Rick Newman Columnist
Yahoo FinanceApril 13, 2018 President Trump doesn’t need a new commission to figure out how to fix the US Postal Service, as he has called for. He could just read what prior analysts have found. Or better yet, ask the Postal Service itself.
Through no fault of its own, the Postal Service, which lost $2.7 billion in 2017, is a perennial basket case that is essentially built to hemorrhage money. It’s not a normal federal agency, funded by Congressional appropriation, but it’s not a normal corporation, either. Instead, it’s a hybrid operation that couldn’t possibly exist in the same form in the private sector. “Under existing laws and regulations,” the USPS itself says in its 2018 financial plan, “our business model is broken.”
Trump doesn’t seem particularly interested in the Postal Service, even though he recently issued an executive order establishing a task force to investigate the service’s finances. Trump’s real beef is with e-commerce giant Amazon, which, he claims, rips off the Postal Service by getting cheap rates for package delivery. Trump doesn’t really care about Amazon, either, except for its CEO, Jeff Bezos, who also happens to own the Washington Post, a frequent Trump critic. Stitch it all together, and Trump has ordered an investigation of the US Postal Service because he hates the Washington Post.
Anyway, Trump’s task force will no doubt discover many flaws in the postal business model that are already well known. First, the Postal Service is extremely limited in how it does business, because of laws that require it to operate in certain ways determined not by free-market principles, but by Congress. Postal carriers are required to visit virtually every address in America six days a week, with a price cap on first-class mail, the USPS’s main source of revenue. The number of addresses goes up every year. The amount of regular mail consumers buy postage for goes down every year. Kindergarten math explains the basic problem.
There are plenty of ideas for turning the Postal Service into a profitable, or at least a break-even, operation. Back in 2010, the Postal Service hired McKinsey to analyze the problem, and the consulting firm recommended efficiency improvements that the Postal Service could undertake to shave costs, which it has done, to some extent. But the big actions needed to truly transform the USPS require approval by the Postal Regulatory Commission or new legislation from Congress, which is why they haven’t happened.
Here are a few of the common-sense moves that would help fix the Postal Service:
Cut mail delivery from six days a week to as few as three.
Let postal carriers deliver mail to centralized drop boxes instead of everybody’s mailbox.
Let the Postal Service close all underperforming post offices.
Allow the Postal Service to charge market price for stamps, setting prices in a way that actually cover costs.
Let the Postal Service sell a wide range of consumer products at its 35,000 post offices, instead of limiting sales to a mere 11 non-postal products.
Stop requiring the USPS to pre-fund retirement health benefits for its employees, a ruinous financial burden no private-sector company bears.
There are many other ideas for reform, including totally or partially privatizing the Postal Service and letting it operate on free-market principles. But even a short list of sensible reforms reveals why Congress does nothing. The direct-mail industry lobbies aggressively against service cutbacks. Consumers would moan if they had to leave their property to get the mail, or pay more for stamps. Rural voters would annihilate any member of Congress who shut down their local post office, no matter how vacant. The postal union would howl about broken promises on health care. And retailers want to make sure the Postal Service never becomes a competitor for things like mobile phones, financial services, or convenience store goodies.
Package delivery, which is where Amazon comes in, is actually a bright spot for the USPS. Revenue is rising—thanks to Amazon and other e-commerce sites—and the USPS is required by law to earn at least a small profit on its contracts to deliver packages. Its contract with Amazon is private, so we can’t know the details for sure, but Trump is likely to discover Amazon is a boon to the Postal Service, not a leech. But don’t expect his task force to report that.
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