USPS Is $14 Billion In the Red This Year, So It Promotes Junk Mail

Why privatization is a better tactic to save the U.S. mail

The United States Postal Service (USPS) thinks it may have found another way to try to stem the tide of its financial losses: more junk mail. The agency has launched a campaign to promote a junk mail service it introduced last year that is targeted at small businesses. The service allows small businesses to use a Web tool to send their direct mail advertisements and solicitations to customers by neighborhood or zip code at a cost of 14.5 cents per item. It will take a lot more than some additional business advertising revenue to fix the Postal Service.

The “Every Door Direct Mail” initiative is but one of numerous reform efforts underway or under consideration. Postal reform saw a relative flurry of activity in Congress last fall, but progress with these reforms has essentially stalled on all fronts. Out of frustration with this delay, Senate Majority Leader Harry Reid (D-NV), pledged to move one of the measures to the Senate floor in the coming weeks, whether the sponsors of competing measures reached agreement or not.

The troubled U.S. Postal Service has been bleeding cash in recent years. According to the USPS, First-Class Mail volume has dropped by 25 percent since 2006, and even steeper declines are expected over the next decade, as e-mail, text messaging, social media tools, cell phones, online bill payment, e-filing of tax returns, and online electronic invitation services continue to gain popularity at the expense of written communication. Last fiscal year, the USPS lost $5.1 billion (not including the required $5.5 billion health-care prefunding payment). It lost another $3.3 billion in its most recent quarter, and is expected to lose about $14.1 billion for the entire current fiscal year ending September 30. Without reform, the agency estimates that annual losses will grow to $18.2 billion by 2015, with a total accumulated debt of $92 billion by 2016.

In an attempt to improve its financial fortunes, the U.S. Postal Service is moving ahead with its own reform and restructuring plan this spring. It has, however, said the closure or consolidation of post offices and mail-processing centers nationwide will be put on hold until after the November elections and resume in early 2013. (An agreement with Congress already stipulates that no closures or consolidations will take place before May 15, 2012.) This is ostensibly for the benefit of states like California, Oregon, and Washington, where voting by mail is prevalent and the closure of mail facilities could thus potentially disrupt elections. Politicians’ aversion for the prospect of post offices and mail-processing centers in their districts closing shortly before an election was most likely a factor as well.

The USPS’s revised five-year business plan issued last month calls for:

  • Closing up to 3,800 post offices and 223 mail-processing centers
  • Increasing First-Class Mail postage from 45 cents to 50 cents (an 11percent increase)
  • Reducing the delivery schedule from six days a week to five (eliminating Saturday delivery)
  • Reducing overnight delivery to a 2-3 day delivery standard (depending on the destination’s distance from the mail’s origin)
  • Eliminating annual retiree health-care prepayments of approximately $5.5 billion
  • Shifting from current federal health benefits programs which “exceed [the] private sector comparability standard in terms of cost and coverage” (see p. 15 of the USPS’s business plan) to a more flexible, tiered program to be run directly by USPS
  • Transitioning older employees to Medicare

About half of the USPS plan requires approval from Congress before it can be implemented. Postmaster General Patrick Donahoe cautioned that if Congress did not provide the USPS the flexibility to implement its proposed reforms, the Postal Service “[risks] becoming a significant burden to the American taxpayer.”

While the USPS certainly needs to scale back its operations, a recipe of higher prices, slower delivery, fewer delivery days, and more junk mail is not very a pleasant notion to consumers or politicians.

As Sen. Bernie Sanders (I-VT) lamented, “Slowing down mail delivery service will result in less business and less revenue.”

The truth is, however, that because the Postal Service has a monopoly on delivering mail, there is no way to know whether a five-days-per-week or six-days-per-week delivery schedule is ideal, or even how much should be charged to deliver a letter. Matters such as prices, service speed, frequency of delivery, and additional mail products and services should be determined by competition and consumer preferences, not arbitrarily by politicians and postal regulators.

As Lysander Spooner, who challenged the government mail monopoly when he formed the American Letter Mail Company in 1844 noted in his essay, “The Unconstitutionality of the Laws of Congress, Prohibiting Private Mails,”

Universal experience attests that government establishments cannot keep pace with private enterprize in matters of business (and the transmission of letters is a mere matter of business.) . . . [Private enterprise] is constantly increasing its speed, and simplifying and cheapening its operations. But government functionaries, secure in the enjoyment of warm nests, large salaries, official honors and power, and presidential smiles . . . feel few quickening impulses to labor, and are altogether too independent and dignified personages to move at the speed that commercial interests require. . . . The consequence is, as we now see, that when a cumbrous, clumsy, expensive and dilatory government system is once established, it is nearly impossible to modify or materially improve it. Opening the business to rivalry and free competition, is the only way to get rid of the nuisance.

While Spooner and several other private mail entrepreneurs sprouting up during the period of about 1839-1851 (see this Cato Journal article by Kelly B. Olds for an excellent history of private mail delivery during this period) were eventually shut down by the government, they proved that private mail delivery was possible. And the competition they provided forced the government to drastically reduce its prices in the process.

Given that the delivery of information and products is certainly not a core governmental function and the USPS operates under an obsolete business model with unsustainable personnel costs. It is time to embark upon a new age of postal privatization.

Adam Summers is a senior policy analyst at Reason Foundation.