Can the United States postal service survive?

Can the United States postal service survive?
The first U.S. postage stamp Ben Franklin 5 cents U.S. Post Office, 1847. Credit: Wikimedia Commons

“Neither snow nor rain nor heat nor gloom of night stays these couriers from swift completion of their appointed rounds,” declares the (unofficial) mail carriers’ creed.

While it may be noble to brave the forces of nature, the more apt question today is whether the United States (USPS) can survive the modern realities of email, online bill-paying and stiff competition from private delivery companies.

Is the U.S. Postal Service terminally outdated?

“The USPS has faced major changes in the competition for parcel service over the last couple of decades as UPS and FedEx have grown,” said Mark Roberts, Penn State professor of economics. “It is now facing large declines in the demand for first-class service as substitute delivery methods -- particularly electronic bill paying and Internet streaming of movies -- have developed.”

One major challenge, notes Roberts, is the hybrid nature of the USPS as a “quasi-governmental agency.” Created in Philadelphia by the Continental Congress in 1775 -- with Benjamin Franklin at the helm as the first Postmaster General of the United Colonies -- the service is neither an entirely government-owned corporation (as Amtrak is) nor an entirely independent business. The USPS is defined as a semi-independent federal agency, mandated to be “revenue-neutral,” meaning just breaking even, without making a profit.

Breaking even it is not.

Recent articles have reported that the USPS will reach a $9.2 billion shortfall when its fiscal year ends at the end of September, 2011 and a $238 billion budget shortfall within 10 years. “Our situation is extremely serious,” Postmaster General Patrick R. Donahoe is quoted as saying. “If Congress doesn’t act, we will default.”

The enormous shortfall, explains Roberts, is partly the result of a law Congress passed in 2006 that required the USPS to pay $5.5 billion dollars every year for a decade to ensure future health benefits for its “career employees” -- all 574,000 of them. (The USPS is the second-largest employer in the nation, after Walmart.)

Given the service’s sharp declines in revenue and its steeper operating costs, it’s doubtful it can sustain that kind of payment, Roberts notes.

“The USPS is saddled with restrictions from Congress that few private businesses would face,” he explained. “It cannot restructure its network of post offices, change days of delivery, alter prices significantly, restructure labor contracts, modify pension or medical benefits, or eliminate universal coverage without intervention from Congress or labor union pressure.

“In the end,” noted Roberts emphatically, “Congress cannot mandate that the Postal Service make profits while imposing operating rules based on political, not business, reasons. It needs to either free the USPS to operate as a business or provide it with the funds to subsidize the mandated types of service -- but Congress is unwilling to do either one.”

On the current trajectory, USPS may eventually be left with managing and delivering only junk mail, believes Roberts. “One response,” he said, “is to downscale and improve efficiency.” The Postal Service is, in fact, trying to do both. USPS officials are pushing a plan to eliminate Saturday mail delivery, close up to 3,700 postal locations and lay off 120,000 workers.

Will that be enough to restore the USPS to fiscal health?

That’s an unknown, says Roberts, but the agency needs to have flexibility to lower prices where it faces more competition and substitute products. The United States Postal Service has a “large, unique and valuable distribution network,” he explained -- one that in its early days helped to unite our nation -- but “paying for the cost of operating that network needs to be shifted away from first-class mail and toward the bulk mail classes which account for an increasing share of the mail volume.”

Otherwise, it might ultimately be stormy economic weather -- rather than snow, rain, heat or gloom of night—that “stays these couriers from the swift completion of their appointed rounds.”

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User comments

Sep 21, 2011
How about raising the rates on all the unsolicited crap that fills our mailboxes until the USPS isn't running at a deficit?

Sep 21, 2011
Dude, if you get a bunch of "pre-approved" credit card offers and catalogues and crap, just take those empty envelopes or blank order forms they enclose, rip off a piece of the paper with your address on it, write in sharpie "Remove From List" next to it and put it in the mail. They have to pay for it then, and it costs you nothing and in a couple of months you will receive nothing, ever again. Until your info gets data-mined again, of course. But still, it truly works. I had to do it for a month or more (sent, I dunno, a dozen or more back from several companies), but eventually they stopped sending them, because it does cost them (to mail it back to themselves, and for some employee to open it and look at it for no reason).

Sep 21, 2011
The USPS should be allowed (even encouraged) to charge what it needs to survive. US postal rates are significantly lower that in other industrial nations. That should change.
In the meantime, Congress can stretch out the payment schedule that the PO as on its facilities.

Sep 22, 2011
There is a national do-not-call list. There should also be a national do-not-mail list, with STIFF fines for even mailing 1 piece to anyone on that list. One bad mass mailing could put them out of business, but they can redeem themselves only if they promise to do Internet only and never mail another piece to anybody. Next stop: junk email.

Sep 22, 2011
Can it? Of course, it doesn't need to be profitable because it is funded by us tax payers... should it survive is the real question.

Sep 22, 2011
Junk email? Just put it in the junk folder and others like it will follow. I use POP mail and don't allow filtering on the mail server. Still, I get relatively few junk mail because I don't open it, just trash it. Sooner or later, it just stops coming.

Sep 22, 2011
Postal service has been one of the traditionally acknowledged functions of government for centuries if not milennia. Although postage has been always paid either by the sender or the addressee, governments in the name of kings or parliaments have always subsidized the running costs of their postal services in the interest of national security, since a postal service controlled by private interests wholly outside the government would not necessarily respond to the needs of the national good. Thus U.S. Postal Service running costs should be considered as much of an EXPENSE for keeping the nation safe as the money spent on our armed services. Nobody expects these last to break even, much less make a profit, and so neither should it be expected of the USPS,although there should be oversight for wastefulness and corruption. There are some things Congress ought to pay for regardless of budgetary considerations. Otherwise, Congress itself serves no purpose and should be all sent home.

Sep 22, 2011
What, you have not trust in UPS/FEDEX/all the others?

If the PO goes private, some people are going to choke over the 'new' costs of postage.

Sep 24, 2011
The PO should not be given another dime of tax payers money. Let it die if it can't compete. They deliver 95% junk mail. They are outdated by at least a decade. Only a fiscally inefficient government would keep such an entity going.

If there is no one behind the counter making a profit, there is no one who cares to adapt and improve. Typical government can't do anything efficiently.

Sep 24, 2011
>noumenon> Sounds good to me. While we're at it, let's gut the military. We have enough nukes to condemn any country willing to attack us to the fury of hell on earth. What do we need with an army or navy or ???

Sep 25, 2011
Unbelievable. Because the naive liberal idealist way of handling world conflict doesn't work, never has, and we will not use nukes where military action is suficient. War and conflict are not obsolete. Delivering pottery catalogs door to door is.

Why is it that everytime the governments absurd fiscal irresponsibility is pointed out some lefty plays the military card. I don't have a problem cutting back some,... but gutting it? Not even Obama is stupid enough to do that.

Sep 25, 2011
Quite believable. It's started already. Time for the US to quit playing the World Cop and let some others take a role.

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