What can you get for 44 cents these days? You can get a fun-sized candy bar. Or 3 ounces of coffee. Or maybe one AAA battery, if it's on sale. Or, you can have someone come to your house, pick up a letter you've written, take it 3,000 miles across the country within a few days, and deliver it to your Aunt Millie's door. That's something you can get for 44 cents.
You may have heard that the United States Postal Service is having financial problems and that its service might be significantly altered as a result. According to its latest annual report, the volume of mail it delivered declined 13 percent last year, from 203 billion pieces in 2008 to 177 billion pieces in 2009. This dramatic drop was partly due to the recession, which meant that companies were saving money by mailing out fewer catalogs and solicitations, and partly because of the growing use of e-mail. In any case, it meant less revenue. Now, the USPS has removed mailboxes in many places to simplify its collection task, and some post offices are closing. It's also seriously contemplating doing away with Saturday delivery to save money. There are many reasons why its situation has become so dire, but mostly it's because all of us Americans have come to expect that we'll receive the service the Postal Service provides at an absurdly low price.
We spend a lot of time debating the proper role of government in our society, just as we should. What we see over and over again is that the market does a lot of things well, but there are things it does poorly, and some things it doesn't do at all. Just as conservatives rail against big government but are happy to get their Medicare coverage and Social Security checks (and drive on government roads, and get their water through government pipes, and have their streets cleared by government snowplows...), I haven't seen anyone claim that we should just shut down the Postal Service and leave mail delivery to the market's invisible hand. Even conservatives know that would never work. And despite its monopoly on mail delivery, when you actually look at the facts, it's hard to avoid the conclusion that the USPS is a pretty impressive operation.
When some people hear about the Postal Service's current struggles, they shake their heads knowingly, with the old clichés about inefficiency and sloth never far from their minds. But the truth is that although you might have to wait in a long line if you're bringing your tax return in at 10 minutes before closing on April 15, the post office actually provides an extremely reliable service, at ridiculously low prices. Let's keep that 44-cent letter in mind as we consider the alternatives. If you're in New York, and you want to mail that letter to Aunt Millie in Los Angeles with FedEx, it'll cost you $10.31 -- over 23 times as much as it will with the post office. UPS, meanwhile, charges $11.20. And that's for the slowest service it has, which will take about the same amount of time as the post office. But what if you needed to get that letter to Aunt Millie right away? For next-day delivery, both the UPS and FedEx Web sites say they will charge you $49.56. The post office? That'll be $18.30. And unlike the private companies, the post office doesn't charge you extra to deliver to a residence. Not only that, in a year they deliver nearly 600 pieces of mail for every man, woman, and child in America, with fewer than half the number of employees Wal-Mart has.
The dramatic difference in rates is one of the reasons FedEx and UPS are profitable companies, while the Postal Service is not. The Postal Service has another challenge: Though it is a quasi-private agency, controlled by the federal government but largely responsible for paying for its own operations, it performs services that a ruthlessly efficient private corporation would have jettisoned long ago -- or never attempted in the first place -- like rural mail delivery. In fact, UPS and FedEx use the Postal Service to do their deliveries to some remote addresses, since it isn't profitable to do it themselves. As one retired postal worker wrote to FiveThirtyEight's Tom Schaller, "Nearly every time I was in a rural post office FedEx or UPS would show up, bring a load of packages to be delivered and pay the postage to have them delivered. I asked a few Pm's [postmasters] about it, they each explained that it was cheaper for them to pay the Postal Service to deliver the packages than to have to drive their trucks sometimes miles into very remote areas."
The Postal Service delivers to those hard-to-reach areas not because it's profitable but because, as an arm of the government, they have no choice. They can't say, "You may be an American, but you live in a rural area, so no mail for you."
That costs more money than it produces in postage, and the USPS has another financial problem, as its leadership never tires of reminding anyone who will listen: Congress requires the Postal Service to prepay for its retiree health benefits, something that no other government agency or private company has to do. This means it has to set aside billions of dollars every year for future benefits, instead of putting that money toward things like paying off its debt. Though USPS has cut costs fairly significantly (its operating expenses were $71.8 billion in 2009, down from $77.7 billion in 2008), it needs to find still more areas to cut to keep from adding to its debt.
If you want FedEx or UPS to deliver something for you, and you're willing to pay the extra money it costs, that's great. But they're never going to get in the business of delivering everybody's mail, whether it's five days a week or six. It just wouldn't be profitable enough. For that service – and especially if we don't want to have to pay $10 or $20 every time we mail in our electric bill – we need the government to do the job.
My neighborhood recently lost its mailbox, which was the cause of much grumbling all around. And I wouldn't much like losing Saturday delivery. But even so, the Postal Service still gives Americans – all of us – a pretty terrific service, at an incredibly low price. We assume it will always be this way, because it's always been this way. And maybe it will. But if it ends up costing a bit more than 44 cents, we should remember what the alternative is – either a dramatically more expensive service or no service at all.
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