Dead Letters

The U.S. Postal Service's long, hard fall.

The U.S. Postal Service (USPS) did not fare well in 2012. Costs, losses, and debts rose as the volume of mail continued a decline that began in the middle of the last decade. Now the USPS is warning that without help from Congress, it will run out of money by the end of October.

In reason's May 1991 issue, Carolyn Lochhead explored the postal service's rising prices, its spiraling labor costs, and delivery trends that were threatening the system's monopoly. In "The Superior Mail," Lochhead wrote, "Labor costs at the Postal Service have spun out of control. Postal employees, with salaries averaging $42,000 a year with benefits, are among the world's best-paid semiskilled workers.…By some estimates, labor represents an astonishing 87 percent of Postal Service costs."

Twenty years later, postal employees make an average of $83,000 in salary and benefits. They still rank among the highest-paid government employees. But the volume of first-class mail delivered by the USPS has dropped 30 percent since its peak in 2001. The volume of all mail handled has dropped 22 percent since 2006.

Lochhead focused mostly on alternative methods for delivering pieces of mail or parcels to people's homes. But advances in technology since 1991 have virtually eliminated the need for certain types of physical mail.

The changes have left the USPS in a bind. Unlike most government agencies, it must pay its own costs through charges for its services; it does not receive federal tax revenue. In November 2012, the USPS reported a net loss of $15.9 billion for the previous year. It defaulted on a $5.6 billion payment into its employees' retirement health fund. It is forecasting a loss of $7.6 billion for the fiscal year that began last October.

In 2012 the USPS began a program to reduce costs by consolidating mail processing facilities. While that plan is proceeding, efforts to close post offices and to eliminate Saturday deliveries have hit political snags in Congress. An attempt to shut down up to 3,700 low-revenue post offices announced in 2012 was scaled back, instead resulting in reductions in operating hours for thousands of small rural locations.