The U.S. Postal Service has long been plagued by financial problems, and there is plenty of blame to go around. The Postal Service has not turned a profit since 2006, and has lost a total of $51.7 billion from 2007-14, according to a new Tax Foundation report.
Things are not off to a good start this year, either, with the agency posting $2.8 billion in losses for the first two quarters of 2015.
During that 2007-14 period, First Class Mail volume has fallen 34 percent. It has actually been steadily declining since 2001 — as email, social media and online bill payment have replaced traditional mail — and has now dropped to levels not seen since 1982.
Some of the losses are attributed to the roughly $5.5 billion in annual payments the Postal Service must make to prepay its retiree health care obligations as a result of a 2006 law, and on which it has defaulted the past three years and will again this year and next year.
Some of it is due to congressional micromanaging. The Postal Service could save $2 billion a year, for example, by closing more than half its processing facilities, which the agency says are duplicative, but politicians have prohibited it from doing so for fear of job losses and upset constituents in their districts. Moreover, the USPS is required to deliver mail to remote, rural locations for the same price as letters delivered in heavily populated, urban areas.
Some of it is self-inflicted. While the Postal Service has reduced staff and undertaken other cost-cutting measures, it still has not gotten its labor costs under control and struggles to innovate, largely because its monopoly status has insulated it from competitive pressures.
Its performance has also suffered. Despite relaxing performance standards for First Class and Periodical Mail at the beginning of the year, on-time delivery rates for the first two quarters are down significantly from last year.
In order to avoid a massive bailout, Congress should remove its strings, privatize the Postal Service and open it up to competition — as numerous other countries have done — and relax the universal service law. Let supply and demand — not politicians and bureaucrats — determine the proper price of mail, which services are offered and whether these prices and services should vary by location.
