The United States Postal Service (USPS) announced a loss of 2 billion dollars for the 3rd quarter of 2014 alone. This is an improvement upon the 15.9 billion it lost in fiscal year (FY) 2012, but it’s not enough. After years of failing to become solvent, it’s time to have an honest discussion about the realities of ending the government-run legal monopoly of the postal service.
One thing is obvious after USPS reported a quarterly loss for the 21st time in 23 quarters – elected politicians often do not make good businessmen. Since 1971, the US Postal Service was intended to be a revenue-neutral and self-sufficient federal agency, meaning it is supposed to operate without taxpayer dollars. After losing 5.1 billion in FY 2011, 15.9 billion in FY 2012, and 5 billion in FY 2013, the fairytale of the self-sustaining government agency without taxpayer subsidies is eroding, and Congress bears much of the blame.
In 2006, Congress mandated that USPS prefund health benefits for future retirees for the next 50 years (some say 75 years) within a 10 year period. Creating such a multi-billion dollar trust fund is quite the burden, and it has added to USPS’s woes. It accounts for large portions of the deficits that the Postal Service has run over the years but not all of them.
The mail service is rapidly becoming less relevant due to technological advances. 40% of the world’s postal volume is delivered by USPS, but mail delivery in general is dwindling. From 2003 to 2013 the US Postal Service’s total mail volume dropped by 43.7 billion pieces of mail and revenue declined by 2.5 billion dollars. Despite multiple stamp price increases, which saw rates rise from 37 cents in 2003 to 46 cents in 2013, the budget isn’t balancing. In 2014, the price jumped to 49 cents per stamp, but this looks to be another year in the red.
The United States Postal Service has more retail locations than any other business in the US. Four out of five of these post offices are losing money, but Congress forbids the closure of a post office solely on the basis of it losing money. USPS leadership decided to close 3,200 post offices in 2009, which may have led to substantial savings. Two years later, only 80 of the 3,200 post offices had closed, largely because Congress refused to permit many of these closures. In 2011, USPS brass identified 3,700 locations they intended to close, and by 2012, only 237 had shuttered. The US Postal Service has made other efforts to balance its budget. The total number of career employees, delivery routes, and vehicles has decreased, and in 2011, it was proposed that Saturday mail delivery should cease. This directive was initially delayed, and now, it doesn’t appear that Congress will approve the plan.
The push for some form of postal privatization and the introduction of competition has been around for years, and while this is contentious, it’s not outside of the realm of possibility. In fact, many European countries have already privatized their postal services to an extent, which has introduced increased competition. There are some complaints that private competing postal firms do not follow uniform standards, postage rates have increased, and some postal locations have closed.
A major concern from privatization opponents is that rural areas will be underserved because certain locations will not be profitable. However, a study by the Hoover Institute revealed that ending monopolized postal service doesn’t lead to limited coverage of rural areas. It actually provides an incentive to provide universal service in a competitive market.
Additionally, reports show that the benefits of privatization are striking. Posts generally become more profitable, modernized, and some even expanded into foreign markets. Postal privatizations in many countries have been remarkably successful. Since beginning the privatization process, Sweden and the Netherlands have become the most highly efficient postal services in Europe. Australia began to deliver mail in a timelier manner. Germany saw increased productivity and expanded internationally and into new business arenas, and after partial privatization in New Zealand, postage rates declined and productivity increased.
Former Postmaster General William Henderson was right when he said, “What the Postal Service needs now is nothing short of privatization.” To become revenue-neutral, difficult decisions will have to be made about USPS’s workforce, capital, products, and business plan. However, the Postal Service doesn’t have the freedom to innovate and adapt to a changing market or have the ability to shed the fat from its operation. Congress and USPS bureaucrats are essentially roadblocks that will prevent the meaningful and bold decisions that are needed to make it function properly. The only way to let the Postal Service thrive is to reduce or entirely remove government control and introduce private competition. Privatization will morph America’s postal system into a streamlined and efficient business with the consumers in mind.