Article Published in the Providence (RI) Journal
Say goodbye to the 37-cent stamp. The U.S. Postal Service is fixing to raise rates again, and plans to file for an increase next year. Representatives recently announced that stamp prices are likely to jump by at least 4-cents. Apparently, a $67 billion dollar budget just isn’t enough to deliver the mail.
The cost of sending a simple letter has crept up … and up … and up. It was only June of last year when they raised the rate from 34-cents. That was the third increase in four years – and already they’re champing at the bit again.
It’s time to rein in this runaway descendant of the Pony Express. What about a price reduction instead? This would not only give Aunt Minnie a break. It could save the Postal Service from near-certain financial meltdown.
According to the President’s Commission on the U.S. Postal Service – whose sole purpose is to figure out how to fix an organization that spends money faster than Americans lick stamps – “The rising cost of operating the Postal Service is on a collision course with declining mail volumes.”
To make matters worse, USPS already owes over $7 billion to the U.S. Treasury. Indeed, if USPS were a private company, it would have been forced into bankruptcy years ago.
But the Postal Service is not a private company.
It’s a quasi-government organization with a federal-enforced monopoly. No one but the USPS mailman is allowed deliver Aunt Minnie’s letter. Consumers have no choice. And there is no competition to make USPS shape up. The Postal Service just raises rates with impunity every time the bottom line comes up a few billion dollars short.
But if the Postal Service ever wants to pay its own way, it needs to lower the price of stamps. This would force USPS to address its real problems – bloat, bureaucracy and inefficiency – by downsizing.
A cheaper stamp would give USPS a hard incentive to cut costs and streamline productivity. Private companies have done it. The Postal Service can, too.
For starters, USPS needs to lower its labor costs. Its 834,000 workers are paid significantly more than their private-sector counterparts.
Meanwhile, the Postal Service spends millions on fancy automated mailsorting equipment, which should make it easier to reduce manhours. Yet labor continues to eat up nearly 80 percent of USPS revenues. By contrast, private companies like UPS and FedEx spend about 56 percent and 42 percent, respectively, on their workforces.
The Postal Service also needs to close some of its 38,000 post offices that aren’t doing much at all – let alone making a profit. According to the Postal Rate Commission, many small post offices average less than ten transactions daily. A General Accounting Office proposal notes that USPS could save over $500 million annually by closing the 10,000 smallest offices.
One of the most egregious ways in which the Postal Service wastes money is through sports sponsorships. According to a March report by the Office of Inspector General, USPS spent $48 million over six years sponsoring activities like baseball, cycling, football and golf tournaments.
It’s common knowledge that USPS spent over $40 million sponsoring Lance Armstrong. But most would be surprised to learn that USPS recently spent over $3.6 million on the New York Yankees. With its weighty monopoly on first-class mail, the Postal Service hardly needs to be promoting itself so aggressively.
Also, USPS should stick to delivering first-class mail and stop competing with private companies – such as UPS and FedEx – in the parcel business. To compete against these more efficient organizations, the Postal Service abuses its privileged monopoly status. The artificially high rate of first-class stamps helps subsidize trucks and other equipment the Postal Service uses to deliver express mail and packages.
In addition to this cross-subsidizing, the Postal Service has many other unfair advantages. It doesn’t have to pay taxes or even parking tickets, and is free from most financial transparency regulations affecting private companies. So it shouldn’t be competing in the private sector – particularly when it helps finance these operations by raising the price of first-class stamps.
The Postal Service will never cure its financial woes by simply raising stamp prices. That will continue to be just a band-aid solution on a deep wound. What USPS needs is substantial cost-cutting reform – not another rate hike to tide it over to the next financial crisis. So let’s bring back the 34 cent stamp.
Mr. Ryan is an adjunct scholar of the Lexington Institute in Arlington, Va. He can be reached at email@example.com.
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