The U.S. Postal Service’s existential problem

The U.S. Postal Service has an existential problem. For five years, the agency has flirted with insolvency. It has $15 billion in debt, its statutory maximum. According to its most recent financial statement, the USPS:

“[C]ontinues to suffer from a lack of liquidity. Cash balances remain insufficient to support an organization with approximately $73 billion in annual operating expenses. The Postal Service’s average daily cash and cash equivalents balances during the three months ended December 31, 2014 were $5.7 billion, which represents only 21 days of operating cash.”

To conserve cash, the agency has put off many capital investments. The service’s 140,000-vehicle fleet is more than two decades old and needs to be replaced. The Postal Service has not made any payments into its Retiree Health Benefits Fund since 2008, meaning its $50 billion in unfunded health care obligations are not getting any smaller. The agency has tried to shave overhead costs by not replacing hundreds of thousands of retiring employees, and closing post offices or reducing their operating hours. (Most post offices lose money.) The agency also plans to go forward with closing roughly 80 of its mail-sorting plants. If Congress allowed it, the Postal Service would end Saturday mail delivery (except for parcels).

How the agency will escape its debt and return to financial sustainability is anything but certain. The service’s existential crisis, however, goes far deeper than finances. Its very raison d’etre has disintegrated. The act that birthed the modern, reorganized USPS declares:

“The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people.”

That was drafted in 1970. Back then, long-distance telephone calls were fantastically expensive for most consumers, and facsimiles were few. Pop songs of the time, like Rod Stewarts’ 1972 hit, “You Wear It Well,” spoke of lovers writing precious letters to one another. When letter carriers went on strike in 1970, President Richard Nixon took to television to announce that he would contend with the threat. National Guardsmen were sent in to replace the wildcatters. Mail was king and the Postal Service could expect to reap profits as a monopolist.

Those days are long, long gone. As Elaine Kamarck previously pointed out on FixGov: “To understand this crisis of obsolescence, all you really need to do is ask yourself when was the last time you got an actual letter, addressed to you in the mail with a stamp on it. Even Christmas cards and wedding invitations are going electronic.” At most, 5 percent of all mail sent is personal correspondence. Magazines of all stripes (The Economist, the now sadly defunct Cat Fancy, etc.) are a mere 3.5 percent of what USPS delivers. More than half of all sent mail is advertising.

Mail is what the Postal Service does and it no longer “binds the nation…. through correspondence.” Mail today is not a communications medium; it is a broadcast medium for businesses.

Indeed, from a 21st century perspective, the USPS looks like a hopelessly retrograde enterprise. We cut down trees, mill them into paper, print words on the paper, then transport the paper all over America in pollution-belching trucks, and have people deliver them (often on foot) to 150 million addresses. Then people throw most of it away unopened. (That junk mail-thwarting companies like Catalog Choice exist testifies to the love lost for mail.)

Meanwhile, I can e-mail my sister in Ohio, text my nephew in New Jersey, Facebook message my friend in Russia and video chat with my mother for little to no cost, and without environmental damage. So why do we need a Postal Service?

To be clear, the Postal Service cannot be abolished; at least, not immediately. Many institutions’ operations remain tied to it. Local governments send jury summons, vehicle registration renewals and other important documents by mail. Voting by mail is widespread in the United States, and Colorado, Oregon, and Washington hold all their elections by mail. Package delivery in America also is deeply dependent upon the Postal Service. FedEx and UPS have postal carriers deliver many small packages to sparsely populated rural areas. (It makes no financial sense for them to do it themselves, and USPS carriers are on the route anyway.) The Postal Service also is tasked by executive order to deliver medicines in the event of a terrorist biohazard attack.

Many of the legislative reforms proposed in recent years dodge the existential question, and instead take for granted that the government should lug paper mail all over America’s 3.8 million square miles. Finding any significant reform that suits the two biggest interest groups (USPS unions and high-volume mailers) is very difficult. Senators from low-population and far-flung states tend to be especially averse to reforms that reduce the massively subsidized service their constituents receive.

But eventually a day of reckoning must come. A government operation that goes bankrupt is unlikely to be bailed out by a public who sees it as a pointless, environmentally harmful anachronism.