A case for privatizing the Postal Service

Former Budget Director Peter Orszag Former Budget Director Peter Orszag AP file photo
The U.S. Postal Service should be completely privatized, President Obama’s former budget chief argued in an op-ed Tuesday.

Peter Orszag, the former director of the Office of Management and Budget, said on Bloomberg.com that USPS would be better off in the private sector, where it could escape congressional requirements that limit its ability to cut costs and become more competitive.

“Privatization is not always the best way to improve efficiency, but the problems facing the Postal Service will be difficult to address if it remains within the government, and there is no longer any sound reason for it not to go private,” Orszag wrote.

Mail volume has decreased 20 percent during the past five years, and revenues have fallen 12 percent during the same period. The agency lost $25 billion from fiscal 2007 to fiscal 2011, he noted.   

USPS has improved mail processing efficiency, Orszag said, but it operates with severe congressionally imposed constraints that hamper its ability to take further steps such as selling off underused facilities. Under the 2006 Postal Accountability and Enhancement Act, the agency also is required to prefund retiree health benefits and faces several payment deadlines later this summer. An upcoming $5.5 billion payment due on Aug. 1 could force the Postal Service to default for the first time in its history.

The Senate passed a bill that would restructure the payment obligations, but the House has not voted on its version of postal reform legislation and is unlikely to do so before the lame duck session in November.  

Even if Congress were to pass a reform bill, it would help only temporarily, Orszag argued.

“Privatization has become the best path forward, mainly because it would take Congress out of the picture,” wrote the former budget chief, now vice chairman of corporate and investment banking at Citigroup Inc.

Orszag noted other countries including Germany, the Netherlands and Japan have privatized mail delivery. He also said there would likely be interest from the private sector, given USPS’ facilities, monopoly access to residential mailboxes and overfunded pension plan. He did add though, that challenges remain even if USPS is removed from the government.

“Despite claims to the contrary, privatized entities do not, on average, become miraculously more productive than public agencies,” Orszag said. “[Privatization] can sometimes turn out to be a disaster -- as has been the case with the financially troubled U.S. Enrichment Corporation.”

Still, he said, privatization offers USPS’ best chance at financial health.

A representative from USPS did not have a direct comment on Orszag’s op-ed piece, but did emphasize the agency’s five-year profitability plan developed earlier this year in conjunction with Evercore Partners, a restructuring and investment banking firm. The representative said congressional cooperation, and finding other ideas to grow revenues and contain costs would be essential to maintaining USPS’ financial viability.
Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

  • Federal IT Applications: Assessing Government's Core Drivers

    In order to better understand the current state of external and internal-facing agency workplace applications, Government Business Council (GBC) and Riverbed undertook an in-depth research study of federal employees. Overall, survey findings indicate that federal IT applications still face a gamut of challenges with regard to quality, reliability, and performance management.

  • PIV- I And Multifactor Authentication: The Best Defense for Federal Government Contractors

    This white paper explores NIST SP 800-171 and why compliance is critical to federal government contractors, especially those that work with the Department of Defense, as well as how leveraging PIV-I credentialing with multifactor authentication can be used as a defense against cyberattacks

  • Toward A More Innovative Government

    This research study aims to understand how state and local leaders regard their agency’s innovation efforts and what they are doing to overcome the challenges they face in successfully implementing these efforts.

  • From Volume to Value: UK’s NHS Digital Provides U.S. Healthcare Agencies A Roadmap For Value-Based Payment Models

    The U.S. healthcare industry is rapidly moving away from traditional fee-for-service models and towards value-based purchasing that reimburses physicians for quality of care in place of frequency of care.

  • GBC Flash Poll: Is Your Agency Safe?

    Federal leaders weigh in on the state of information security


When you download a report, your information may be shared with the underwriters of that document.