The United States Postal Service has lost $69 billion over the past 11 years and has $143 billion in unfunded liabilities. Its financial performance has not exactly been inspirational.
Yet some members of Congress, including those senators also running for president, such as Kirsten Gillibrand of New York, Bernie Sanders of Vermont, and Elizabeth Warren of Massachusetts, are still talking about expanding the scope and mission of the USPS to include banking services. It makes no sense for an agency that is so deep in debt to be given the responsibility to handle anyone else’s money.
The president’s postal service task force concluded that an agency with such limited expertise and capital should not expand into any new business, such as postal banking, where it does not have either competence or advantage, or where there is a risk of additional financial exposure. When the USPS inspector general suggested in January 2014 that the agency could provide financial services, the USPS responded by noting that its “core function is delivery, not banking.” A postal bank would hurt consumers and taxpayers by undercutting well-regulated, private financial intuitions and undermining the fundamental role of the postal service.
A failing federal agency should not enter and disrupt a private industry that is already competitive and efficient. The national market-driven, merit-based banking system operates much differently and yields far fairer results than would a politically driven operation.
Even with its massive losses and debt, the USPS retains significant financial advantages over the private sector. The agency does not pay taxes on its income or capital gains on the sale of its assets. It has access to $15 billion from the U.S. Treasury at preferential rates, which it has tapped out. The value of the benefits from its monopoly status and government subsidies has been estimated at $8 billion annually, which confers an unfair advantage in competing against private financial institutions. It is also unclear if the USPS would be held to the same financial standards as banks, which could potentially politicize lending and weaken credit standards.
Government agencies are constantly seeking to expand their powers, making it likely that once the USPS gets into banking, it will seek other powers as well. The state of the USPS is all the proof needed to demonstrate its inability to carry out the integral, lifeline service of banking, much less survive in an already highly competitive market.
A key argument behind the push for postal banking is that it would allow greater reach to an “underserved” market. This idea is laughable. There is no reason to believe people would trust the USPS over alternative financial institutions. In fact, its reputation for service and its financial condition would likely create distrust that it could handle anyone’s money.
The so-called underbanked are either unbanked (6.5% of U.S. households) or underbanked by choice, not for a lack of access to banking institutions. Not only is there no national “unbanked” crisis, there are also tens of thousands of private sector entities that have the competency and ability to reach all Americans.
Regarding the mistaken idea that the USPS can provide greater geographical reach than existing banking institutions, the 31,324 USPS branches come to about one-third of the 88,646 retail bank branches, and less than one-tenth of the 475,000 ATMs nationally, which perform the same services that the postal bank proponents are seeking. Additionally, nonbank financial services companies such as Western Union operate across the nation and are often strategically placed in low-income areas to better ensure service for the so-called underserved.
The USPS has been slow to address the agency’s long-standing structural problems. It should be seeking ways to modernize its broken business model, rather than seeking to enter other business sectors outside its core competency. It would be both counterintuitive and just plain dumb to give this already-failing federal institution wider latitude to infringe on the private market for financial services.
Ted Budd, a Republican, represents North Carolina’s 13th Congressional District in the U.S. House. Tom Schatz is president of Citizens Against Government Waste.
