The steady decline in mail volume over the past 15 years has recently kicked into high gear, potentially foreshadowing major financial problems for the U.S. Postal Service (USPS) and the demise of a communications medium that has literally knit the nation together.
Whether used to distribute government documents (e.g., driver’s licenses and court papers), for marketing and business development, or personal correspondence, a strong mail system means a strong America. It cannot, and will not, ever be entirely replaced by electronic communication.
From fiscal years 2007-22 (which begin October 1 of the preceding year), first-class and marketing mail volume fell 42 percent, a 2.4 percent compounded annual drop. For the first four months of USPS’s fiscal year 2023, it is down by 5.6 percent. The downward spiral accelerated in January, with volume falling 8.8 percent.
Two other factors make this four-month decline disconcerting. First, this year’s measurement includes the high volume of election mail, which normally would give the current fiscal year a spike. USPS projected a volume drop this fiscal year, but the decline is nearly 50 percent more than predicted even though the U.S. economy, for now at least, has avoided a recession.
The volume drop follows a decision by the Postal Regulatory Commission (PRC) to allow rate increases above the rate of inflation, which first kicked in starting in 2021. Over the past two years, the price of first-class mail has risen by 18.5 percent while the Consumer Price Index is up 14.3 percent.
There are three steps that policymakers should take to assess this situation before it accelerates into a crisis.
First, call a time out on mail price increases. USPS is a monopoly when it comes to mail delivery. It is not just that USPS’s volume has dropped, its financial losses have grown. Through the four months ending January 2023, USPS lost $2.1 billion, more than double what was projected in its Fiscal Year 2023 financial plan.
It is incumbent the cash-strapped PRC quickly study and report on the impact that rate increases are having on mail volume. If necessary, the PRC should ask for a supplemental appropriation from USPS, which directly funds the PRC, and turn to Congress if USPS refuses.
Postmaster General Louis DeJoy, who has been vocal that he will be in aggressive in pushing for higher rate hikes, should accept a timeout on the increases until such an assessment is made. An expected July increase should be postponed.
Second, USPS’s mailbox monopoly should end.
Under a 1934 law, putting items other than USPS mail in a mailbox can result in a fine for each offense. Though little known and seldom enforced, this means the neighborhood Mom who shares information about a party or the enterprising Girl Scout distributing a sales circular are both committing federal offenses, and potentially can be in big trouble.
A 2018 U.S. Treasury Department Postal Service Task Force report called for USPS to “explore licensing access to the mailbox” as one way to “extract value from its existing assets and business lines.” In doing so, Americans who increasingly rely on more deliveries at home would have a sensible and added convenience.
Third, USPS and the PRC should dramatically improve their understanding of postal costs to improve operational efficiency. A January 2014 study by A.T. Kearney, undertaken at the request of USPS’s Office of Inspector General, recommended actions to have a more rigorous analysis of granular costs and for knowing the cost of every item so that better decisions can be made.
The study found that “a modern bottom-up costing system would provide substantial and numerous benefits to the Postal Service, like those enjoyed by companies of comparable sizes. This costing system will provide Postal Service executives with common and accepted views of costs and profitability.” Nine years after the report, and with the rise of data analytics, it is time for USPS to move to this approach.
The future of USPS depends on maintaining high quantities of mail and finding ways to stabilize and even eventually grow mail volume. The above steps can be quickly and readily taken and should be before greater problems ensue.