About 100 years ago, a cunning banker built a branch in Vernal by mailing himself bricks because it was cheaper than shipping them. W.H. Coltharp realized that USPS’s parcel post rate was half the cost of shipping via commercial freight wagons, so he had each brick individually wrapped and mailed 400 miles to Vernal – all 37 tons of them.
He had considered using locally fired bricks, but preferred a specific kind of pressed brick only available at the time in Salt Lake City because they looked cooler. To be fair, they kind of do:
This anecdote from history is perhaps the most glorious instance of the private sector exploiting government service … and alas things haven’t changed that much with the Post Office since then.
Democrats in Washington are proposing a preposterous $46 billion bailout of the US Postal Service, one which keeps the dysfunctional agency on interminable taxpayer life support, demands minimal meaningful reforms, and continues to subsidize private-sector exploitation of our mail system. While Democrats rejoice over the “plan”, many fiscally sensible Republicans – including our Senatorsm Mitt Romney and Mike Lee – still have an opportunity to bring clarity to these nefarious maneuvers and stop the ensuing calamity before it starts.
The Post Office has not adapted in a serious enough way to the massive technological advances of the last 20 years. USPS has lost billions lost every year for the last 15 consecutive years, and the agency’s operating expenses accelerated by a margin of $9 billion more in 2020, compared predictions from 2014. CFOs have made grand promises about long-term financial stability since 2007, but resisted any substantive reform.
The Democrats’ Postal Service Reform Act (PSRA) promises token efforts to address systemic issues, but it will make things worse it its gets to President Biden’s desk.
The PSRA has one huge problem. It includes an unnecessary provision that undermines the sound cost management practices the agency needs to make sure its profitable ventures don’t continue to subsidize its failing ones.
Section 202 of the PSRA calls for USPS to “maintain an integrated network for the delivery of market-dominant and competitive products,” which sounds nice but will eviscerate efforts to price mail products and package products based on their respective cost structures.
In any other business, different parts of the product line are assessed for profitability, so if for example appetizers at a restaurant are more profitable than hamburgers, the restaurant will make a big deal about getting you to buy appetizers. While it sometimes makes sense for a company to run a loss leader strategy, where they might lose money on hamburgers to make sure you buy extremely profitable soft drinks, it doesn’t make sense for USPS to exploit its core public function in this way.
First-class mail has long been USPS’s most profitable product, as people have long since sent emails instead of birthday cards, that revenue has dropped and left everyone wondering why we still need so many post offices of brick and mortar. The Post Office has tried to make up the difference with packages, but that has been – as industry experts described it – a devil’s bargain.
While this has led to a marginal increase in USPS revenues, the quality of mail service has plummeted since 2015, and cost growth increased by as 9 percent in 3 year’s time. Declining service is leading to people seeking alternatives, which is leading to lower revenue, which is leading to even worse services, etc., etc., etc.
Understanding line-item costs is a prerequisite for improvement. The Post Office needs to charge customers for services at market-competitive rates and nix benefits to special interests. The Office of Inspector General (OIG) demanded the USPS enact better cost accounting systems seven years ago, but still nothing has happened.
The country still needs a post office in some form, but not without reform. Sen. Mitt Romney, who sits on the Homeland Security and Government Affairs Senate Committee, is in a position to lead on this issue – and realizing the need to address government waste is something he and Sen. Mike Lee have always been good about. Our post-corona world is a time for fixing systemic problems, not extending them. But asking Congress to fix this feels like talking to a brick wall.
Jared Whitley is a longtime DC and Utah politico, having worked in the Senate for Orrin Hatch, the Bush White House, and the defense industry.