As readers of NTU’s work on postal issues know, it’s been a rough decade and a half for America’s mail carrier. From declining mail volumes to skyrocketing deficits driven by labor costs, the United States Postal Service is in severe financial trouble. In the 3rd quarter of this year, the USPS lost $3 billion on top of the more than $80 billion in net losses over the past 15 years. It is more important than ever that Congress work on a bipartisan solution to tackle the root causes of the Postal Service’s poor financial condition and enact a comprehensive reform package that ensures it remains operationally viable for decades to come.
Instead of striving to improve the structural issues within its core business, the USPS appears more focused on exploring ways to expand its footprint beyond mail and package delivery. Last week, numerous media outlets reported that the beleaguered United States Postal Service (USPS) has been operating a pilot program enabling some locations to offer financial services to its customers since mid-September. According to an October 4 article in the Washington Post, customers are permitted to redeem paychecks in exchange for Visa gift cards at several locations along the East Coast. The outlet also notes “postal officials expect to expand the pilot into a fuller study with more locations and financial products, such as bill-paying services and ATMs.” Taxpayers should be concerned that this new program could be the first step toward postal banking - a dangerous expansion of the USPS’s mission of delivery.
The possibility of USPS embracing full banking services would be a mistake, not only for the agency, but also for taxpayers, who would ultimately underwrite the cost of a failed venture.
While the operation of a pilot program is surprising, it is not surprising that the agency is interested in offering financial products. After all, for decades liberal and progressive lawmakers have urged the adoption of postal banking, and the House of Representatives last year passed a provision to allow postal banking. Thankfully, that provision did not become law. NTU and other taxpayer groups continue to argue USPS should not engage in banking activities, which would put too many Americans, as well as their deposits, into the hands of a government entity that has no experience in loan underwriting and doesn’t even have its own financial accounts in order. Even the Department of Treasury views postal banking as fool’s gold to fix USPS’s problems. In a major 2018 report, they note “given the USPS’s narrow expertise and capital limitations, USPS should not pursue expanding into new sectors, such as postal banking, where the USPS does not have a demonstrated competency or comparative advantage, or where balance sheet risk would be added.”
Proponents of postal banking argue it could help rightsize the USPS’s finances while also providing banking services to lower-income Americans. Yet evidence fails to show that it would be a boon for government coffers or even help the unbanked population. Data from the Federal Deposit Insurance Corporation shows that the share of households without a bank account has declined significantly from 2015, down from 20 percent to 5.4 percent.
Postal banking - whether it’s offering check cashing services or deposit accounts - is a misguided step in its path towards profitability. Congress and the public are in need of many answers to how and why this new pilot program began. As they seek answers, they should also seek consensus on the mission of postal service reform.