A proposal to create a “hybrid” United States Postal Service would keep postal workers on their routes while allowing private companies to compete for mail collection, transportation, and processing. Now all it needs is a divided Congress and a reluctant postmaster general to sign off on it.
A new study released today by a non-partisan Washington think tank recommends a radical departure for the struggling United States Postal Service: a public-private partnership that would open up much of the service’s back-end logistics to outside competition.
The idea to partly privatize the Postal Service has been floating around for at least a decade, and it’s been the subject of other recent studies too, including a white paper written in part by former postal employees and released by the National Academy of Public Administration; and an analysis of that paper funded by Pitney Bowes, a shipping and packaging company that would almost certainly benefit from the post office’s privatization.
But the study released today by The Information Technology & Innovation Foundation adds a bit more to the discussion.
This public-private hybrid proposal centers around private companies competing to accept, transport, and process much of America’s first-class mail. The USPS’s mail carriers would keep their “letterbox monopoly” on existing delivery routes, and the Postal Service would determine a national average for delivery costs that it would charge those private carriers.
The author of the paper, ITIF President Robert Atkinson, likens it to the break-up of AT&T in the 1980s, which allowed competition among long-distance carriers for the first time. “If you want to go to a post office in the future, you might go to CVS or a Safeway or your local bank branch,” says Atkinson. “And then they might contract with FedEx to move that mail, which would all end up at a local USPS processing facility.” From there, mail would essentially be delivered like it has been since the development of the postal service two centuries ago — but, in Atkinson’s view, at much lower costs.
That would mean a dramatically different, and smaller, USPS. Atkinson estimates that 40% of the more than 500,000 workforce would lose their jobs and possibly half of the more than 30,000 post offices would close. But he argues that some of those jobs would be made up by private carriers performing work previously done by USPS.
In theory, opening up the USPS’s services to competition would allow it to operate much more efficiently, and save costs. In its second quarter, which ended March 31, USPS lost $1.9 billion, an improvement over the same period in 2012, when it lost $3.2 billion, largely due to a reduction in operating hours and a consolidation of mail-processing facilities. Still, the Postal Service is losing $25 million a day.
“If it was a private company, it would’ve filed Chapter 11 by now,” says Atkinson.
Atkinson’s study cites numbers from the Government Accountability Office showing that contract postal units, which operate out of a primary business like a supermarket but offer many of the same products and services as an official post office, are much more cost-efficient. According to the GAO, the USPS incurred $0.17 in costs for each dollar of revenue at CPUs compared to $0.51 at post offices.
(MORE: Why Some Men Are Big Losers)
Most other recommendations for fixing the USPS’s financial problems are much less radical; many include finding new sources of revenue like shipping beer and wine, closing facilities, or continuing to pare down its workforce. On the other end of the spectrum is complete privatization, which would fully get rid of the Postal Service we know today. A hybrid public-private partnership is somewhere in the middle and is probably the most interesting proposal being discussed.
But the hybrid recommendations don’t address a fundamental issue with Post Office finances: the multi-billion-dollar Congressionally mandated payments to pre-retiree health benefits that the Postal Service is required to make each year. Proponents of partially privatizing the USPS argue that while eliminating that requirement would certainly help in the short-term, the trend lines show continued future dips in mail volume and increased use of digital communication among Americans that will eventually have to be addressed by more structural changes.
The biggest problem, however, may getting any serious reforms approved by Congress, which shows no real signs that it wants to fundamentally alter the way the Post Office operates. Postmaster General Patrick Donahoe, meanwhile, seems more inclined to continue paring back services and finding new revenue streams. In the end, a hybrid proposal may just be another interesting idea that won’t get traction. But, eventually, something will have to be done to right the Post Office’s ship.
“The reality is, this is a bit of a build it and they will come proposal,” says Atkinson. “And it may be that the USPS is as efficient as you can get. But I don’t think that’s the case. If it is, then we haven’t lost anything. USPS would get all the business. But I think the urgency will increase over time to do something. Eventually people are going to say, we have to do something really serious here. And the reality will sink in that you have to take more serious structural positions.”