Have the folks who run the U.S. Postal Service heard the one about the first thing you do when you’re stuck in a hole is to stop digging? A private corporation regulated by the United States government, it’s perpetually in the red, this time to the tune of nearly $4 billion.
These kinds of numbers are unsustainable. If they continue, the service may be forced to curtail weekend service, reduce its workforce, and, worst of all, go into competition with banks and office supply chains offering payday loans and stationery alongside stamps.
That’s not a route most anyone, save for politicians like Vermont Sen. Bernie Sanders, who wants the USPS to get into the banking business, wants to go down. It’s tough enough competing against FedEx and DHL. It doesn’t need to go up against Office Depot and 1-800-CASH-USA too.
Not everything is gloomy. The USPS reported growth in its shipping and packaging business in FY 2018. Revenues were up by 10 percent over the previous year and volume up by 6.8 percent. Instead of seeing it as the good news it is, postal policymakers are thinking it shows the way to staunch the seemingly ever-increasing flow of red ink.
Here’s the secret why the USPS now has it over its competitors. Postal deliveries are made daily to just about every home and office in the United States. Since postal carriers are already making a stop, the USPS can charge less to carry packages to places where a stop is already scheduled. Unlike the big delivery companies, they’re not making special trips.
Over the last decade, the Post Office has generated more than $144 billion in revenue and $42 billion in profit from parcel delivery. That’s $42 billion that doesn’t come from first-class or bulk mail or the sale of stamps to collectors on the first day of issue.
That’s a lot of money, which is why some policymakers think the way for the USPS to get out of debt and on to stable financial footing is to increase the price for shipping packages and perhaps narrow the scope of their delivery. If they were following market principles which would suggest the better plan is to offer better, more diverse service that would boost volume and bring in even more money, they would be smart. They’re not.
What’s on the table would kill the goose that’s laying the few golden eggs lying around in the nest. Somehow policymakers have been convinced it makes economic sense to raise the price to ship something from Point A to a weigh station instead of directly to Point B. And, going forward, direct shipments from Point A to Point B will cost more too.
That’s muddle-headed thinking that will cost the USPS the very customers keeping it afloat — if that’s what its current financial situation can be called. Charging more for the same or diminished services will bring in more customers all right. They’ll just be in line at the kiosks and stores of its private-sector competitors like FedEx and UPS when then need to send a parcel someplace.
Its competitors have something to offer. Most major shippers can track packages in something close to real-time, can provide customers with personal accounts to streamline billing, give money-back guarantees when on-time deliveries are late and have a precise time of day delivery target options.
The USPS is trying to match all that, but its main selling points are still price and door to door delivery anywhere for a uniform price. If it raises the price it charges on parcel shipping, it’s giving up one of its clear advantages over the other guys.
In the real world pushing for dramatic increases in the price of one of the only profitable activities a company engages might spark a shareholder revolt. Fortunately for USPS management, it doesn’t have to deal with shareholders. Instead, it has to deal with a U.S. Senate-confirmed board of governors appointed by the president and members of Congress whose interest in postal matters is usually limited to legislation naming post offices and keeping anyone from closing any that don’t do much business.
On this issue though, they need to engage. The USPS has been the first choice for small package delivery for many decades. In 1912 Congress specifically authorized and directed the USPS to deliver all sorts of packages to our homes and our offices. It’s been bread and butter for them and it’s been one of the few government or quasi-government services on which people can rely. “Neither rain nor snow ” and all of that. It’s done this job well — and should be allowed to continue, protected from foolishness like the increase in parcel shipping prices so it can continue to do so efficiently and to the nation’s economic benefit.