NCPA - National Center for Policy Analysis

U.S. Postal Service Must Streamline

May 10, 2011

Nearly forty years ago, on July 1, 1971, the Post Office Department evolved into the United States Postal Service (USPS), a federal but independently operating entity that sustains itself with no direct support from taxpayers.  To cover years in which it operates at a deficit, it has a $15 billion credit line with the U.S. Treasury, says Greg Beato, a contributing editor at Reason Magazine.

  • In 2006 the USPS processed and distributed 213 billion pieces of mail. 
  • By 2010 that number had dropped to 170 billion, and according to forecasts commissioned by the USPS, the total will sink to 150 billion by 2020. 
  • In March 2010, postal administrators announced that the USPS could run up a cumulative deficit as high as $238 billion during the next decade.

To cut expenses in the face of eroding revenues, the postal service floated the idea of reducing delivery to five days a week and stepped up its efforts to shutter underperforming post offices and branches.  This year, it hopes to close as many as 2,000 of its approximately 32,000 outlets.        

  • Closing a small-town post office, or even a couple thousand small-town post offices, isn't going to put much of a dent into the $8.5 billion deficit the USPS recorded in 2010 or the $3.8 billion deficit it racked up the previous year.        
  • The postal service's most pressing fiscal crisis arises from a provision in the 2006 Postal Accountability and Enhancement Act that requires it to prefund its Retiree Health Benefits Fund at the rate of approximately $5.6 billion a year from 2007 to 2016; the agency has not been able to make those payments without running up huge deficits.

If the USPS wants to maintain its self-sustaining status in the face of declining demand for its most lucrative monopoly, first-class mail, it must shed personnel, streamline infrastructure and cut services, says Beato.

Source: Greg Beato, "The Post-Postal Society?" Reason Magazine, May 2011.

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