Beyond Our Means
Tuesday, June 26, the Asset Building Program hosted an event in conjunction with the Congressional Savings and Ownership Caucus to explore the concept of postal savings as a potential mechanism to promote small-dollar savings among ordinary Americans and to provide additional revenue and an updated service portfolio for the U.S. Postal Service. Justin King, Federal Policy Liaison with the Asset Building Program, began by outlining the issues at stake: a postal service struggling to stay afloat, the toll the recession has taken on the personal finances of Americans amid long-standing shortcomings in personal savings, and the potential role that the United States Postal Service could play in providing savings accounts and other small banking measures to Americans, particularly those poorly served by large financial institutions. He cited recently released data from the Federal Reserve Survey of Consumer Finances that shows that Americans increasingly want to save for emergencies, but that many struggle to do so. He then introduced author and Princeton University professor Sheldon Garon along with his book, Beyond Our Means: Why America Spends While the World Saves.
Professor Garon first gave a brief history of savings banks and postal savings in United States and other countries, such as England, Germany and Japan. He noted that historically savings banks had had social, rather than commercial, value. Governments such as Japan and France have defended their postal savings banks on the grounds that they provide a necessary service to citizens, a service which would not function adequately if it were turned into a privatized commercial venture. A postal savings bank, Garon argued, would combine the positive features of both institutions, including nationwide access and government guaranteed stability. Successful postal savings banks in other countries accept small deposits, require little or no minimum balance, and pay interest, thus encouraging lower income individuals to save.
Simultaneously, this system would greatly benefit America’s currently ailing postal system. Due largely to the widespread use of internet communication, the postal service has experienced a sharp decline in delivery revenues. It is becoming increasingly expensive to operate post offices, especially in sparsely populated areas, and many are facing forced closure. A solution to this drain on public funding can be found in the creation of a US postal savings bank. Garon pointed out that the postal service is already very accustomed to handling monetary transactions via money orders and international account transfers. Slightly altering the function of post offices might save many from forced closure while also providing the much needed availability of a dependable savings account.
Referencing the successful postal banking systems operating in other countries, Garon suggests that a similar model can operate in the United States. 99% of French households have bank accounts, while nearly 25% of Americans are unbanked or under-banked. A postal savings bank would not only encourage those with smaller incomes to save and promote financial inclusion, but would also reinvigorate the USPS by counteracting some of its fiscal challenges.
Watch video footage from our event from last winter to learn more about Sheldon Garon’s research on savings patterns worldwide and the concept of postal savings.