substantive legislative change, the USPS is destined to collapse financially without taxpayer subsidy. That’s a destiny no one should find acceptable. For sure, Congress won’t. Its reaction to such a circumstance is likely to be less than calm, deliberative decision-making. The system it subsequently creates likely will be fraught with a level of instability and uncertainty that no mailer would deem satisfactory.

Recently, House postal subcommittee chairman John McHugh brought forward the latest version of his postal legislative reform bill. A key facet of McHugh’s measure is his proposal of price caps.

These so-called caps set out an area of pricing and regulatory discretion the postal service can enjoy if it attains certain goals pertaining to its operation. The caps can provide the means to create real financial incentives for productive postal employees. At the same time, they’ll define a threshold for requiring the postal service to endure regulated ratemaking as well as the embarrassment of having to undergo such pain because of its failure to operate cost-efficiently.

Government bureaucracies (including the USPS) respond to incentives that are different from those in the private sector. For a government official, minimizing political pain often is more important than maximizing other kinds of pleasure. The pain a bureaucrat wants to avoid is public embarrassment and the strictures of intense oversight and regulatory review.

McHugh’s proposal provides some of the incentives the postal service desperately needs to help it operate in a fiscally responsible manner. The measure may not be perfect in the eyes of many beholders. But when you look at the big picture, enactment of the bill is far preferable than leaving things as they are.

Everybody had better think through how they intend to react to this measure. If people behave as in the past and insist the bill be crafted to favor their way alone, the disaster everyone says they want to avoid will be inevitable.

The U.S. Postal Service backed the production of “The Inspectors,” a TV movie about postal inspectors who track down a mail bomber. The film’s debut last month on Showtime was not without controversy. According to published reports, watchdog groups feel the funding makes it a quasi-infomercial.