The USPS needs to stop delivering financial losses 


The United States Postal Service (USPS), whose business model has been called “unsustainable,” is about to deliver something that no one wants to get. Its third quarter financial report is due to be released on Tuesday, Aug. 8, 2023, and it will likely continue the postal service’s run of financial losses that began in 2007. It will also make it unlikely that the Government Accountability Office will remove the USPS from its High-Risk List, where it has been since 2002.

In the 117th Congress, Congress passed, and President Biden signed into law H.R. 3076, the Postal Service Reform Act of 2022, which codified the agency’s mission and helped to stabilize its finances. It allows six-day delivery, an integrated delivery network for mail and packages (separating these functions could have cost up to $15 billion), and performance targets and reviews of accounting for direct and indirect costs. It also requires semi-annual reports on finances and operations and a “dashboard” on service performance.

Now it is up to the USPS to take advantage of this new law and get its costs under control. Postmaster General Louis DeJoy’s 10-year plan, including $34 billion for “self-help” cost reductions, is intended to move the USPS in the right direction. But two years into the implementation of this plan, results have fallen woefully short. Indeed, the USPS appears to be moving in the wrong direction.

Labor costs, which constitute 75 percent of USPS expenses and were not addressed in the Postal Service Reform Act, rose by 6.5 percent from fiscal year 2021 to fiscal year 2022 and continue to rise. While the USPS has stated that paying too much overtime was a reason for the conversion of 125,000 employees from temporary to full-time since October 2020, overtime is a fraction of overall costs. Increasing the number of full-time employees makes it more difficult to adjust to changing market conditions, since it is harder to terminate them. DeJoy also has complained about having to increase pay to account for inflation, but that is provided for in the contracts with these permanent employees that was agreed to by the USPS. Moreover, this massive conversion occurred when the Postal Regulatory Commission determined that efficiency and service performance was higher in 2012 than it is today.   

Despite numerous reports of excess facilities at the USPS, something else not addressed in the Postal Service Reform Act, there are not only no plans to close facilities but also billions of dollars being spent to expand current facilities or build new facilities. It is difficult to see how pursuing an expansive strategy makes financial sense in the face of declining mail volumes and stabilizing package volumes. Although the USPS has been quite reticent to provide details about its “network plan,” it would appear to envision displacing and replacing activity currently performed more efficiently by private sector partners. Once again, higher costs will be passed on to customers and it will be much harder for the USPS to keep its finances afloat.

Finally, to further compound its fiscal woes, the USPS still seems interested in expanding its activities beyond delivering mail and packages. The Postal Service Reform Act allowed the USPS to provide only non-commercial governmental non-postal products and services and then only if they provide a “net contribution” to USPS finances. This provision of the legislation was one of the reasons that it received majority support from Republicans, since it is intended to prevent the USPS from getting into banking and similar commercial businesses, which has been supported by President Biden and members of Congress like Sen. Elizabeth Warren (D-Mass.). Postal banking was rejected in the December 2018 report of the Department of the Treasury Task Force on the United States Postal System and the GAO’s May 2020 report, “Congressional Action is Essential to Enable a Sustainable Business Model.” When the USPS inspector general suggested in January 2014 that the agency could provide financial services, the USPS noted its “core function is delivery, not banking.” This concept should be buried forever.

The USPS should focus on its core mission and stop delivering disastrous financial results. Time spent on areas like postal banking and package fulfillment, which are both well-served by the private sector and outside of the USPS’s statutory delivery mission, utilize capital that could otherwise help the organization’s sustainability or keep mail and package rates affordable.    

Tom Schatz is president of Citizens Against Government Waste.

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