USPS’ Financials Justify the White House’s Commission to Reform the Postal System

Over the past three months, the USPS announced today that they lost an additional $1.5 billion. As total losses for FY2018 climb to $3.3 billion, USPS management continues to deflect blame as opposed to rolling their sleeves up and figuring out how to better manage their finances.

President of American Consumer Institute, Steve Pociask emphasized the need for U.S. Postal Service management to work towards solutions in order to get out of the massive debt they have compiled over the past decade. “The U.S. Postal Service has continued to lose billions of dollars each year for over a decade, totaling over $65 billion. Reform at the USPS that focuses on the necessary services that are profitable, like letter mail delivery, is a good first step to right the ship.”

The Postal Regulatory Commission recently authorized unneeded rate increases for postal products, which the American Consumer Institute ardently opposed. The U.S. Postal Service was originally created to provide letter mail service to every address in the country. This service still covers its costs at a greater than 2 to 1 rate, which warrants shielding postal consumers from yet another rate increase. In fact, looking at the U.S. Postal Service’s Annual Compliance Review, monopoly products have yielded significant profits, while competitive products like specialty delivery services appear to be under water.

American Consumer Institute has continued to address the troubling impacts of the Postal Regulatory Commission’s proposal to authorize substantial postal rate increases over the next five years. Such an exercise would unsuitably raise prices on products for which Congress has granted the Postal Service a monopoly. As a result, these core products have demonstrated proven profitability by generating an estimated $2.16 in revenue for every dollar in attributable costs. ACI has been very clear about this reality in recent filings with The Commission, however rate increases were rubber stamped.

Competitive market products like package deliveries have recently received the ire of policymakers because of the artificially low prices that USPS charges to some of the larger e-commerce companies. To be clear, e-commerce companies aren’t really to blame when they are offered a deal that some would say is too good to be true. The question lies with the Postal Service and whether it makes sense to continue to offer below market prices that fail to generate a profit, only to increase volume. It doesn’t take a credentialed economist to understand that such pricing will only generate losses and debt as package and parcel volumes grow.

The Task Force that was put together by the President to review the U.S. Postal Service and make recommendations is expected to release their analysis of the postal system soon. This report is a critical opportunity to help fix the clear problems that exist with the business model and ensure the future of letter mail deliveries that we all depend on. We look forward to their report and hope they provide real solutions and reforms that fix the existing USPS problems.

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