"BIG WHEELS KEEP ON TURNIN'"...BUT ALL THAT'S BLOWIN' IS STEAM

The following is a postal perspective by PostCom President Gene Del Polito.

This, ladies and gentlemen, is the eleventh year in which the U.S. postal world has been involved in consideration of postal legislative reform. At this point, we're about where we left off in the last Congress, i.e., bills that seem to win bipartisan support at the committee level, but progress no further than that. This year, as was the case in the last Congress, there are two wild cards in play.

The first is the Administration, which seems steadfast in its position regarding the treatment of the CSRS escrow and the assignment of military-related costs to postal retiree obligations. The second is the U.S. Postal Service itself, which still appears reticent whenever the topic of postal reform comes up. The streets are filled with various tidbits of information ostensibly obtained from unnamed postal sources concerning the Postal Service's unhappiness with H.R. 22 and S. 662.

For the moment, though, let's forget the Postal Service's ambivalence about reform. Let's talk about the Administration and the approach it has taken thus far--particularly, its stance on elimination of the P.L. 108-18 escrow of funds and the military retirement issue.

The Administration's spokespersons have labored mightily to explain why stiffing postal customers with an additional pension liability is good public policy. It's been a lot of wind and water signifying nothing other than that they are not embarrassed about straining for a rationale that's beyond reason.

The fact is that no other federal agency has been subjected to the same treatment the Administration would give the Postal Service regarding prospective retirees' military service retirement credits. Plain and simple, the retirement money for other agencies' military service comes from the Treasury.

The USPS, and the USPS alone, has been tagged with the responsibility to pay for any postal retiree's military service, and the only rationale for that is the USPS raises money of its own which is ripe for the Treasury's taking. Why? Because only the Postal Service has cash-paying customers that are there for the milking. Talking about it in any other way is baloney.

Second, the imposition of a CSRS escrow was a political ploy intended to coerce the Postal Service into being more forthcoming about what it intended to do with the CSRS reform-related savings. Whatever the thinking may have been behind the escrow is now old hat. The reason for an escrow no longer exists.

Life in Washington doesn't stand still for anyone or anything. So, once the escrow was ordered for FY 2006, the USPS immediately began to plan how to satisfy the obligation until and unless Congress removed the requirement. When asked by OMB for its income and expense plans for FY '06 and beyond, the USPS, quite naturally, noted that rates would have to rise to cover the escrow obligation. When rates rise, federal income rises. When federal income rises, budgetary deficits look smaller.

Of course, the converse also is true. If you eliminate the need for the escrow, projected federal income falls and deficits seem to grow. In Washington's conservative political climate, rising deficits are a recipe for political disaster.

Consequently, when the sponsors of H.R. 22 and S. 662 signaled their willingness to "do the right thing" and get rid of the escrow and return military-related retirement obligations back to the Treasury, the Administration's folks blanched. The whole idea that income that had been booked (from a budgetary perspective) somehow might go away was a disaster at a time when budgetary deficits and federal debt were soaring out of sight.

There would be only one way to handle postal reform, the Administration's mantra became, and that was through some approach that would be "budget-neutral." In other words, the Administration already had decided to put its hands into the private sector's pockets, grab whatever spare change it could get, and justify as good policy the fleecing of postal users.

As political pundits like to say, the art of politics in Washington is the art of the "possible." Compromise, not confrontation, is the way to govern (so they say). Consequently, those who claim skill in this art began to preach of the need to be "reasonable," to stop demanding that the Administration reverse its posturing, and to swallow a bunch of political hot air served up in the guise of "good public policy."

Nonsense! Shifting new non-postal retirement obligations to postage-paying citizens and businesses was a political money-grab of the worst kind. It adds to the USPS' burden. It endangers future postal fiscal viability, and promises to impede, not facilitate, economic vitality and growth. It's bad public policy. It's bad fiscal policy, and it should be reversed, not justified via some cockamamie post-hoc rationale.

Furthermore, there is absolutely no need for the imposition of a CSRS escrow. The whole justification for the initial imposition (specious though it was when enacted) has long since passed. Because someone in the Administration didn't have the foresight to recognize that an escrow, in reform, was going to be abandoned is no good reason to stick it to mailers in the guise of "budget-neutrality."

Bad policy is bad policy. And the approach some within the Administration have been applying in this instance to postal reform is not only disingenuous, but also is counter to the policy Mr. Bush himself has articulated on other matters such as Social Security reform and tax policy in general.

The whole purpose behind the President's establishing a Commission on the Postal Service was to head off a fiscal disaster waiting to happen to a key part of the American economic infrastructure. To now insist on an approach to "reform" that virtually guarantees the fiscal crisis reform was meant to avoid is irrational--particularly since the Commission itself argued for an elimination of the escrow and the return of military retirement obligations to the Treasury.

House and Senate leaders have been doing their level best to put H.R. 22 and S. 662 into a form that meets the Administration's previously articulated key reform criteria. There is real reform there. If the Administration really wants to make it better, then it should call for a comprehensive, objective review of the Postal Service's unfunded employee health-retirement costs, sit down with congressional leaders to devise a payment plan that covers this obligation without bankrupting postage-payers, and break the deadlock that has bogged down reform.

In short, the Administration needs to recognize a reasonable approach to policy-making when it presents itself, and do the right thing. End the escrow. Send back military retirement to the Treasury. Set right the postal system's underlying legislative and regulatory framework, and let reform happen. To do anything less should be deemed absolutely unacceptable.