NCPA - National Center for Policy Analysis

Addressing Postal Service Reform

September 30, 2015

It is no secret that the United States Postal Service (USPS) is facing serious budgetary shortfalls due to usage changes (a rapid decrease in first class mail), technological substitution, unfunded employee benefit mandates, and a legal and regulatory governing framework that cripples USPS' agility and innovation. The result is a struggling institution unable to fix its own problems, sometimes despite its best efforts.

  • The U.S. Postal Service was created more than 200 years ago and may be the country's oldest continuously operating business.
  • Between 1998 and 2002, the number of first-class single piece letters dropped from 54.3 billion pieces to 49.3 billion pieces. And the trends have continued. As the main business of the post office withers away, the result is increasing debt. In recent years, even when revenue grows, so do losses.
  • In 2014, the USPS lost more than $5 billion -- its eighth consecutive annual net loss in a row. These losses occurred in spite of an uptick in operating revenue and in spite of a 9 percent increase in the shipping and packaging business.
  • The postal workers union insist that any reform efforts first require that the agency pre-pay the cost of its health benefits for current retirees.
  • Unfunded liabilities increased from 83 percent of revenues in 2007 to 147 percent of revenues in 2012.

One solution is to break USPS up into two divisions that can each pursue different goals with different levels of autonomy and flexibility. One, public institution would respond to the universal mandate to deliver mail nationwide, daily. The second institution would be privatized and work to compete with other private sector institutions to enter new markets, generate new products and services, and innovate out of the shadow of handcuffing government regulation.

Source: Elaine C. Karmack, "Delaying the inevitable: Political stalemate and the U.S. Postal Service," Brookings Institute, September 2015.

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