This is a repost of my column at Heartland Institute’s Fiscal Times from July 6th regarding the USPS toying with the idea of moving into banking services.
Also, see my prior article from June – New York Lawmakers Consider Snuffing Out E-Cigarettes in Public, Private Buildings
The U.S. Postal Service’s (USPS) watchdog is suggesting the quasi-governmental agency enter the banking industry in hopes that taking up the role of private banks would “benefit Americans and generate much needed new revenue.”
In addition to its primary services of delivering mail, USPS provides financial services such as domestic and international paper money orders, international remittances, open- and closed-loop gift cards, and limited check cashing.
In fiscal year 2014, USPS spent $5.5 billion more than it collected in revenue, and it is currently defaulting on pension payments to retirees.
Doubling Down on Failure
Brian Wise, senior advisor to the U.S. Consumer Coalition, says USPS is doubling down on a failed business model.
“This is an agency that should not be assuming any more risk right now,” Wise said. “Banking services are already taken care of by the free market. The last company one would want to invest in is one that is not profitable. The USPS is the last place any customer is going to go.”
Who Watches the Postmen?
Allowing USPS to crowd out private banks is a very bad idea for consumers and taxpayers alike, Wise says.
“They can set very low prices to clear out the competition in favor of its own products,” Wise said. “That’s a huge violation of the public trust. When the USPS becomes insolvent, any financial debt incurred will have been guaranteed by the Treasury. This is sort of a giant bailout scheme.”
‘Ducking the Issue’
Rick Geddes, an associate professor of policy analysis and management at Cornell University, says USPS should get serious about making reforms.
“Services at the USPS have been in decline for over 14 years,” Geddes said. “Things like this are ducking the issue of what is needed: comprehensive postal reform. They’re losing billions each year, and we’re setting them up to lose more money. The postal service needs fundamental reform.”
“They’re saying that with these offerings they will compete with private industry, but they’ll cross-subsidize their services by using revenue from the new ventures,” Geddes said. “By using some of their monopoly services profits, they could unfairly subsidize areas where they face competition.”