Nearly four years into the Delivering for America restructuring plan, losses are accelerating with no sign in sight of USPS being break-even. Image: Tada Images/Shutterstock.com
With the U.S. Postal Service (USPS) careening to financial insolvency, mail delivery taking far longer than it did in the 1970’s, and postal rate increases for the past four years outpacing the worst inflation in four decades, it is time for radical, holistic change.
The Elon Musk and Vivek Ramaswamy Department of Government Efficiency (DOGE) can be the catalyst for this which will be highly visible and beneficial to the public. As such, it will also spur reform at other government agencies.
While President-elect Trump said on December 16 that privatization of USPS is “not the worst idea I’ve ever heard,” a better approach is to shrink USPS to its core functions, especially delivering mail.
Simply put, no sensible investor is going to want to buy USPS as is. And fighting to change the law so USPS could be privatized is a more formidable and unlikely task than getting Matt Gaetz confirmed as Attorney General.
In its Fiscal Year 2024 10-K, USPS reported it had a negative net worth of $32.6 billion in addition to a $9.5 billion annual loss. This is despite receiving $107 billion in assistance from the 2022 Postal Service Reform Act, $10 billion in COVID grants, and an advance payment of $3 billion for electric vehicle purchases for 10 years.
Worse, USPS has defaulted to the federal government without consequence, while management audaciously demands an increase in its $15 billion borrowing limit from the U.S. Treasury. Specifically, USPS reports in its 2024 10-K that it defaulted on $12.5 billion in retirement obligations for the past three years, with a total of $27.1 billion in such defaults since 2014. On the hook for this are other federal employees and taxpayers, i.e., the rest of us.
There will be massive efficiencies and improved finances at USPS by taking the following steps.
Pension investment reform. Per its 10-K, USPS had $249.5 billion in pension assets at the end of Fiscal Year 2024, but it should have pocketed another $15 billion or more in Fiscal Year 2024 investment gains. By law, USPS can only invest these pension assets in government bonds. So, unlike state and regional pension funds which invest in a mix of stocks and bonds for government workers and teachers, USPS came up short.
It is disappointing that while USPS management makes many hard charging legislative demands from Congress, this one is far down the list. Furthermore, a 2023 study by the USPS Office of Inspector General found USPS has historically lost out on $1.2 trillion in investment gains by not being able to make conservative, plain vanilla stock-index and related investment for its employees
Focus the mission on mail delivery. While mail volume is down and projected to continue to fall, it is still quite large, at more than 110 billion pieces in Fiscal Year 2024. Since mail volume started its precipitous drop in the late 2000’s the response of USPS has been to bet the farm on package delivery, rather than to downsize and right-size its operations. The results have been disastrous from a financial and service perspective.
In October 2021 USPS lowered its standards, saying it would add an extra day to the targeted delivery time of 39 percent of mail, but deliver 95 percent of the mail in the lengthened time frame. Those standards have never been met, as repeatedly documented by the Postal Regulatory Commission.
Even before the 2021 change, mail delivery was slower than it had been in the 1970’s. Now, it is much worse. And slower mail service accelerates the decline in mail volume as customers go elsewhere.
Halt the Delivering for America Plan and independently assess it. Nearly four years into the Delivering for America restructuring plan, losses are accelerating with no sign in sight of USPS being break-even. Only a handful of USPS officials know what the plan costs and when, or if, it will show results. There must be a strategic pause until an independent assessment can be made of whether the plan makes sense.
Implement defined contribution plans for new employees. USPS’s retirement benefits have long been considered the gold standard, the best that any employee in the U.S. can expect to get. These obligations are simply not sustainable. All new employees should be enrolled in strictly defined contribution plans, with a reasonable USPS match.
Automate and end onerous labor regulations. With large volumes to be moved around at predictable, regular intervals, there are opportunities to deploy robots to make USPS more efficient. Labor agreements should also be amended so that workers can do different tasks in different areas. This will actually provide greater job security, as it will right-size the work force and ensure work for all employees.
Systematically Deploy AI. USPS collects and uses massive amounts of data. It needs to assess more rapidly what is working best, and why, so that best practices are in place throughout the organization. This will also enable USPS to thin and right-size its management ranks.
One way or another, change is coming to USPS. There is almost no conceivable way for USPS to not run out of cash in President Trump’s second term. It will be difficult, if not impossible, for politicians to justify additional abundant government handouts to USPS, after it has already gotten sizable assistance.
The time is now for DOGE to focus on USPS and for Postal Service management and employees to work together to shed the agency’s fat and make it a respected, efficient, servant of the people.
About the Author: Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.
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