In the 2012 fiscal year, the United States Postal Service has reported a loss of $15.9 billion. This is an unsustainable financial trajectory and policymakers in Washington D.C. have realized this. In the face of this impending crisis for the USPS, many solutions have been proposed, but none have caught on. The reality is that Congress lacks the ability to institute structural reforms in time to stave off a default. The best option is total privatization.
The financial difficulties of USPS are rooted in two base problems. First is the unique structure of the organization. The USPS is legitimated by a clause in the Constitution that states the government has the right to “establish Post Offices and Post Roads” — commonly interpreted throughout the years as a right of all Americans to have access to paper mail, regardless of geography. Congress controls USPS and directs them to complete this task. Yet, USPS receives no federal funding and relies on stamps and other services for revenue. This combination of subordination to the federal government and financial self-sufficiency has created many problems. The required payments to pre-fund retiree health benefits is an exemplary case. These payments are unique to USPS, and alone make up $11 billion of the losses in fiscal year 2012.
The second problem is the Internet. The proliferation of e-mail corresponds directly to the decreased use of paper mail, the USPS’ primary source of revenue. This means that without federal support, the USPS balance is never leaving the red.
Privatization would allow new management to institute dramatic reforms in a way a partisan legislature never could. However, a newly privatized USPS may be financially unwilling, if not unable, to provide the services currently provided at a loss by the USPS, namely mail delivery to remote areas. If the government is to continue their moral mission to provide the basic right of mail to everyone, they will need to subsidize the high cost of delivery to remote areas for a newly privatized USPS — otherwise the new USPS may decide delivering to these isolated regions isn’t an option if they’re trying to turn a profit.
With the growth of e-mail and the decrease in the volume of mail and revenue, the only way to save the USPS from liquidation is privatization. Although access to mail is considered a basic right of U.S. citizens, the USPS is following an unsustainable fiscal model, and has lost $25.4 billion between the 2007 and 2011 fiscal years. Although privatization may result in more expensive mail, especially for isolated geographic areas, it is necessary for the USPS to survive rather than vanish in bankruptcy. The federal government will need to shoulder some of the burden of the new USPS by subsidizing mail delivery to high-cost areas. Ultimately, as snail mail becomes increasingly irrelevant and more people gain access to the Internet, a privatized USPS will be better able to adjust to the climate of decreasing revenues and search for new ways to serve the American people without running an unsustainable deficit.