A modest proposal to fix the Post Office's pricing problem

After a couple of years of showing some progress in profitability, the United States Postal Service is back to recording significant losses, going a half billion dollars in the hole again last year. This took place despite regular approvals of postage cost increases from the federal government. The recent response from the Post Office has been to ask Washington to free them up to set their own prices like any other business. But this month, Uncle Sam once again shot down that idea. (Government Executive)

The U.S. Postal Service will continue to face a cap restricting its annual price increases, the agency’s regulators ruled on Friday, dealing a blow to the cash-strapped agency looking to boost its revenue as customer demand for traditional mailing services declines.

The news was not all bad for the Postal Service, as the Postal Regulatory Commission acknowledged the existing inflation-based cap structure failed to bring “increased pricing efficiency” and “has not maintained the financial health of the Postal Service.” PRC proposed to allow USPS to increase its prices in each of its offerings by up to 2 percent more than inflation over the next five years, with an additional 1 percent increase allowable only if the agency meets its operational efficiency and service goals.

So the “good news-bad news” takeaway here is that the government will continue to act as a watchdog of USPS pricing, but they’ll also continue to approve regular increases in postage prices and regulate how much they are allowed to rise. Personally, while understanding that there’s a serious problem to be addressed here, I don’t get terribly upset over bumps in the price of stamps. I remain amazed that any service exists where I can stick a document in an envelope, have someone show up on my porch, take it and deliver it to the other side of the country for fifty cents or less. That’s an unbelievable value.

But the fact that the USPS continues to lose money needs to be seen to sooner or later. Allowing them to set their own prices like any other business isn’t really a viable option because the Post Office isn’t actually like all other businesses. While there are obviously package delivery services like UPS and FedEx competing with them in certain sectors, the Post Office still retains what is essentially a government endorsed monopoly in letter delivery.

So what to do? There are some options on the table which aren’t being explored yet. For one thing, we could stop giving other countries such as China a nearly free ride. You may not be aware of it but following an agreement known as “ePacket” made in 2011 under the last administration, China can ship packages up to a certain size or weight to the United States for next to nothing. The USPS loses roughly one dollar on average for each of these packages. This policy needs to be scrapped because it creates a huge imbalance in China’s favor.

We could encourage some changes on the domestic front as well which might not only increase profitability, but customer satisfaction as well. Here’s a thought. Raise the price of bulk mailings or anything with an address that includes the phrase “or current resident.” I get annoyed every time my mailbox is stuffed with such litter. It’s obviously not intended for me and it’s the old world equivalent of spam. Double the cost of those bulk rate mailings, which will likely make advertisers think more seriously before sending them. More revenue for the USPS and less clutter to go into our recycling bins.

At the same time, lower the price of individual packages obviously destined for a specific customer. This would make it easier for small businesses to use the USPS to deliver their products as well as taking a bit of the bite out of individuals mailing packages to friends and family members who actually want to receive them.

Surely some sort of balance between “penalizing” bulk mailing and encouraging useful business deliveries and personal gift sending could be figured out. Let the Post Office make more money while having to handle less spam mail, leaving them free to focus more on mail that people actually want to receive. Is that really such a radical idea?