For the first time in many years, ordinary folks mailing letters and cards had their day in court and won.
On Sept. 13, a federal appeals court ruled that the United States Postal Service’s 10% stamp hike was illegal. Judge Neomi Rao rightly noted that “although the five-cent stamp price hike may have gone unnoticed by many, the American Revolution was fomented, in part, by ordinary people who objected to taxation through stamps.”
The USPS argued that the price increase, the largest since the Civil War, was needed to stem the tide of red ink crippling the agency. But taxpayers and USPS consumers will only be off the hook once the agency gets serious about significant operating reforms. For the sake of millions of Americans piling birthday and well wishes cards in their mailboxes every day, the agency must get its act together.
With $70 billion in net financial losses over the past decade, it’s hard to deny that the USPS has a significant problem on its hands. According to Postmaster General Megan Brennan, the beleaguered agency will run out of cash by 2024, absent significant changes. Brennan promised a comprehensive 10-year business plan by the end of the summer, and USPS consumers and federal taxpayers have yet to see the fabled document. But one thing Americans can count on is a yearly hike in the price of postage.
In January 2019, the USPS hiked the price of first-class stamps (read: small, regular mail) from 50 to 55 cents. Evidently, the agency has the chutzpah to make its consumers pay for its refusal to embrace serious changes.
These price hikes will make less and less of a difference as first-class mail volume and revenue dwindle relative to other parts of the mail business. In fiscal year 2018, total revenue from single-piece letters and cards (like that letter to Grannie) made up less than 13% of all USPS revenue. Even assuming that no stamp buyers were put off by USPS’s 2019 price hike, the gambit would raise postal revenues by less than $1 billion per year, a fraction of a percent of the agency’s unfunded liabilities, which are currently north of $120 billion.
But postal leadership should be careful about what they assume. The USPS inspector general notes that the decline of traditional mail has been “coinciding with the pervasiveness of electronic communication media like e-mail and social media, communication channels that are often very inexpensive or even free.” Each additional stamp price hike makes the digital domain all the more attractive to cash-strapped consumers.
Instead of hoping that consumers will stay by its side even as stamp prices go through the roof, the USPS should embrace cost-cutting reforms that will save consumers and taxpayers billions of dollars down the road. For example, the agency could probably rake in more money by consistently using its own scheduling tools than it could with its failed 2019 price hike.
The agency’s F1 scheduler is capable of efficiently matching the 500,000-strong USPS workforce to locations and job functions with the most need, but inconsistent use of this tool has led to missed opportunities and rapidly escalating costs. Similarly, holding middle-mile contractors accountable for missed deadlines, overbilling, and shipping snafus could save the USPS more than $1 billion per year, even if current reform attempts are an abysmal disaster.
The Taxpayers Protection Alliance tallied up total potential savings from proposed cost-cutting measures and found that the agency could save more than $3 billion per year just by being more efficient.
The USPS undoubtedly has its work cut out for it as it tries to reverse course and pay down unfunded costs greater than $120 billion. But targeting runaway costs is a far fairer and more practical approach than gouging consumers who are sending letters to their dear aunties. But for now, letter-senders across America can thank the courts for a temporary reprieve from USPS shortsightedness.
Ross Marchand is the director of policy for the Taxpayers Protection Alliance.
