News & Politics

USPS Drops Cost to Mail a Letter

Postmaster General Megan J. Brennan released a statement announcing a price drop for the cost of a first-class stamp. The reduction is not a noble one but merely the result of an expired surcharge originally put into place to stop the bleeding of the failing institution.

Brennan explained the 2 cent decrease will result in $2 billion in annual revenue loss.

Since 2007, the USPS has lost $50 billion, according to Chris Edwards at Cato who argues the USPS ought to be privatized.

The dismal financial performance comes despite several advantages the USPS has over competitors like Fed Ex and UPS.  “It has monopolies on first-class mail (letters under 13 ounces) and standard mail (bulk advertising items). It also has a monopoly on access to mailboxes, which is a unique protection among postal systems in the world.”

Another benefit enjoyed by the USPS is that it can borrow from the U.S. Treasury at subsidized interest rates and it pays no income taxes; yet it still loses money.

“Snail mail” use has been on the decline since the internet started booming. “First-class mail volume has fallen 40 percent since a peak in 2001—from 104 billion pieces to 62 billion pieces. That decline was driven by the rise of email, Facebook, Evite, and Internet bill paying, and the decline of printed magazines. The USPS’s financial challenges have been compounded by a legal requirement to pay down the company’s unfunded liabilities for retiree health care.”

One option for the USPS is to privatize. Writes Edwards, “Congress should free our postal system by privatizing the USPS and repealing its various legal monopolies. Those reforms would give entrepreneurs a chance to improve America’s postal services. In 1979, when the USPS— under political pressure—lifted its monopoly over ‘extremely urgent’ mail, we saw the growth of innovative private delivery firms such as FedEx.”

But it seems likely the USPS will remain on the wrong track.  Postmaster Brennan seems to think the way to stronger financial footing is with a rate hike. “To properly compete for customers and continue to meet America’s evolving mailing and shipping needs, the Postal Service needs the financial capability to invest in the future. We continue to seek legislative reforms to put the Postal Service back on a sustainable financial path, and pricing is an important component.