With 650,000 employees, most of whom cannot even be laid off, much less fired, the United States Postal Service (USPS), the federal government's quasi-private, semi-government stepchild, is the largest federal bureaucracy in the land, eclipsing even the 611,000 civilian employees of the Department of Defense, and one of its most expensive and inefficient.
Begun in 1639, when the General Court of Massachusetts designated a tavern as the official drop-off location for overseas mail, the delivery of mail in the Colonies did not become organized until October 1774, when William Goddard, Philadelphia printer and publisher of the Pennsylvania Chronicle, frustrated with the inability of the British-run Royal Post to deliver his paper in a timely fashion, presented his plan for a Constitutional Post to the Continental Congress. The Continental Congress, however, took no action until after the Colonials won the battle of Lexington and Concord, in April of 1775. Goddard's plan was promoted heavily by Benjamin Franklin, until, on July 26, 1775, the Continental Congress appointed Franklin the first Postmaster General, almost a year before the Declaration of Independence was written, and the United States Post Office (USPO) was born.
From its birth in the late eighteenth century, through the nineteenth and well into the twentieth century, the USPO led a storied, if somewhat checkered, existence. In its heyday it adopted the motto, first uttered by Herodotus in ancient Greece: "Neither snow, nor rain, not heat, nor gloom of night shall stay these couriers from the swift completion of their appointed rounds." Renowned worldwide during that period as among the world's most secure and efficient postal services, the USPO began to falter badly at the midpoint of the nineteenth century, despite its monopoly status, established by the Postal Act of 1792.
Complaints of poor, slow service mounted, and the Post Office monopoly began to be challenged by the likes of Henry Wells, founder of Wells-Fargo, and the fabled Pony Express. The USPO's reputation had declined by 1853 to the point where the Los Angeles Star editorialized:
Can someone tell us what has become of the U.S. mail for this section of the world? Some four weeks has passed since it arrived here. The mail rider comes and goes regularly enough, but the mail bags do not. One time he says the mail is landed in San Diego; another time there was so much of it the donkey could not bring it, and he sent it to San Pedro on the steamer–which carried it to San Francisco. Thus, it goes wandering up and down the ocean.
In 1845, Congress passed additional legislation tightening the monopoly laws and establishing greater penalties for private carriers, but the private services continued to flourish, emboldened by the success of the Pony Express, which was founded in 1860. So good was the Pony Express service that even the Post Office began to contract it to carry the government mail.
Government mail service remained erratic well into the twentieth century, and worsened, even as the government tightened its monopoly on mail delivery. Subsidies, begun in the 1800s, escalated, but service continued to decline, exacerbated by the postal unions' ever-growing stranglehold on the Post Office's operations.
As service continued to deteriorate, private carriers flourished. United Parcel Service (UPS), founded in 1907 as the American Messenger Company by a Seattle teenager, James E. (“Jim”) Casey, did so well that its success prompted the Post Office to go into the parcel delivery service itself. In 1912, rural Congressmen, catering to their constituents' desire to have less expensive parcel delivery to go along with the subsidized Rural Free Delivery (RFD) established in 1896, provided the Post Office with yet more subsidies to begin Parcel Post service.
In 1971, in the face of mounting losses and growing competition during the 1960s, Congress "privatized" the US Post Office; established the United States Postal Service (USPS) as a semi-private, government-owned corporation in a vain attempt to reorganize the Post Office and stem the hemorrhaging of taxpayer funds. It didn't work. With very few exceptions, the USPS, has continued to post losses most years since its inception, even as postal rate hikes and cutbacks in service have become nearly annual events.
With the growing presence of private carriers threatening its very existence, the Postal Service began aggressively to attack competitors in the courts, sometimes to the point of ridiculousness:
In 1976 in New York, a pack of Cub Scouts tried to raise money by delivering Christmas cards: Postal Service lawyers ordered them to stop, and threatened the ten-year-olds with a $76,500 fine. A New York Times editorial regretted that the Postal Service's carriers were not as fast as its lawyers.
In yet another vain attempt to compete with the growing roster of private carriers, the Postal Service hit on the not-so-brilliant idea in 1974 of establishing so-called Bulk Mail Centers to expedite the handling of parcels. The result, after spending $1 billion (back when a billion was real money)? The Washington Post, June 11, 1974 edition noted,
The General Accounting Office (GAO) reported that a parcel "mailed the 103 miles from Pensacola to Panama City, Florida, will travel 1536 miles through New Orleans, Memphis, and Jacksonville." A billion dollars was spent to slow down parcel delivery.
Hard on the heels of a $2.8 billion loss in 2008, the Postal Service is projected to lose more than $7 billion of the taxpayers' money in 2009. These enormous losses occurred despite massive infusions of cash from the federal government. According to the USPS 2005 Annual Report, the Service received $3 billion each year in 2003, 2004, and 2005, listed as "Capital Contributions of US Government," yet the Postal Service claims they have received no "subsidies" since 1982. In his annual Statement to the Finance Subcommittee of the Senate Committee on Homeland Security and Governmental Affairs in January 2009, Postmaster General/CEO John E. Potter claimed,
The economic premise of our system, envisioned by the Postal Reorganization Act of 1970, had long been that ever-growing mail volume would produce the revenue necessary to support a mail processing and delivery network that must expand to serve up to two million additional homes and businesses each year. For more than three decades, that business model contributed to the development of a self-supporting postal system, one that satisfied the statutory mandate that it break even over time, and one that has not received an operational subsidy since 1982.
In the same address, Potter admitted that the Service is being crippled by its labor costs, which are literally out of control. The Postal Service pays 80 cents of every dollar of revenue in employee salaries and benefits. This is in sharp contrast to the less than 50 cents paid by both FedEx and UPS. In his address to the Senators, Postmaster Potter indicated that almost 10% of all revenue is swallowed up just in paying for retiree health benefits alone; a payment that, "in 2008 amounted to $7.4 billion – $1.8 billion paid to the Office of Personnel Management for current retirees, and $5.6 billion deposited into the Postal Service Retiree Health Benefit Fund to prefund future premium payments. This cost is expected to be even higher in 2009," according to Potter.
With its costs spiraling out of control, the Service is also experiencing a precipitous drop in its volume, particularly in First Class mail, which is rapidly being replaced by email, instant messaging, and even social networking sites such as Twitter and Facebook. Online billing and bill payment have nearly eradicated household bill payments by mail, traditionally the mainstay of First Class, the Service's fiercely protected monopoly. For decades now, first UPS and later FedEx and others, have steadily eaten into the Postal Service parcel market by providing faster, more secure and more reliable service than the Service can provide. Private carriers have also chipped away at Standard class, the so-called "junk mail" market segment.
In a very real sense, the Postal Service is a victim of its labor unions. Its two largest, the American Postal Workers Union (APWU), with more than 330,000 members, and the National Association of Letter Carriers (NALC), with more than 300,000 active and retired members, have together sapped the Postal Service of its vitality for decades. According to the Wall Street Journal, Postal workers
…have among the best wages and benefits in all of American life.
Most employees have no-layoff clauses, the starting salaries are about 25% to 30% higher than for comparably skilled private workers, and the fringe benefits are so expensive that the Government Accountability Office says $500 million a year could be saved merely by bringing health benefits into line with those of other federal workers.
Caught between the rock of rapidly escalating costs and the hard place of dwindling demand, there is no evident solution for the Postal Service to rebound and restore its viability. Rather than prolong the agony, and the continued hemorrhaging of taxpayer money, Congress should end the Postal Service's remaining monopoly, open the carriage of First and Standard classes of mail to competitive bids from private carriers, and take steps to begin the task of shrinking the Postal Service to a size more in line with the realities of today's mail communications market.