SUMMER READING: Postal Edition

Every year, countless beachgoers are basking in the sun or traipsing into the water when they come to a sudden and sobering realization: they didn’t check their mail before leaving for vacation. While mail carriers have been known to deliver in rain, snow, sleet, and hail, that adversity certainly does not extend to riptides and sandcastles. Unfortunately, the United States Postal Service (USPS) has more than enough problems on land before it can ever hope to deliver mail to windsurfers riding the waves offshore. America’s mail carrier has faced “wipeout” losses of more than $100 billion over the past fifteen years and is projected to lose an additional $60-70 billion by 2030. The few rays of sunlight in postal financial projections are overcast by storm clouds that would give any beachgoer pause. To help keep consumers and taxpayers in the know about “Pacific” postal problems (and to help keep postcards dry and sand-free), the Taxpayers Protection Alliance (TPA) presents “Summer Reading: Postal Edition.”

The USPS has the expansive (and expensive) mission of delivering to hundreds of millions of addresses across the country. Unfortunately, it has proven unable to do so in recent years without taking on significant net losses. According to the Government Accountability Office, the USPS has roughly $200 billion worth of unfunded liabilities and debt, a total equal to roughly 250 percent of the agency’s annual revenues. Congress saw the severity of this fiscal crisis and acted by passing the Postal Service Reform Act (PSRA). But, as is usually the case, lawmakers’ actions made the situation worse.

The PSRA essentially forgave the agency’s retirement liabilities and shifted around a significant percentage of costs onto Medicare, which is already projected to run short on funds by the end of the decade. Lexington Institute senior fellow Paul Steidler notes, “The…[PSRA]… signed by President Biden on April 6 makes it harder to improve historically slow mail service and it passed over needed systemic overhauls. At its core, PSRA is a bailout. It wipes away $57 billion in defaulted debt that the Postal Service has failed to pay for its Retiree Health Benefits Fund since 2011… PSRA does nothing to spur the service to better understand its costs so that it cut them where appropriate and more accurately charge customers for the actual cost of the product or service being used.” One might think that, in exchange for a lavish bailout from Congress, the USPS would at least commit to reasonable delivery times and service standards.

In reality, the agency is actively slowing down mail delivery even as it receives a blank check from taxpayers. Despite the claims of postal leadership, this service slowdown won’t even do much to help the USPS cut down on operating expenses.

TPA’s analysis of USPS’ plan to slow down approximately 40 percent of first-class mail notes that, “The USPS predicts that slowing down the mail and substituting air transportation in favor of highway transportation will save the agency roughly $169 million on net per year. Even taking this figure at face value, these cost savings do not amount to much during a fiscal year (FY). The PRC notes, ‘[t]he Postal Service’s projected net cost savings of $169 million represents 3.4 percent of total transportation costs for FY 2020 and less than a quarter of one percent of the total FY 2020 operating expenses of [$]82 billion.’” Not only will the savings be miniscule, but the sullied reputation of America’s mail carrier may pose serious financial issues down the road as consumers continue to stop their reliance on the postal system.

There are plenty of better ways to ensure that the USPS makes ends meet. For starters, the agency must see to it that product revenues are consistently covering costs. According to a recent analysis by the USPS Inspector General, “Postal Service flats have a problem. As a group, they don’t cover their costs. Last year, they collectively lost the Postal Service about $630 million. First, what are flats? They are not European apartments or a type of shoe. In the postal context, ‘flats’ are large mailpieces between the size of a typical letter and a thicker parcel. Full-size envelopes, magazines, and catalogs are all considered flats. It’s a very popular format…. Last December, the Postal Service described its top initiatives to reduce flats costs. We examined them in our recent audit, Flats Cost Coverage, and found that most of the initiatives did not have specific, measurable objectives that would directly reduce these costs.” Additionally, America’s mail carrier has been underpricing packages for years. According to TPA’s 2022 Postal Pricing Primer, “the percent of vehicle depreciation attributed to competitive products remains below 20 percent despite the agency purchasing larger, more expensive vehicles to accommodate packages… Most alarming of all is the agency’s refusal to fully examine the role played by competitive products in escalating overtime costs and assign supposedly unattributable ‘network travel’ costs accordingly. In addition, the USPS fails to account for vehicle and headquarter personnel costs that are clearly increasing as the agency shifts to a package-centric delivery model.”

If the USPS was an ordinary business, it would make up for this deficient cost coverage by targeting price increases on these specific product categories. While the agency has increased prices across the board in recent years, its insistence on targeting first-class letter mail results in letter revenue cross-subsidizing other, non-profitable lines of business. In July, TPA noted, “the United States Postal Service (USPS) increased the price of first-class Forever stamps from 63 cents to 66 cents. Additionally, America’s mail carrier is, ‘seeking price adjustments for Special Services products including Certified Mail, Post Office Box rental fees, money order fees and the cost to purchase insurance when mailing an item.’ These price increases come just months after the beleaguered agency raised rates on consumers in January 2023 and a year after a July 2022 increase…. A first-class stamp now costs double what it cost twenty-five years ago. These perpetual increases have not made America’s mail carrier any faster, efficient, or more reliable.”  

Something has to change in order for the USPS to get back into the black. But, as long as the “sharks” in Congress, postal labor unions, and agency leadership continue to justify higher postage and costlier mail provision, consumers will continue to pay the price. It’s time for the USPS to get out its pail and shovel and get to work on a real plan to keep costs and prices under control.