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210 IRET Congressional Advisory 1 (2006)

handle is hein.taxfoundation/iretcgadv0207 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. October 11, 2006 Advisory No. 210 UNION DEMANDS HURT POSTAL SERVICE REFORM Executive Summary Postal unions were created to represent their members, which is their right and obligation. Their positions, however, are not necessarily in the best interest of mail users, taxpayers, and the general economy. The House, Senate, and Administration almost reached a deal on major Postal Service legislation prior to Congress's pre-election adjournment. (The House and Senate had previously passed somewhat different versions of H.R. 22, the Postal Accountability and Enhancement Act.) Union opposition killed the deal, despite large concessions that would have met most union demands. This paper steps back to look at three legislation-related issues on which one or more unions expressed strong views, and asks whether the unions' positions are consistent with reform. The centerpiece of H.R. 22 is rate-cap regulation, which would give the Postal Service more flexibility to adjust postal rates, but cap increases at the inflation rate. For rate cap regulation to protect mail users and encourage financial discipline, the rate cap must be a firm cap. The unions, regrettably, prefer a soft cap with loopholes. The Postal Service needs to contribute significantly less to fund retirees' pensions because Congress retroactively changed the law in 2003. (Retirees' benefits are unaltered.) The Administration wisely advocated using every cent of the savings, which are currently going into an escrow account, to reduce the Service's approximately $65 billion unfunded liability for retirees' health care costs. The unions, though, object; they hope some of the escrow money will flow to them. When the Postal Service and a union cannot agree on a collective bargaining agreement, an arbitrator sets wages and some benefits. The Service believes this has contributed to a substantial postal pay premium and high labor costs. The Administration and mailers suggested changing the law to instruct arbitrators to consider as one factor the Service's financial health. Despite union opposition, this would be an excellent reform. Acceding to union demands would be politically easy but the result could quickly become reform in name only. Genuine reform requires some changes that postal unions oppose. g~*I A3~ S I gg~ 8 Ae ~II