President Trump has threatened to cut funding to the already troubled U.S. Postal Service. He wants it to raise rates for certain commercial retailers, particularly his longtime enemy Amazon. He plans to reach further into the day-to-day operations of the USPS via his appointment of ally Louis DeJoy, a businessman without experience with the service.
The argument that the USPS is too large has been around for decades. In 2011, there was a plan to close 3,653 post office locations. Members of Congress worked, successfully, to kill the plan. However, Amazon.com Inc. (NASDAQ: AMZN), FedEx Corp. (NYSE: FDX) and United Parcel Service Inc. (NYSE: UPS) have grown enough that they have taken on many post office functions. The use of email has further undermined the need for First-Class mail.
For the quarter that ended December 31, the USPS said it lost $748 million. This was before payments made for unfunded employee obligations. The loss was on revenue of $19.4 billion. For the same period the year before, the USPS lost $1.5 billion on $19.7 billion in revenue. For the latest period, First-Class mail declined but “Shipping and Package” revenue rose. These are the areas where Amazon, USPS and FedEx have their strongest systems.
The USPS suffers from two substantial cost problems. The first is that it delivers mail six times a week. The other is that it delivers to rural areas where populations are sparse and the cost per delivery is high.
The USPS is extraordinarily large. It had 496,934 career employees in 2019. The number of non-career employees was 136,174. There are “31,322 Postal Service-managed retail Post Offices,” another way to say there are over 30,000 locations.
The USPS would not need nearly as many people if it cut deliveries to three times a week. There is also reason to think that at least 10% of its offices could be shuttered. The 2011 attempt was built around closing mostly rural and semirural offices. These obviously get less traffic than in places with more population density. When postal employees drop off mail at each home or office, there is no reason letter-sized and small packages cannot be taken away by the same person.
How many people would the postal service fire? Certainly tens of thousands. It is built on a model that is over two decades old, and that is expensive.
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