ACI Reacts to Continued Fiscal Chaos at the U.S. Postal Service

Today, the U.S. Postal Service detailed a loss of $540 million in its financial report for the first quarter for the new fiscal year. Given the peculiar financial management path that the Postal Service has taken in recent years, The American Consumers Institute (ACI) is hardly surprised by the organization losing over $65 billion over the last decade.

While commonsense dictates that such an indebted operation would look inward and make it a top priority reduce its expenses by any means necessary, the Postal Service has taken the opposite approach. In fact, the USPS’ “controllable” expenses, which is measured as the cost to its products and services before factoring in any retirement benefit payments, have risen each of the last four years. Since 2014, USPS spent $274.4 billion on product costs alone. How did this happen?

A primary explanation can be found in the Postal Service’s year-end financial report for 2017. Here management cites that higher costs have been “driven by the more labor-intensive Shipping and Package business.” Because these service lines are designated as “competitive market” products, instead of within Postal Service’s monopoly charter, the USPS doesn’t have to fully disclose key financial information. So, it is ultimately impossible to quantify how significantly Shipping and Packages are adding to the Postal Service’s losses.

We can, however, verify that letter mail service is highly profitable. ACI has discussed at length the financial successes of the USPS’ core products. In 2017, First-Class mail letter covered cost by 235%.

Because of this ACI has argued that the Postal Service should not further burden millions of captive mail customers with continued price increases.  Regrettably, the Postal Regulatory Commission appears ready to reject this consumer-interested notion. A ruling last year sets the stage for dramatic price hikes on mail services for the next five years. This amounts to a simple maneuver to help pay for and keep its package business afloat.

Today’s losses only serve a stark reminder that there are alternatives. Analyzing the value of each USPS product on a standalone basis is essential to ensuring responsible management.

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