NCPA - National Center for Policy Analysis

U.S. Postal Service Needs to Privatize in Order to Survive

April 3, 2012

The U.S. Postal Service (USPS) has been struggling financially for several years.  Fighting technological innovations that have made many of its services obsolete, the enterprise faces persistent deficits and crippling long-term debt, says Adam Summers, a senior policy analyst with the Reason Foundation.

  • 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.
  • 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.

Congressional efforts to reform the service have largely fallen flat, stalled or trapped in political gridlock.  This has left the agency to propose a number of business model reforms on its own that it will seek to implement:

  • Closing up to 3,800 post offices and 223 mail-processing centers.
  • Increasing first class mail postage from 45 cents to 50 cents -- an 11 percent increase.
  • Reducing the delivery schedule from six days a week to five (eliminating Saturday delivery).
  • Reducing overnight delivery to a two to three day delivery standard.
  • Eliminating annual retiree health care prepayments of approximately $5.5 billion.
  • Shifting from current federal health benefits programs to a more flexible, tiered program to be run directly by USPS.
  • Transitioning older employees to Medicare.

Though these efforts are admirable as the bloated service seeks to cut down on wasteful spending and return to profitability, they will almost certainly prove insufficient in the long run.

Rather than simple reforms, the USPS needs a full, privatizing restructuring in order to survive.  Competition in the postal system would help participants better assess optimal mailing rates and services, and would simultaneously allow the federal government to sever ties with an unprofitable enterprise.

Source: Adam Summers, "USPS Is $14 Billion In the Red This Year, So It Promotes Junk Mail," Reason Foundation, March 22, 2012.

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