My article about the postal service got an unusually robust amount of play among the blogosphere, so I thought I’d respond to some of the comments.

First of all, I think there’s wide agreement on the left that the postal service doesn’t actually have a funding problem at the current time. This recent default stems entirely – entirely – from a 2006 postal reform law, back from when Republicans still held the House and Senate. The law included a ludicrous requirement, unseen in any other government organization, and really unseen in any company period, that the postal service prefund their pension benefits for the next 75 years through a $5.5 billion annual payment. Currently, the postal service has about $45 billion in that account. If they didn’t have that requirement, they would be in the black.

The requirement has drastically harmed the functions of the agency, which is used by almost every American. In July, USPS began closing offices around the country to meet the annual payment. By the time current downsizing plans are completed in 2014, Americans will see 229 processing plants closed and 28,000 jobs lost. In June, ten USPS employees launched a multi-day hunger strike to protest the cuts.

Without the pension payment, USPS would have a $1.5 billion surplus instead of a $20 billion shortfall. “[T]hese ongoing liquidity issues unnecessarily undermine confidence in the viability of the Postal Service among our customers,” said USPS spokesman David Partenheimer.

The USPS has actually overpaid into one of its pension funds by $11 billion, the exact cost of their 2011 and 2012 required pension payments. The Senate already passed a bipartisan bill that would deal with this by loosening the requirement and lowering the annual payment. This is a completely manufactured crisis and just adopting the Senate bill, which also returns the $11 billion overpayment, would end the insolvency chatter. The whole thing is part of a scheme to send the postal service into privatization, and send that massive, multi-billion dollar pension fund into the waiting arms of a corporate entity that would love to raid it and toss it into their treasury.

So we all agree on that. Long-term, there has been a slowdown in mail delivery and that presents challenges for the postal service. I suggested diversification of its service portfolio, such as through postal banking (a common service in other countries) or getting into the broadband market. Matt Yglesias notes that this would only harm community banks and credit unions, which compete on simple banking. I’m not sure that’s totally true – the megabanks still carry a vast market share (not everyone has moved their money yet) – but I take the point. Still, this all assumes that there’s no room for growth in this sector. Because the likely targets for a public option for simple banking are not those who already have a bank, but the unbanked (in much the same way that the public option would have been attractive to the uninsured). There are millions of unbanked Americans, and they are getting absolutely hammered by payday lending and the check-cashing industry. If they had a simple banking option, right at the post office in the center of town, I think it could be attractive to them. What’s more, it would be extremely useful to the economy, as all that usurious money poured into goosing the profits of the check-cashing and payday lending industries would instead stay in the pockets of people who will spend it.

Now, Kevin Drum says that this is a pipe dream, that the USPS couldn’t possibly compete with existing banks. He says that postal banks work elsewhere because they’ve been around forever, and that there isn’t the expertise at our post office to compete. Well, really simple banking correlates to what the post office already does – hold stuff for people. In this case they would hold money. And since I don’t think the postal service should go into derivatives or even do lending, I don’t think a lot of expertise is necessary. Just hold money for people, give them the ability to withdraw money on a debit card, and invest the funds in safe instruments like Treasuries, and make money on the spread. Seems possible to me. As for whether they can gain market share, again I think the competition here is the services to the unbanked, which are completely unscrupulous, and there’s a lot of possibility to offer a far better deal. The only way to find out is to try.

As for broadband, while it seems like a natural evolution, I do agree that there’s an expertise problem here. The postal service has the second-largest workforce in the country, but not necessarily one primed for broadband construction. So that would require a real shift in their workforce. I’d like to see more study here, because we really have a need for better broadband services – our Internet is really crappy – and the postal service would be well-positioned to pick up some grants to carry out that mission.

Matt Yglesias makes a separate point, that we don’t need universal flat-rate service from a public entity. I think that as long as we still have a digital divide, we need universal service, and without the flat-rate guarantee, the same people on the wrong side of that digital divide would be the ones who get hurt – cutting the postal service inevitably hurts poor areas the most. I also agree with Drum:

…It really does seem as if universal service is an important function, and I’ve never believed that a private post office would provide it. A private USPS would provide differential pricing up to a point, with small towns having higher postal rates than big cities, but there would be plenty of places left that are just flatly unprofitable. At any reasonable postal rate they’d be money losers, and at very high rates they’d get so little use that they’d still be money losers. There would literally be no rate at which they’d be profitable to service.

Now, maybe that’s OK. Maybe you could privatize the postal service with a requirement that they either deliver to an address or provide a free PO box for delivery and pickup. Unfortunately, this would work only if the privatized post office retained its monopoly status on first class mail, which means you’d lose all the benefits of competition. What’s more, you’d almost certainly still be left with a pretty fair number of people who effectively have no mail delivery, since a private operator would probably shut down thousands of small post offices, leaving some customers with a 30-mile drive or more to pick up their mail.

That’s pretty much right. This is still an important function, and there are ways to make it even better.