Assessing the Recommendations of the President’s Task Force on the Postal Service

Abstract

Over the years, the US Postal Service (USPS) has undergone several major legislative overhauls, including the Postal Reorganization Act (PRA) in 1970 and the Postal Accountability and Enhancement Act (PAEA) in 2006. Each change in regulatory regime has had substantial impacts on USPS operations, pricing, strategy, and regulation. Recently, the President’s Task Force on the Unites States Postal System released its report summarizing the recent history of the institution along with a set of recommendations that, put together, may constitute the outline for another round of regime changes, either via legislation or by USPS policy actions. In a previous paper, “An economic model of the regulatory structure created by the PAEA of 2006,” we built a model of the Postal Service embodying the regulatory and pricing structure dictated by the 2006 law. We examined its key elements and their likely impact on the US postal industry, in particular projecting financial instability in the absence of successful cost control. In this paper, we perform a similar exercise, constructing a new model of the Postal Service that reflects the assertions put forth in the Task Force recommendations. We use that model to identify and quantify the key elements of the SBM and draw out the implications for future USPS behavior and results. We calibrate the model to approximate current USPS costs, volumes, and demand sensitivities.