Reports of the U.S. Postal Service’s impending demise are greatly exaggerated. According to a “national business agent” for the American Postal Workers Union, the agency “is being stolen from under [the public’s] feet.” At a recent rally, postal workers accused their employer of breaking its contract with consumers and embracing privatization. The truth is that America’s mail carrier is in over its head, piling on historic net losses, and pursuing budget-busting business lines. The USPS can deliver for consumers without breaking the bank and inviting phony charges of “privatization.”
Charges of impending postal privatization are nothing new. In 2018, Sen. Bernie Sanders (I-Vt.) pushed back against the purported privatization of the USPS, warning that, “[i]f the goal of the Postal Service is to make as much money as possible, tens of millions of people, particularly low-income people and people in rural areas, will see a decline in or doing away with basic mail services.” The USPS seems pretty far from a position that would allow it to make “as much money as possible.” The struggling agency has lost more than $100 billion over the past 15 years. (READ MORE: The Postal Service Needs Real Fiscal and Hiring Reform)
Losses have continued even after postal “reforms” that relieved the USPS of its obligation to prefund employees’ healthcare retirement benefits and thrust those costs onto Medicare. The USPS reported a $2.5 billion net loss for the second quarter of fiscal year 2023 and expects to lose an additional $60–70 billion by 2030. If postal leadership was attempting to eliminate future liabilities by selling itself off bit by bit, consumers might expect to see the agency slowly backing away from lines of business such as money orders and parcel deliveries. The USPS has gone in the opposite direction, stubbornly clinging on to not-so-core offerings despite not being able to turn a profit on these side ventures.
For example, the USPS currently offers money orders to consumers and charges $2.40 for each order. The agency’s inspector general (IG) routinely monitors the postal money order market and assesses the competitiveness and accessibility of the agency’s services. According to their analyses, USPS money order prices are consistently higher than their private market competitors. In a 2022 report, the IG noted that maximum prices were 45 cents higher than the next-most-expensive competitor (Western Union) and minimum prices were 85 cents higher.
These higher prices have not resulted in increased revenue for the USPS. The IG reports, “Postal Service money order costs exceeded revenue in three of the past five fiscal years … costs surpassed revenue by about $4 million in FY 2017 and FY 2020 and by about $19 million in FY 2021.” One key contributor to declining cost coverage is window service costs, which increased 24 percent during the fiscal year 2017–2021 period. However, USPS management “ha[s] not comprehensively monitored product performance or implemented initiatives to reduce window coverage costs and increase future cost coverage.” Despite this cost growth and lack of profitability, there’s no indication that the USPS will back away from its money order business anytime soon.
Similarly, the USPS has almost certainly been under-attributing costs in its package delivery business. Under the 2006 Postal Accountability and Enhancement Act, the USPS must take account of all its costs and determine the business lines responsible for each expense item. For example, if the agency purchases a scanner for the sole purpose of processing packages, then the agency must attribute the cost of that scanner to its “competitive products” (i.e., package) category.
Certain types of expenses (such as labor costs and lease expenses) are not easily attributable, and the Postal Service has been criticized by watchdog groups such as the Taxpayers Protection Alliance (TPA) for under-attributing costs to package deliveries in a way that makes package deliveries appear more profitable. According to a 2022 TPA report, “assigning just 10 percent of [currently] unattributed costs to package deliveries would add approximately $1.3 billion in attributed costs” which would need to be reflected in package prices. Yet, the USPS has given no indication that it intends to introduce market pricing or eliminate unprofitable parcel deliveries.
Seeing the headlines, one could be forgiven for thinking that the USPS is on the verge of privatization. The reality is that the USPS is captive to mission creep and cost overruns like so many other agencies in Washington, D.C. America’s mail carrier shouldn’t aim to make “as much money as possible.” But it should ensure that its revenues are covering costs so that taxpayers and consumers don’t have to cover costly bailouts.
Ross Marchand is a non-resident fellow for the Taxpayers Protection Alliance.
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