PRC Commissioner Compares USPS Financial Woes To Banking Industry

 Below are excerpts from the dissenting opinion of Postal Regulatory Commission member Ruth Goldway



The First-Class Mail prices proposed by the Postal Service fail to comply with the statutorily imposed workshare requirements of 39 U.S.C. § 3622(e), when analyzed under the established analytical methodology. To circumvent this problem, the Postal Service employs a different analytical methodology, which effectively delinks singlepiece First-Class Mail prices from presort First-Class Mail prices. This unilateral decision on the part of the Postal Service is far reaching in that it directly influences the design of economically efficient rates, the distribution of hundreds of millions of dollars in workshare discounts, and potentially could lead to Postal Service decisions that place an unequal, and potentially unfair, price burden on single-piece mailers. I believe that major methodological changes should not be made in a vacuum without thorough
review, including the consideration of the view of those that use the mail.

It strikes me that there are close parallels between what is happening to the Postal Service financially, and what has been happening to the banking industry. The banking industry was given wide discretion to lend how and on what terms it chose. The assumption was that this was safe because the managers’ discretion would be bounded by certain basic principles (e.g., that investors would have knowledge of the kind of securities marketed, and the risks would be publicly known either through an SEC filing or prospectus) and accountability would be provided by a diligent board of directors.

It is now clear that these basic principles and institutional safeguards were allowed to become mere window dressing. I fear this to be the direction in which postal regulation is headed. Congress intended that there be a certain economic “rhyme and reason” to both class prices and product discounts; hence, provisions such as section 3622(c)(2) (attributable cost floor) and section 3622(e) (discounts match avoided costs). Are these on the way to becoming window dressing? The uneconomic approach to rate setting can be a factor contributing to the Postal Service slide into financial distress. If the Postal Service is to be excused again for violating 39 U.S.C. § 3622(e), the reasons given must be carefully chosen so that the Postal Service, and the postal community, do not get the impression that there is not now, and never will be, any enforceable standard for workshare pricing.
PRC decision