Memo to USPS: Don’t Slow Down the MailJune 24, 2021
Visitors to the James A. Farley Building in Midtown Manhattan, which formerly served as New York City’s main United States Postal Service (USPS) branch, will find these iconic words inscribed on top: “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”
This assurance has served as the unofficial moto for the USPS, which prides itself on speedy delivery even if there are places and periods where they fall short. However, this reputation for speedy delivery could soon be a thing of the past. Newly proposed USPS service standards would mean that roughly 40 percent of first-class mail (e.g., letters to Granny) could slow down by up to two days.
While USPS leadership believes that these changes will save money, slowdowns are likely to backfire and contribute to long-run losses. Real reform requires across-the-board cost cutting, rather than longer waiting times for mail.
The USPS has been in rough shape for a while now. America’s mail carrier lost $9.2 billion in FY 2020 and has accumulated more than $80 billion in net losses since 2007. Total debts and unfunded liabilities are approximately $160 billion.
Wiping out all of this red ink would require raising the price of each and every stamp printed in 2020 twenty-fold. This is obviously not an option.
The USPS recognizes that the status-quo is unsustainable and announced a 10-year plan in March to stem the bleeding. In the blueprint, the agency argued that current service standards are unattainable and made the case for changing the current 1- to 3-day service standard to a 1- to 5-day service standard. The assumption baked into this proposal is that any damage in the agency’s reputation and resulting loss in patronage will be more than offset by cost savings.
But the USPS is unlikely to find a panacea in the degradation of its service standards. The National Postal Policy Council notes, “The Postal Service’s own estimate (which in past cases have materially overestimated the actual cost savings it experienced) is that the net effect of the service standard degradation would be an annual increase in net income of $169.5 million…That equates to only 0.23 percent of the Postal Service’s annual $73.1 billion in revenues.”
In other words, America’s mail carrier is risking its entire reputation on a change that would barely add to USPS coffers. The agency already received a glimpse of the popular backlash to mail slowdowns during the height of the pandemic. The quarantining of thousands of workers led to millions of mail pieces not reaching their destinations on time, resulting in blistering media critiques and Congressional investigations.
The winding down of the pandemic has led to a significant improvement in service performance but mail delivery may soon return to pandemic-era slowness if proposed service standards are implemented. Maximizing revenue over the long-term means protecting the strength of your brand, not winnowing away at the quality of the product.
There are plenty of more sensible measures the USPS could take in order to get back into the black. A 2019 report by the Taxpayers Protection Alliance (TPA) estimates that the failure to hold middle-mile delivery contractors accountable has cost the USPS at least $1 billion per year, or roughly a quarter of what the agency spends on highway contracts per year.
Though the USPS has not seriously tried to address this issue in particular, the agency has tried to “optimize” contractor routes to save money. This effort is not going well. A January 30, 2019 Office of Inspector General report found that “there were no nationwide cost savings from the HCR Optimization Initiative in FY 2017.”
The USPS could save far more money by making sure they are not overpaying for middle-mile contracts and increasing audits on this part of the delivery process. And the agency could probably save even more money by embracing a unified logistics platform as mentioned in the 10-year plan.
The USPS has a long road ahead of it to escape its troubled past. But chipping away at the agency’s reputation for fast service is not the answer. The agency can continue to deliver for the American people through cost-cutting reforms, not service degradation.
Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.