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Postal Service in Crisis

Summary:
Mail volumes are falling and the U.S. Postal Service is losing billions of dollars a year while accumulating large liabilities. The USPS has partly offset declining mail revenues with growth in package revenues. But the company’s finances look pretty bleak overall. The table below illustrates the USPS’s predicament with data from 2009 and 2018 from here, here, and here. The data in the table reflects that: Mail demand is falling and package demand is rising. The problem is that mail is more profitable and accounts for most of USPS revenues. USPS management has cut costs where it can, such as by reducing the worker count. But Congress resists other cost savings such as closing post offices, even though the number of retail customers is falling. Marketing mail has become by far the

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Mail volumes are falling and the U.S. Postal Service is losing billions of dollars a year while accumulating large liabilities.

The USPS has partly offset declining mail revenues with growth in package revenues. But the company’s finances look pretty bleak overall.

The table below illustrates the USPS’s predicament with data from 2009 and 2018 from here, here, and here.

The data in the table reflects that:

  • Mail demand is falling and package demand is rising. The problem is that mail is more profitable and accounts for most of USPS revenues.
  • USPS management has cut costs where it can, such as by reducing the worker count. But Congress resists other cost savings such as closing post offices, even though the number of retail customers is falling.
  • Marketing mail has become by far the largest type of mail by volume. Thus we have a vast fleet of trucks driving around the country, burning gas and creating pollution, and the main thing being delivered is junk mail.
  • More than three-quarters of USPS costs are employee compensation, which includes excessive health and pension benefits. About four-fifths of the USPS labor force is unionized.
  • USPS has been losing money for more than a decade. Expenses are a few billion a year higher than revenues.
  • USPS assets are falling and liabilities are soaring. The largest liabilities are unfunded retiree health benefits, worker compensation costs, and debt.

What’s the solution? I testified to Congress that the USPS should be privatized and postal markets opened to competition. Those reforms would give the USPS the flexibility it needs to cut costs, diversify, and innovate, while creating equal tax and regulatory treatment of businesses across postal and package markets.

Chris Edwards
Editor of http://DownsizingGovernment.org (@DownsizeTheFeds) at the Cato Institute.

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