U.S. Post Office $174 Billion Lost Since 1800

The United States Post Office (USPS) is one my favorite agencies to talk about. In an analysis I did I examined how much the USPS actually lost since 1800. I was able to get a hold of this USPS data which shows the annual expenses and revenues since 1800. When you add up the losses (not adjusted for inflation) they amount to $33 billion. I used the WestEgg inflation calculator and figured out a factor to use for every year to figure out what the yearly loss or gain would be in 2012 dollars. When you inflation adjust the cumulative amount since 1800 it comes out to be $174 billion. This figure is really understated because the U.S. Post Office doesn’t pay taxes if it buys trucks, tires, or other equipment.

In my analysis it was interesting to find that the number of post offices actually peaked in 1901 at (76,945). These days (2012) there are around 26,755 post offices. The peak year for the pieces of mail was greatest in 2006 with 213 billion pieces. What is interesting is that throughout the 1990’s the amount of mail increased even as the internet was coming around. However it wasn’t until 2002 until the number of mail pieces actually decreased. The pieces of mail will only continue to decline in the future as more people use e-mail, texting, and cell phones which are all forms of communications that are in competition with snail mail. 

If any rational person heard a government organization had lost $174 billion since being created what would they do? Most rational people would say can we improve it an economist or business person would say can we eliminate it. Meanwhile in the private sector FedEx in the past 3 years has earned over $4.6 billion in profits. UPS in this same time period has made over $9 billion.  Most rational people would ask if we really need the service. In the case of the post office it is a no brainer given we have companies like UPS, FedEx, DHL, and many more logistics companies. What is even more bizarre is that if mail was privatized it would actually increase government revenue since the added profits private companies would be making would be taxed. Also the 546,000 employees that currently work at the U.S. Post Office could apply for jobs in these private logistic companies. Private companies would hold these employees to a higher standard. For instance back in 2011 we all remember the U.S. post office employee who was caught defecating in a yard who then was placed on administrative leave (this employee would be fired immediately in the private sector).

Why not let the private sector take over an area the government can't seem to handle?

Post Office Default, Do We Really Need USPS?

In what seems to be great news the Post Office announced that it will default on its $5.5 billion payment for future retiree health benefits. The United States Post Office (USPS) will also owe $1.5 billion in workers compensation and millions in interest payments. As I have pointed out here, here, and here despite the USPS best efforts of cutting jobs, talking about cutting back services, and closing down certain facilities USPS will lose $14 billion this year. What is even worse is that since the inception of the United States Post Office has lost $33 billion and counting since the founding in 1789. This figure actually understates the true amount spent since USPS is exempt from paying taxes on things like vehicles, tires, and other goods they purchase.

Technology like e-mail, online payments, and even cheap cell phones made sending things snail mail obsolete. If grandparents want a picture of their grand children parents no longer have to go to Eckerd’s (now CVS) or Walgreens to develop pictures and then send them in a package to their loved ones. Today in a few seconds people can snap a picture and e-mail it without any postage. Banks and payment transfer companies are also to blame since they developed ways for people to transfer money electronically. The Federal Government is going to stop mailing paper checks next year for people who receive Social Security and instead pay direct deposit or by debit cards.

Why USPS is still operating is beyond me. People worry if USPS was no longer in business who would deliver the mail. My answer would be FedEx, UPS, DHL along with other logistics providers. Cities or neighborhoods could decide who they wanted as their provider.  Have you ever heard about how great of an experience someone had with USPS? Profit seeking companies like FedEx and UPS have to make sure they not only deliver in an efficient manner but also create shareholder value which makes employees accountable. USPS employees are not held accountable and not until 2008 was an employee actually laid off.  USPS has 546,000 employees in 2012 which is a large decrease from the 752,949 employees it had in 2002. If USPS were to disband other companies like FedEx, UPS, and DHL could absorb these employees and would need more since they would have more things being delivered. Profit seeking companies would also want to make sure people in rural areas got their mail or else they couldn’t make profit. Given how inefficient USPS is not only would profit seeking companies need more help they would be hiring workers who would be paying more in taxes, and the companies themselves would have more profit which means they would pay more in taxes.

Do people really even need mail besides for sentimental things considering people e-mail, scan, fax, or call us if they really need something important? Not having to get all those advertisements in the mail would be a positive thing but of course we just trade off those for spam.  I really can’t understand why anyone with a pulse would want USPS to still exist given the billions that is wasted, the inferior service, and the lack of accountability.

Post Office Hunger Strike and Time to Privatize Mail

Postal workers have now gone on a hunger strike to protest the cuts that will be made to the United States Post Service (USPS). Yesterday 10 postal workers stood outside in front of the U.S. Capitol to protest that Congress has done little to help the situation. Representative Dennis Kucinich help lead the rally of the so few. Kucinich made a statement that he would help try to strengthen the Post Office and do what he could to try not to privatize it.

The Post Office is expected to lose $14 billion this year. Last year the Post Office lost around $8.3 billion. With e-mail and texting becoming a common place fewer and fewer people are sending letters. In 2006, Congress required that USPS prefund their retirement health benefits (like most private companies already do) which cost $5.5 billion per year. In order to cover some of these costs the postmaster general Patrick Donahoe has mentioned getting rid of Saturday delivery. The Post Office has a history of threatening to cut Saturday delivery as mentioned in this article however only did it once in 1957.  This of course will help USPS lose less money however won’t put the post office in the black any time soon. As I mentioned in this post last year since the Post Office opened it has lost more than $13 trillion.

Free market solutions like letting FedEx, UPS, DHL and others take over will work wonders. People point out the jobs that will be lost at the USPS if we were to privatize mail. UPS and FedEx would be hiring the qualified workers from USPS to help them with the increase in business. People would save hundreds of hours every year for not having to deal with USPS. Also the increase in business for companies like UPS and FedEx would cause them to earn more money which would lead them to pay more in taxes. At the same time the taxpayers would be saving over $14 billion per year. Other countries like Germany, The Netherlands, and even the EU mentioned in 2008 that they wanted to eliminate national monopolies on the mail system by 2013. Let us let free markets work when it comes to mail.

Postal Layoffs and Time to Privatize?

The U.S. Postal Service (USPS) announced plans to lay off 120,000 people. Even though USPS has been around since 1775 it only started to lay off people beginning in 2008. The Post Office is constantly burning through money and at this point they are trying to minimize loses. Next month the Post Office will become insolvent. This is actually positive if we are closer to privatizing the mail system. The number of mail items second through the post office has dropped over the years. The main reason for this is the internet which allows people to send electronic mail for a minimal price.

USPS is now trying to figure out how to remain solvent. Cancelling Saturday mail has already been discussed although I don’t that will do much to solve the major problems of: pensions, compensation, or accountability. In terms of pensions USPS in June of this year had to suspend employee contributions to try to save $800 million. USPS claims that they have been overcharged for pension obligations and are due $75 billion from the government. In 2009, an average postal worker made $79,000 in total compensation (wages + benefits). Economist James Sherk found that postal workers earn an extra 15%-20% per hour than workers in the private sector.

The Post Office employs around 560,000. This means the Post Office spends $28 billion a year on salaries. The total cost is more if you include providing benefits for workers. The Post Office until three years ago had never laid anyone off in their almost 240 year history. The Post Office has little to no accountability for its workers. Take the example in May of a mail carrier in Portland, Oregon who defecated in a yard while on his mail delivery route. The worker was put on unpaid leave but was transferred to a different route. If this happened at UPS or FedEx the worker would have been fired the day it happened.

Hopefully, more people and politicians will realize USPS can’t continue. In 2010, the Post Office had a loss of $8.5 billion. If we had FedEx and UPS delivering mail not only would we get rid of the deficit of the USPS, but more revenue would come into the government since FedEx and UPS would have to hire more workers who have to pay taxes. The idea is to create more productive use of assets and more tax payers.

Post Office Cutting Service = Time to Privatized

The U.S. Post Office is now considering closing 3,700 post offices. The post office last week said they soon they will cut Saturday mail service and could go to mail service three days a week by 2025. In 2011, the Post Office is expected to lose $8.3 billion. The U.S. Post Office employs over 583,000 people. What is really bizarre is why so few people are talking about getting rid of it or drastically scaling it back. The Post Office has been in business since 1789. If you added took the income-expenses since 1789 the total $13 trillion. Yes $13 trillion or a little less than the total U.S. GDP for one year has been spent on mail. So the United States would have been better off never have creating the Post Office and using a private organization.

A no brainer is to let the government to privatize the mail and let FedEx and UPS to work their magic. FedEx moves 3.4 million packages a day. UPS delivers 15.6 million packages and documents a day. I am here to inform you that these companies also make a profit. UPS made a profit in 2010 of $3.49 billion. FedEx made a net profit of $1.18 billion.

People might say something like “I don’t want a business seeking profit delivering my mail”. However, we meet people every day in profit seeking businesses that deliver high quality with low prices. If anyone has been to the post office they know of the long lines, employees who seem too busy to help you, and inferior service. I never notice long lines at a FedEx or UPS store. As a general rule I don’t notice any long lines at profit seeking entities. An employee that has worked for the Post Office has never been laid off. What incentives do Post Office workers have if they can never be fired?

On the books is a law that makes it a felony to allow anyone to deliver first class mail except for the U.S. Postal Service. It is somewhat strange that this is still in effect today. FedEx and UPS handle millions of pieces of mail. I see no reason why UPS or FedEx wouldn’t be able to handle the job of the U.S. Postal Service since they already handle millions of pieces of mail every day. Communities could work deals with any mail carrier they wanted for their mail like they do with trash and recycling. More than half a million people would be out of work if the U.S. Post Office was shut down. However, some of these people could work for a for-profit company and be required to create value. Some of these people would have not had jobs for long if they spent one day in the private sector.

Very few people I think realize how much money the U.S. Post Office is losing every year. If the American people realized how much U.S. taxpayers are subsidizing the mail I believe they would be more in favor with getting rid of it and privatizing it. The Post Office could have never in a million years dreamed of FedEx or UPS.