Last month, the U.S. Postal Service celebrated its 241st birthday and it is really showing its age. The agency has lost billions of dollars over the last 10 years and has been distracted from fulfilling its core mission of delivering the mail. The Postal Service needs a total makeover to ensure that its next birthday is a happier occasion.
Fresh off of its birthday “celebration,” the agency released its third-quarter report for 2016 and the results were nothing to be happy about. Once again the USPS lost money. And, once again the losses were more than $1 billion. The net loss of $1.6 billion for the third quarter was more than the $981 million net loss for the like quarter last year.
The loss in the third quarter marks $3.29 billion in losses in the current fiscal year and brings the agency to $40 billion in losses since 2011. The growing debt is due to financial mismanagement and lack of focus on providing its core service.
One area that the Postal Service needs to come clean about is its package delivery business. USPS management claims that its package delivery service is a success. Management brags about how much package delivery has increased and which new specialty delivery programs it has initiated. But the more services the USPS provides, the more debt it accumulates; something is not quite right. USPS has yet to release detailed numbers about the profit or loss of its grocery delivery arrangement, other than potential revenue being capped at $10 million.
The continued focus on services that have nothing to do with delivering mail is a growing problem. Whether it’s grocery delivery, financial services, or whatever industry the USPS thinks it should dabble in next, there is a growing lack of attention on mail delivery. Customers are starting to notice as first-class mail volume is down 40 percent since 2000. Slow delivery times continue to plague the agency, including a 50 percent spike in late mail arrival in 2015.
Debt has not always been a problem for the USPS. In 2006, a 29-cent “Pluto: Not Yet Explored” stamp was put onboard a spacecraft being sent to Pluto by NASA. That same year, there was no debt at the USPS. The stamp sent to Pluto set a Guinness World Record for “the farthest distance traveled by a postage stamp” but if the USPS’s debt problem worsens, it may be in line for another world record. This one it won’t brag about.
The good news is Congress has recognized the need for reform. The bad news is there’s a real danger of doubling down on the wrong strategies when it comes to the reforms that are being proposed. The recently introduced Postal Service Reform Act of 2016 is nothing other than window dressing for reform and a handout to the Postal Service at the expense of postal customers and taxpayers. There are no structural reforms to address the leadership vacuum that currently exists. The legislation raises rates on the profitable part of the USPS and it expands the non-postal services. These “reforms” won’t improve the business model.
Conversely, the legislation financially rewards the poor financial decisions the agency has enacted. The legislation also fails to address cost-saving measures such as eliminating Saturday delivery (which could save $2 billion per year) or purchasing new vehicles with a plan that could, according to a recent study, “generate nearly $2 billion in savings for USPS while providing a valuable opportunity for fiscal reform.”
Congress and the USPS need to focus their attention on reforms that will put the agency on the path back to doing what it is it was created to do all those years ago: deliver mail. Until then, there will be continued failure at both a leadership and performance level. That failure will lead to more losses and those losses will eventually be too much for the agency to undertake, exposing taxpayers to a potential bailout of the USPS.
They say you can’t teach an old dog new tricks, so maybe it’s time the USPS heeded that phrase by ending the continuous experimentation in new services, and instead simply focused on the core mission of delivering the mail.
