In 1999, the price of a first class stamp jumped from 32 to 33 cents. Now the U.S. Postal Service (USPS) wants another penny per stamp. That's the bad news. The good news is that the review process could take as long as 10 months, ample time for Congress to rein in USPS by enacting some overdue postal reforms.

USPS claims to need the revenue because of falling mail volume. Such annual chicken-little warnings have consistently proven to be false. Actually, USPS has posted more than $5 billion in profits since 1995, and its 1997 annual report projected a growth rate in total mail volume of 3 to 4 percent per year over the next decade. Because USPS is legally required only to "break even," one could ask why it hasn't returned any of its profits to first-class mail customers in the form of lower stamp prices. Why does it continually raise prices instead?

The fact that USPS can ratchet up postal rates virtually at will despite its massive profits points to several significant problems with the Postal Service. It is a grossly mismanaged quasi-governmental agency with a protected monopoly on mail delivery, and almost no one has the power to oversee its activities, let alone block an increase in the price of stamps.

One need only look as far as USPS's own Office of Inspector General (OIG). In its most recent report, OIG identified well more than $1 billion in wasteful spending and mismanagement in the mail business alone. OIG has churned out hundreds of reports detailing an epidemic of mismanagement at USPS. Both the Postal Rate Commission and OIG have questioned the integrity of USPS data. For example, as it did during the last rate hike, USPS has tendered stale data to make its case, omitting from its projections revenues from the January 1999 increase, which are estimated to be in the $1 billion range.

USPS's for-profit ventures have also led to some costly dead ends. The General Accounting Office reported that in 1997 USPS squandered $84.7 million on competitive activities, like peddling t-shirts and hats festooned with the USPS logo and pre-paid phone cards. Its Global Package Link, Global Priority Mail programs, and electronic postmark system are all money losers. First-class mail is USPS's cash cow, so the penny increases in stamp prices are needed to underwrite failures on non-mail business ventures.

Further, USPS freely expands into private markets, using its monopoly advantage to compete unfairly against companies like Federal Express and United Parcel Service. Although USPS claims to fear the growth of the Internet, it is positioning itself to get a piece of the action. Postmaster General Henderson wants USPS to control online bill paying. Laughably, he warns that allowing a "private-sector company" to develop and own the platform for e-payments would be "a monopoly model," but that USPS should be the "trusted third party" that facilitates e-payments throughout the country. In a recent Washington Post article, the Postmaster General compared USPS to every other business in America.

Not true. USPS pays no taxes of any kind. It is exempt from federal antitrust laws, state zoning laws, vehicle licensing fees, and even parking tickets. It has access to below-market rates on credit, the right of eminent domain, and the backing of the full faith and credit of the U.S. government. Conservative estimates of the value of these subsidies exceeded $1 billion in 1997. One researcher observed that these subsidies force taxpayers to make a "down payment on the Postal Service's risks," a chilling thought in light of USPS's rampant inefficiency.

Who has the power to say no to the Postal Service? Virtually no one. In 1970, oversight of USPS was shifted from Congress to two appointed boards, the Postal Rate Commission and the USPS Board of Governors. However, the Commission can only make a "recommended decision" on rate increases. The last word resides with USPS itself. During the last rate case, Ed Gleiman, chairman of the Postal Rate Commission, seriously questioned the veracity of USPS data and saw no reason for an increase at all. Congress agreed and passed a nonbinding resolution rejecting the rate increase. The price of stamps went up.

USPS must not be permitted to act like a business when it's convenient and then demand that its captive customers bail it out when it fails. The Savings and Loan crisis of the 1980s was a painful reminder that the absence of oversight coupled with excessively favorable tax treatment is a toxic combination, encouraging risk, inefficiency and waste. The U.S. Postal Service needs a reality check and to be forced to account fully for all of its financial and business activities.