Money Talks is a column that explores what happens when business, the economy, and culture collide.
On April 13, 1957, America was rocked by a national crisis: The mail did not come. It was a Saturday, and Postmaster General Arthur Summerfield, facing a budget crisis, decided to cut off Saturday deliveries. The decision was sensible, economically speaking. But it was politically disastrous, provoking a huge outcry from Americans who found it intolerable to wait two days for a letter. Later that week, President Dwight Eisenhower signed a bill that provided more funding for the post office, and on April 20, letter carriers across the country were back on their appointed rounds.
That April 13 hiatus was the only time in the history of the U.S. Postal Service that mail wasn’t delivered on a Saturday, and from one angle, it looks like just a little quirk of postal history. But it was actually a perfect expression of the post office’s basic dilemma: It’s expected to be run like a business, but it isn’t allowed to do the things a business in its position would.
The post office has been losing billions of dollars for years, but this year, because the pandemic crushed mail volume, it’s on pace to lose at least $12 billion.
This is a dilemma the USPS has faced for many decades. But the combination of the pandemic and this year’s election — which has brought an unprecedented increase in mail-in voting — have thrown the problem into even sharper focus.
The post office has been losing billions of dollars for years, but because the pandemic crushed mail volume, it’s on pace to lose at least $12 billion this year. The post office is a government agency, but thanks to the Postal Reorganization Act, a law that was passed in 1970 in order to help modernize the post office, it’s supposed to be self-sustaining — meaning it gets no regular federal funding. So in order to stay afloat, it had to get the government to bail it out to the tune of $10 billion. And when the new postmaster general, Louis DeJoy, responded by trying to implement cost-cutting measures, it provoked a political uproar because it seemed possible that DeJoy’s initiatives would delay the delivery of mail-in ballots and therefore the election results.
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The reasons for the agency’s financial troubles are no secret. The advent of email, online payment services, and direct deposit has dramatically shrunk the number of first-class letters mailed every year. Between 2007 and 2013 alone, the volume of first-class mail shrunk by 37%, with postal revenue going with it. The post office has a huge workforce, with 640,000 employees, and a labor-intensive business: Mail has to be delivered by hand door to door. So its ability to automate its operations is limited. It also has pension and health-care obligations to older workers that are larger even than those owed by the Big Three automakers. And while it’s made some moves that have helped its bottom line, like expanding its package-delivery business to compete with UPS and FedEx and partnering with Amazon, it’s made only a small dent in its ever-accumulating pile of red ink.
So if the problems are obvious, why is no one doing anything about them? The answer is that they’ve tried. In administration after administration, postmasters general have offered up plans for reform. If they’ve failed to create a sustainable business model for the USPS, it’s because the post office isn’t, ultimately, a business. It’s a government-provided service, subject to rules and regulations that no privately run business — not even utilities — are subject to and unable to make the kinds of decisions that any real business would make.
If the post office were a business, after all, what would it do? It would likely consolidate deliveries into a few days a week, which would cut down the number of trips postal carriers had to make (and therefore the number of postal carriers). It would charge more to send letters longer distances. If delivering to certain areas — say, rural areas where homes are far apart — was unprofitable, it might eliminate deliveries there or do them only once a week. It would raise prices more frequently. And so on.
No one would say, “The Department of Defense lost $700 billion last year” because we believe it’s providing a service worth paying for. It’s not obvious why the post office is any different.
As a government agency, though, the post office can’t do any of those things. It is legally required to deliver mail six days a week to every address in America, and it has to deliver letters for exactly the same price no matter how far that letter is traveling. (We just accept it as natural that you can send a letter from Florida to Hawaii for the exact same price as you can send it to someone who lives down the street, but obviously, in economic terms, it makes no sense.) And it can’t raise stamp prices faster than the rate of inflation unless it gets special approval from a regulatory commission.
Plus, consider elections. This year, the post office is being asked by state governments across the country to deliver tens of millions of absentee-ballot applications to voters, return those applications, deliver the ballots, and then return the filled-out ballots in time for them to be counted. And they’re being asked, in many cases, to do so very quickly; in more than half the states in the U.S., you can apply for an absentee ballot a week or less before the election. Yet the post office is not allowed to charge extra for any of these services — in fact, it delivers ballots even if they don’t have any postage on them at all. And it’s expected to prioritize election-related mail over all its other customers. No normal business would do any of these things. The post office does them because, as a government agency, it’s required to.
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The point is that as we’ve designed it, the post office is neither fish nor fowl: It’s a money-losing platypus. That doesn’t mean it can’t be fixed; it just means we need to be clear about what, exactly, we think the real problem is. If the problem is that the post office isn’t making money, then the solution is to scrap — or at least significantly weaken — the rules that hamstring it. That’s what DeJoy would like to do. He’s already gotten in hot water for scrapping sorting machines and cutting overtime in the interests of efficiency, but he apparently would like to go much further than that by delivering mail less frequently, introducing geographic variation in pricing, and raising prices substantially.
Alternatively, though, we could decide, once and for all, that the post office is an essential government service and that the real problem is the expectation that it should make money. After all, while we now say the post office is losing money, that’s just a rhetorical convention. We could just as easily say it’s spending government money, the way the Defense Department or the Department of Motor Vehicles does. No one would say, “The Department of Defense lost $700 billion last year” because we believe it’s providing a service worth paying for. It’s not obvious why the post office is any different. In fact, the 1970 Postal Reorganization Act, the law that made the post office an independent agency, paradoxically starts by saying that the USPS “shall be operated as a basic and fundamental service provided to the people by the Government of the United States.”
Either way, we’d still want the postal service to be as efficient as possible; it probably does make sense, for instance, to end Saturday delivery. But the real point is that we should be clear about what we think the post office is and what role we want it to play. For 50 years, we’ve embraced the illusion that it could be simultaneously an arm of the government and a profitable business. It’s time to pick one.