To Save the USPS, We Must Privatize It

[Muda69]

https://www.cato.org/publications/commentary/save-usps-we-must-privatize-it

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The U.S. Postal Service has been losing money for more than a decade. Its financial outlook is bleak, with $110 billion in unfunded retirement costs and more liabilities accruing every year. Congress is in denial about the crisis, and there is a growing chance that taxpayers will be put on the hook for a bailout.

The USPS is a huge enterprise with more than 600,000 employees and $71 billion in annual revenues. Revenues are supposed to cover its costs, but it has lost $69 billion since 2007. There are a couple of culprits. The volume of first-class mail — the USPS’s most profitable product — has plunged 45 percent since 2001. And while the company has expanded into package delivery, it faces heavy competition from UPS and FedEx, and will likely be challenged by Amazon and other upstarts down the road.

A Trump-administration task force last year found that the USPS’s business model “is unsustainable and must be fundamentally changed if the USPS is to avoid a financial collapse and a taxpayer-funded bailout.”

There are lots of cost-cutting measures that could temporarily stave off such a collapse. But in the long run, the USPS needs to diversify its business to survive and grow, and that is a trickier problem than it seems.

As a government entity that pays no taxes, the USPS would enjoy an unfair advantage over potential private competitors in the markets outside its legal monopoly on mail delivery — the markets into which it needs to expand to survive. FedEx pays $2 billion a year in federal, state, and local taxes, while the USPS pays none.

How can we let the USPS diversify and grow without creating unfair competition? The answer is privatization, and the opening up of the postal market that would come with it.

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The important thing is to restructure the USPS before its financial hole gets even deeper. Advertising mail — 62 percent of mail volume — is declining as ads move online. Transactions mail — 19 percent of mail volume — is declining as bank statements, bill paying, and similar activities move online. The volume of periodicals, personal letters, and other types of mail is also falling. Any way you slice it, “snail mail” is being left in the dust as 290 billion emails a day zoom around the planet.

In short, the USPS needs a makeover for the digital age, and Europe has shown it the way: privatization, diversification, and competition.

I agree.  

[swordfish]

USPS and AMtrack - same thing.

[Muda69]

8 minutes ago, swordfish said:

USPS and Amtrak - same thing.

Generally agree, although Amtrak gets funding directly from U.S. appropriation bills,  which the USPS does not.  Instead the USPS get things like federal tax breaks,  a monopoly on letter delivery, and cheap borrowing from the U.S. Treasury.

 

[Muda69]

After Losing Nearly $4 Billion Last Year, Postal Service on Track to Lose $7 Billion This Year: https://reason.com/2019/05/10/post-service-lost-2-billion-in-three-months/

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The U.S. Postal Service lost more than $2 billion during the second quarter of the fiscal year, putting it on track to finish the current year more than $7 billion in the red—way worse than the nearly $4 billion in losses it posted last year.

In its quarterly fiscal report, published today, the Post Office reported small decreases in mail volume and overall revenue compared to the same quarter of 2018. Its big losses are driven by a sharp increase in expenses, primarily workers' compensation costs, pension liabilities, and payments for retirees' health benefits.

For the fiscal year that ended on September 30, 2018, the Postal Service recorded a then-record loss of $3.9 billion. At the time, Postmaster General Megan Brennan bluntly declared that the agency "cannot generate revenue or cut enough costs to pay our bills" and predicted that the agency would continue to post losses at "an accelerating rate."

After losing $1.5 billion in the first quarter of the current fiscal year, the Post Office has now lost $3.6 billion in just six months. That comes even after an increase in the cost of sending first-class mail. The cost of a stamp jumped 5 percent on January 1, and other mailing services increased by 2.5 percent. The agency predicted that those changes would increase revenue by $1.7 billion—but expenses have been outpacing revenues by a wide margin.

It's not exactly news that personnel costs are driving the Postal Service's financial problems. The agency has $100 billion in unfunded pension liabilities and "no clear path to profitability," according to a White House assessment report released last year. The Post Office has lost $69 billion since 2007, and it probably would have gone bankrupt long ago if it were a private entity—FedEx and UPS certainly wouldn't exist today if they were posting annual losses of $4 billion. And they pay taxes, which the Postal Service does not.

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"Privatization would give the the flexibility to save itself, allowing access to debt and equity markets for capital investment—a lifeline for a company that has long been short of cash and deferring the purchase of vital new vehicles and technologies," Chris Edwards, an economist at the Cato Institute, writes in National Review.

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