USPS is the acronym for one of the worst run operations of a poorly run US government bureaucracy. In July, the US Postal Service announced its second increase in First Class Postage rates this year. The explanation is that inflation and prior bad decisions have set it up to lose a billion dollars this year. The representatives of the USPS also note that there is less first-class mail, so that means they are not getting as much money from what might be considered their historic flagship service.

History

Most Americans know the Second Continental Congress founded the Post Office in the 1775 as part of the break from British control, and that Ben Franklin was the first postmaster general. The ability to get mail throughout the colonies was an indication of civilization for the new nation in formation. That the Post Office was a success is beyond debate. It reliably functioned for many years and contributed to America’s development.

In 1970, President Richard Nixon signed into law the Postal Reorganization Act, which created the USPS, effective July 1971. That reorganization has been the status of the Postal Service so long, many Americans may assume that is how it was always structured. At the time, creating the USPS was considered a bipartisan effort to salvage the inefficient Postal Service and modernize it.

The concept was that the USPS would be its own corporation and would make business decisions internally, not through congressional committees. The critical improvement was that politics would be removed from the decision-making process. The same legislation created the Postal Rate Commission (“PRC”) to provide input from the public and competing delivery services.

In the early 1980s, during the Reagan Administration, the government phased out the federal subsidy to the USPS for providing free or discounted services to non-profits and services for the blind. Again, the idea was to have a government corporation that covered its expenses and made good business decisions. In the rules for operations, however, there was a particular provision that each class of mail had to pay for itself. The oversight for this was through the PRC. Given that the same mail delivery person brings most classes of mail to each address, it is not clear how one would really separate the fully allocated cost of one type of mail from another.

In 2006, with the Postal Accountability and Enhancement Act, more reforms came along, including changing the PRC’s official name to the Postal Regulatory Commission. The new PRC was to keep a better eye on the USPS and ensure compliance with various laws and regulations.

Image: A derelict USPS mailbox by Jason Taellious. CC BY-SA 2.0.

Today

To say that these past efforts to right the sinking ship have been a failure would be a massive understatement. The USPS has been an ocean of red ink. A 2021 Forbes article headline pretty much sums up the status quo: “Why The U.S. Post Office Is In Trouble – 678,539 Employees And A $9.2 Billion Loss In 2020.”

There is a saying that “insanity is doing the same thing over and over again and expecting a different result.” Maybe it is time for real changes at the good old post office. Because Americans are sending dramatically less first-class mail, the USPS is taking in less money. In the private sector, that means time to cut staff, cut services, or increase the cost of the services that make up the volume of services the public is requesting. Increasing the cost of a first-class stamp is sort of like the saying about “rearranging chairs on the deck of the Titanic.”

Proof that the current USPS mess is still controlled by politics is the 2022 Postal Service Reform Act. This is a bipartisan bill that essentially doubled down on what the USPS is still doing wrong today.

For starters, it requires continuation of six-day delivery. Proponents cite appealing, but out-of-date phrases, like “serving rural communities.” But the Internet is available virtually everywhere in America. Given that most mail today is junk mail, regardless of location in America, it’s doubtful anyone is sitting waiting for their mail delivery these days.

The other argument in Congress was that people need their prescriptions delivered. In reality, if someone needs his prescription delivered within 48 hours, he’s highly likely to go to their local drugstore, not wait by his mailbox. However, the concept that either of these excuses would justify the current over-staffed and underutilized six-day delivery system is politics at its worst.

Another problem is that domestic rates seem to be subsidizing international rates. Consulting the USPS site, International Mail Services & Shipping Rates, reveals a complicated mess. It is hard to figure if first-class domestic mail is subsidizing international mail. However, here is a comparison from the USPS website for international mailing information. Sending a regular, first-class envelope of one ounce or less to nearby Belize would be $1.50 for “Rate Class 8.” However, sending that same first-class envelope a much greater distance to China would be the same $1.50 for “Rate Class 6.”  It’s unclear why the US would charge the same for a much greater distance from the US mainland. This is especially puzzling given the current aggressive actions and statements of the PRC leadership.

A Real Reform Plan

It is time to cut costs, increase pricing for the services that are actually in demand, and move toward a different operation and service model.

1.    Bulk rate mail and packages must increase in cost to match the USPS overhead. Most Americans have important things like bills sent electronically. That is a much more secure way to get such material. Most Americans sent over 90% of their mail directly to the recycling bin. Why is the USPS still cutting the bulk mailers a deal?

2.    Cut delivery to four days a week. Four weekdays for business districts like Manhattan, and three weekdays plus Saturday for residential areas. Anticipate that by 2050, one- or two-day-a-week delivery will be the norm.

3.    Does the USPS really need to compete with FedEX and UPS? Many do not trust the USPS actually to deliver things overnight. The fact that Amazon and its competitors are subcontracting certain services to the USPS suggests that the USPS is not charging market rates for those deliveries. There is no definitive data, but as much as a third of USPS losses could come from maintaining services that are done poorly in competition with private companies that can do them better.

4.    Stop kowtowing to the postal unions. Because they are federal employees, they cannot strike. The reality is that the vast majority of these jobs are unskilled and semi-skilled. The pay and benefits should match private sector jobs at the same skill levels. All defined benefit USPS pensions should be eliminated now. Prior commitments can be covered just as the private sector does by purchasing annuities. Over 90% of private sector employees no longer have pensions. This would remove a major unfunded liability and provide cost relief to the USPS. It would also set a good precedent as defined benefit pensions for the rest of the federal workforce need to be eliminated to help deal with the growing National Debt crisis.

5.    Privatizing the USPS is not a likely approach. However, the idea over 50 years ago was to get the politics out of the USPS operation. It’s time to really do that.

This is a problem that the US government, despite its historic inefficiency, can fix now.