Today, the US Postal Service announced that it will no longer deliver first-class mail on Saturdays. The decision highlights the dramatic need for reform in the 200+ year old institution, whose financial health has been in precipitous decline since the turn of the century.
Some background on the Postal Service’s troubles:
- Since its 2001 peak, overall mail volume is down almost 25%.
- During the same period, first-class letter mail (the most profitable type) has declined by 33%.
- It lost nearly $16 billion in 2012 and loses about $25 million per day.
- It has hit the limit of its credit line with the US Treasury–$15 billion.
The Postal Service estimates that cutting Saturday delivery will save it about $2 billion per year, so clearly more is needed. Fortunately, AEI’s R. Richard Geddes has outlined some reforms that could not only get the Postal Service back in the black, but actually allow it to expand.
First, Congress should determine what level of physical mail service is necessary for government to ensure in the 21st century and how to pay for that service level, rather than leaving this up to the Postal Service itself.
Second, Congress should free up the Postal Service to become a more commercial entity by eliminating the service’s monopolies over mail delivery and mailbox use. This will subject the USPS to the discipline of competition.
Third, Congress should reform the USPS’s organizational structure. Specifically, the agency should be corporatized, making it subject to the standard set of corporate laws and norms associated with a large commercial entity. This will provide managers with clearer incentives and help raise the capital required to pursue new lines of business.
Many other nations have embraced these types of reforms, with great success. All 27 members of the EU have eliminated their postal monopolies and have seen their postal services become more efficient and effective as a result. Germany in particular stands out: Its post was privatized in 2005 and has since become a major player in the global delivery and logistics business, operating in 220 countries. It is now the world’s largest courier company.
The US Postal Service has a huge network of sorting centers and letter carriers, meaning it has infrastructure and experienced personnel. Given the right reforms, it too could become a leader in the global delivery sector.
Be sure to check out Geddes’ full article here.