As NTU continuously notes, the United States Postal Service is in severe financial distress due to a myriad of factors that began long before the COVID-19 pandemic hit the United States. For the past twelve years, USPS has experienced multi-billion dollar deficits totaling more than $75 billion. Worse yet, the Government Accountability Office (GAO) finds that USPS’s unfunded liabilities and debt stands at $143 billion, which is double its annual revenue. The Postal Service is consistently listed on the GAO’s “High Risk List report” due to the agency’s “deteriorating and unsustainable” financial condition.
In an effort to bring a new source of revenue to USPS, the House of Representatives last week passed an amendment onto a $1.4 trillion spending bill to allow the Postal Service to offer banking and financial services products to customers. House passage of this concept, often regarded as “postal banking” has brought new life to the old idea to put the government back in the business of banking people through the postal system. However, bringing back these financial services would spell disaster for the post office at the taxpayers expense.
One consideration that should be taken into account is that the post office would not be exempt from the same costs and restraints that commercial banks face. In addition, the post office has a long history of financial instability. The cost of hiring new employees, retraining, and restructuring would only serve to add to the present deficits. In the private sector, something that is grossly unprofitable is rarely given more responsibility, but in the public sector, the opposite seems to be true.
It is also unclear whether this provision will even help provide services to an estimated 14 million unbanked or underbanked individuals. According to a 2017 survey, most unbanked Americans stated that they do not make enough money to make banking worthwhile. Another 30 percent stated that they don't trust banks. Though some communities may not have a large number of brick-and-mortar locations, mobile banking has become viable for anyone to access financial services, regardless of their zip code. Given this information, it seems uncertain whether this amendment will achieve its purpose.
The post office itself stated in a recent press release that “our core function is delivery, not banking.” Even a recent Treasury report dispelled postal banking, noting, “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.”
In addition to this uncertainty, there are other concerns that should be addressed. One such concern is in what way the post office will compete against private community banks. Many banks and financial institutions are worried that the post office will be granted special privileges, subsidies, and exemptions which will grant them an unfair advantage. Given the history of the post office, these worries are not unwarranted. In 1844, Lysander Spooner’s American Letter Mail Company was sued out of existence by the federal government after his private sector alternative challenged the government monopoly. There is no need to involve the federal government more in an already highly regulated industry such as finance.
Lastly, there are significant concerns about the Postal Service’s ability to safeguard customers' private information. Government agencies have a history of being susceptible to cyber attacks and the post office would be equally vulnerable. Private financial institutions have the monetary incentive to safeguard against cyber attacks and other information leaks. Public institutions, however, lack these incentives.
Given the financial instability and security concerns of the post office, it is in no way prudent to expand the duties of the post office to include banking practices. Some may bill it as a silver bullet to USPS’s financial situation, but lawmakers must focus on its structural flaws to make the Postal Service viable in the 21st century—not more schemes to cover those flaws. Postal banking will bring more costs than benefits and lawmakers would be wise to avoid this financial folly. After all, how many members of Congress would be lining up to be the first to make a deposit into their post office bank account?