Skip to comments.Is rural mail delivery the real problem with the USPS budget?
Posted on 02/09/2013 1:09:57 PM PST by SeekAndFind
It's Saturday, and I went out on the front porch this morning after shoveling out from Nemo and got the mail as usual. There was an advertisement trying to get me to switch homeowner's insurance and a coupon flyer for the local grocery store. That sort of surprise waiting in the mailbox doesn't exactly get me all up in arms over the Post Office's idea to cancel Saturday mail delivery. Up until now, I’ve been assuming that the Post Office is simply an unprofitable enterprise and they may have to put trucks out on the road less often to reduce costs. I suppose I’ve been mostly in line with Jon Stewart’s rather cynical take on the subject.
I can’t believe the business model of transporting letters with vehicles across the country for forty cents a pop is failing. Sorry… where ya want me to take that? Hawaii? Yeah, no trouble. I’ll put it on a plane, get it there in two days. Uh… ya got a quarter?
But perhaps there’s more to the story than that. Doug Mataconis links to Matthew Yglesias who seems to feel that government subsidy of more expensive deliveries to rural areas is part of the rot at the heart of this business model. What was once a lucrative monopoly, according to this line of thinking, has been squeezed out of the profit margins.
But the monopoly has become less lucrative and thats not going to change in the future. Thats squeezed the budget, squeezed postal workers compensation packages, and is now squeezing the quality of nationwide mail service. As a country, we need to ask ourselves whether providing subsidized mail delivery to low-density areas is really a key national priority. Without the monopoly/universal service obligation, its not as if rural dwellers wouldnt be able to get mail, its just that they might need to pay more in recognition of the fact that its inconvenient to provide delivery services to low-density areas. Nostalgia-drenched Paul Harvey Super Bowl ads aside, its not the case that rural Americans are unusually hard-pressed economically or are disproportionate contributors to the economy. They are, rather, the beneficiaries of numerous explicit and implicit subsidies, of which the Postal Services universal service obligation is one.
Doug seems to agree:
Most of the complaints one hears about privatizing first class mail and ending the USPS monopoly on its delivery center around the issue of what is to be done about delivery to rural areas. The basic idea behind is that it shouldnt cost rural customers, or those who want to correspond with them, more to send first-class mail than it does to send first-class mail from one major city or suburb to another. Theres no economic rationale for this kind of policy. Indeed, it exists nowhere else almost nowhere else in the delivery business right now. If you want to send a package via USPS, you are generally going to pay based on where youre sending it to. UPS prices its delivery services in much the same manner. The only place you see flat-rate pricing is in things such as overnight mail, which is based on an entirely different kind of business model from regular package shipping and for which the customer is paying a premium for the convenience of next-day, or 2nd-day, delivery of something that would ordinarily take a few days longer.
I’m no package delivery expert here, but I’d always sort of assumed that the United States Post Office was pretty much designed with an untenable business model baked into the cake. It’s something which is mandated by the Constitution, thereby bringing the government into the mix, but it’s being expected to run at a profit while conforming to a business model which no sane, private business would ever consider. It costs more to drive a letter or package fifty miles out into the boonies than it does to simply get it to a commercial hub in a city or suburb with the bulk of the parcels. If you charge the same amount for all of the letters, somebody is getting more value for the same price point than everyone else, simple as that. I suppose you have to average all the deliveries together to come up with a flat price which keeps you in the black, but it’s got to be one hell of a lot more than fifty cents per letter.
With that in mind, it’s hard to see how eliminating Saturday delivery does much to address the real problem. You’re still running the same losing business model… you’re just losing money more slowly by doing it one less day per week. I’m still not entirely opposed to just having the Post Office jack up the rates far enough to make the service profitable. If it costs more to mail junk – particularly bulk advertising and such – people might think more carefully about what they are mailing, rather than flooding our boxes. Exceptions could be made for free or low cost postage for the mailing of payments to utilities or answering required government correspondence. But do you really think it’s reasonable to be able to send a letter from Virginia to Oregon in two days for four bits?
Its the fault of the bitter clingers....again.
Haha, no, that’s not the answer. Why nothing mentioned about the bloated pension funds? (Someone had to bring it up in the comments section of that article; another commenter posted about heavily-discounted junk mail rates.)
The Constitution only “empowers Congress “To establish Post Offices and post Roads”. It does not say it must run the Post Office!
I am not sure how this would work. If you live in the country and want to mail a letter somewhere, how could you possibly know how much it would cost? Every letter would have to be taken to the post office to determine the cost.
The postal service would be making a profit if it hadn’t made big promises to the union. Had they paid normal private sector wages there would be no problem. Idiots like this writer should do something productive for a living.
If everyone used the post office to send each other first class letters instead of sending emails or text messages, the post office might even break even. My neighborhood letter carrier told me that about 85% of his mail volume is bulk rate junk mail. As he put it, “Without the junk mail I wouldn’t have a job”. And bulk mail rates are way lower than first class.
Time to just disband the post office. Person to person communications have moved on to other technologies. Want to send something physical? Then pay FedEx, UPS, or someone else to deliver it. Delivering “thoughts” via email is cheap. Delivering real tangible stuff isn’t.
I would support cutting delivery back to, at most, twice per week. Even one delivery per week wouldn’t really impact me, other than perhaps to make the occasional birthday card late depending on timing.
I worked for the Post Office for a few years. Every year management was given a bonus at Christmas. It didn’t matter if they were losing money or not.
Why would a business that’s losing money pay a bonus?
Sorry for shouting but it's clear that, without exception, private enterprise always beats a government-run entity. Look no further than public schools compared to private schools. Likewise, the artifice of the taxpayer-funded Postal Service stifles what would otherwise be a very efficient, cost-effective delivery system with the likes of FedEx and UPS going head-to-head in a free market to offer consumers real value.
No the biggest problem with the post office is that the older workers all OWN jobs and negotiate their work. Make everyone a regular employee, get rid of the union, and treat the temps right and there would be a big profit.
I wonder whether the current rate of 46¢ for the first ounce is too low. To deliver a one page letter to the next town, UPS quotes $11. To send it to NC costs $16.
“The trouble is called JUNK MAIL , raise it to first class postage and watch the profits go up. How many pounds of paper thrown away each year ,that is never read ?”
Profits go up? More likely the post office loses what little it currently makes from junk mail. Does anyone actually think that the junk mailers will pay first class postage rates? Most of these advertisers are probably already wondering if their current junk mail advertising campaign is actually generating enough business to justify the cost. Why would anyone think that the junk mail business is not sensitive to the cost of postage?
From my point of view, the post office should charge $10 postage for every advertising piece - especially the credit card applications! I’m opposed to chopping down trees to make paper to make junk mail to fill landfills. And I’m a conservative! We are currently using tax money to subsidize the junk mail industry.
The airlines did that a while back too. “Paying to fail” (i.e. management) is certainly not uncommon.
Thomas Jefferson feared that the postal service would become a source of patronage and a waste of money. Jefferson also expressed doubt at granting Congress the power to designate post roads, as he considered road building to be a state responsibility.
The real problem: the USPS board of directors (whatever called) refuses to set prices at viable rates.
I don’t understand why the post office needs to deliver to each residence address. Delivery to a neighborhood dropoff should suffice, with residents going there to pick up their mail. This can save a lot of money. If a dropoff point is within six to ten blocks, that is walkable. For those who argue on behalf of handicapped or others stuck in a residence, same rules apply as to how they obtain food and other goods via secondary help.
I also agree that the business model should change, charge more for expensive delivery destinations. And charge more for junk mail; I hate the stuff.
For personal mail I might agree, but business mail IMHO still needs to be 5 days a week.
That makes sense. It would be easy enough to split addresses into residential and business addresses similar to what UPS or FedEx does.
You need the post Office. I worked for overnight delivery. You do not want them running the post office. Your in la la land. Politicians screwed the post office by allowing Fedex boxes in the post office area by corrupt officials. You do not put your competitors box in your business property. You have no idea all the little tricks. These big companies will run it for expensive profits. Do not think they are going to charge cheaply. Once the post office is gone your screwed.This is their master plan orchestrated by powers that be to get rid of the post office. There is a step by step plan to slowly piecemeal till it does not exist. Save the post office.
So-called “junk mail” actually subsidizes the rest of it. It’s cheaper to mail but more profitable to the postal servicd because the mailers get discounts to presort the mail, sometimes down to delivery sequence, tray it, even truck it to bulk mail centers or even sectional center facilities.
Raise “junk mail” to first class rates, watch all “junk mail” totally disappear and watch first class quadruple if the USPS even survives it.
Your sentiment is a widespread one, but it’s a complete misperception, usually perpetuated by newspapers who see direct mail as competition. How about going after them for the several pounds of mostly unwanted junk in their Sunday edition? Why is that less obnoxious?
The real problems began with the US Postal Service when the Postal Union was allowed to form.
That was back when virtually employees were US military veterans.
Try to find a Postal employee today that is a Vet and/or a real American.
Everyone’s zip code could have a one letter prefix. Rural zips would get a B for bumpkin and everyone else’s would have a C for cool. Then just apply a simple formula. B to B would cost $47. B to C or C to B would be $27. C to C would be $.05.
Of course it cost far more to send a head of lettuce from a B zip code to a C zip than it does a letter, so the cool people can expect a significant food cost increase.
The writer is an idiot and I seriously doubt he has ever put together any business plan.
Hard to imagine how I'll be screwed considering the fact that I use the post office for next to nothing. Convert a couple additional bills to epay and begin sending ecards, and I think I wouldn't have to mail more than a handful of parcels per year.
Maybe we need to consider cutting members of Congress to be in session for a period of 140 days that meets every other year, much as the Texas Legislature does.
We would all be much better off.
I ship and receive at least one package a day. Rural people buy online because whatever you want is probably not available within 50 miles. Rural packages subsidize the letters.
The problem is that the postal service has morphed into a jobs service for otherwise-unemployable drones that aren’t really up to the task. They give extra points on the exam for characteristics that have NOTHING to do with the ability to deliver the mail.
that message will be lost.. Back in the 90’s, I attended a meeting with the PMG and he said that they would not make it 20 years given the economic realities of the union contracts and the legacy retirement obligations. He was right.
The “junk mail” is what actually keeps the post office viable because most bills are paid online and that return mail (usually 1st class) has gone away. Take that “junk” away, and you got three day a week delivery with most of that money going to pay some 60 year old retiree’s Viagra and the people on the “disability” gravy train.
I don’t understand the problem, if you don’t want it, throw it out.
Won't happen. they will just migrate to a Val-Pak or equivalent.
Most of these advertisers are probably already wondering if their current junk mail advertising campaign is actually generating enough business to justify the cost.
The general return on bulk mail advertizing is 1%, and that is if you target your mailing. Blanket bulk can go as low as 1/2 of 1%.
A substantial increase in bulk mailing rates would see the Post Office lose even more.
No, it is not rural post offices or rural delivery. They are not union, although the proposals to combine routes would result in routes big enough to require union carriers. If you want to see the hole down which most of the postal money is going, please go to the post office at 14th and L St NW in Washington DC and try to do something really complicated, like buy some stamps. Rude, incompetent, lazy and did I mention aggresively rude? That any small, functioning post office would be closed to keep these clowns in velvet is a great illustration of what’s wrong.
The thing about direct mail advertising is that a.) you know exactly how much it costs and b.) you know exactly what you're getting back from it.
If it's not returning its costs and paying a profit -- you don't do it again.
Hence, almost all direct mail campaigns are proven profit-makers.
If you think postal subsidies are bad, wait until you learn about the “high-cost” component of the Universal Service Fund. The Universal Service Fund collects taxes from your phone bill (about $7B per year) and “redistributes” them to a variety of “worthy” causes. One recipient provides subsidies to “high-cost”, mostly rural, telephone companies. The most egregious is the subsidy of phone service in Maui as much as $13K/line/year.
Raise it to first class postage and a lot of junk mail will cease to exist—not a bad thing.
Then subcontract out the delivery of the actual, worthwhile mail that is left to UPS, Fedex, etc.
It wouldn’t be too difficult to get them to provide the added services needed in order to get the contracts, and the mail could still have a USPS imprint of some kind, if that mattered.
I mean this as respectfully as I can put it and I don't wish to descend into ad hominem arguments on either side. Phrases like "big companies" and "expensive profits" used in a pejorative sense are not what I expect to find here on Free Republic.
The "big" adjective is oft-used by leftists in phrases such as "Big Oil", "Big Tobacco" and "Big Pharma" with the implications that that these businesses are up to no good. Similarly, "expensive profits" smacks of language employed by Occupy Wall Street crowd when they refer to "obscene profits" or "outlandish profits". By no means am I lumping you into that group but words do have meaning and, in the spirit of true FRiendship, you might advance your case better by using terms that are more in line with the Conservative lexicon.
As for profits, as shareholder in a number of corporations, some large and some small, I want a tremendous profit from my investment. From my viewpoint, there simply is no such beast as profit too large -- call it "obscene", "extravagant" or anything else. I want and rightfully deserve maximum profits from the risk I take as a capitalist in the wonderful free market system that we enjoy here in America.
I may be guilty of missing your essential point where you advocate for the continued existence of a government-run Postal Service. But the words you happened to choose (probably with no ill intent at all) were like Kryptonite to me as one who strongly favors an unfettered free enterprise system with the role of government reduced to the extent that it can drowned in a bathtub -- and tiny one at that! :-)
Agree with the sentiment that the govt is NOT enumerated to actually deliver mail... only to provide for infrastructure so that mail can travel across state lines.
Indeed, the USPS is only treading water because they are paid by the RNC to deliver wasted and meaningless fundraisers to millions of conservatives who go.... “meh...” and then write a check directly to some tea party candidate anyways...
That's the prevailing conventional wisdom, but it doesn't take the facts into account.
Saturday is not a "slow" mail day. The volume of mail delivered is roughly the same as any weekday.
Monday is a very heavy mail day. All the letters, magazines, and junk continue to flow through the system on Sunday even though there's no delivery. Mondays are hard.
Now, as the plan goes, we will add Saturday's mail to Sunday's and Monday's and -- just like the underpants gnomes planned -- profit will result. And don't even mention three-day weekends.
The mail volume on Mondays will now be crushing. Either more workers will need to be brought in to sort and deliver it [eliminating the savings] or it will simply stack up in the P.O. and trickle out during the week as staffing permits.
Also, there is a small army of substitute carriers who work Saturdays and the regular carrier's vacation and sick days. Eliminating Saturday deliveries will cause most of them to seek other work. It's their only guaranteed work day.
This will cause tremendous problems in coverage down the road.
It's such a crazy proposal that I suspect it is just a negotiating ploy to get Congress to get off its fat ass and end the stupid health care pre-payments that are causing 90% of the losses.
Twice a week means they’d now have health issues since the normal deposit would be over 50 lbs—2 lbs of quality mail and 48 lbs of crap.
The easy answer is simply to limit mail delivery in remote areas only to once or twice a week.
That's an interesting point. We live in the suburbs and do a good bit of purchases from Amazon (out of convenience more than necessity). It would be interesting to see the full P&L for those rural post offices because it might be counterintuitive to many for the reason you stated.
You’re on it. In my office, Saturday is the second biggest, if not the biggest day of an average week. This week I did 10+ hours on Monday, and 9+ today. The rest of the week was lighter, but we just closed a “sortation” facility and sortating has been moved to another location, trucks ran differently etc. I can’t wait to add Saturday to Monday. We will have to leave stuff behind, so we can make it back before dispatch.
All that said, the USPS would GREATLY benefit from a business friendly Administration, and some economic growth. THAT is the real problem. With the USPS. Really, actually, for real, honest economic growth, would benefit everyone, and the USPS would be there working, and back to breaking even.
Cutting Saturday delivery is another hair-brained idea by someone way up in the food chain paid to come up with ideas. They propose to save $2 billion, but they also proposed to save a boatload of cash by putting in Flat Sequencing machinery to cut down the street time of letter carriers. How did that work out? Eh, they didn’t save enough to cover their costs. It’s losing money.
“or it will simply stack up on the P.O.”
That is an excellent point.
Speaking strictly from a business point of view...a Monday holiday delays mail for days. Three days of built up mail will be a nightmare and very disruptive to a business.
Before all of the tech savvy jump on me...a lot of business is still conducted in a traditional manner. Not every small or medium sized company can operate soley on the internet. A lot depends on what service is being delivered. That is not completely a bad thing. If the internet goes down, companies that are totally dependent are s.o.l.
I can personally get by with less delivery service from the USPS...my business not so much. As hard as this may be to believe...lots of folks don’t have computers for communication!
When the USPS declared the end of Saturday mail, they thought the People will rise up in indignation.
Now the Union has to scream bloody murder to save their phony baloney jobs. Big screw-up by the USPS politicians.
Yeah. What you said. Unions need to be reined in in terms of power to cripple the economy. They are hand in glove involved in much of the inflation in our economy, in particular the public sector unions. sd
Crazy, isn't it?
I've read no economic justifications [with volumes of mail and requisite delivery times], just the pronouncement from the PMG that it'll save $2 billion. I have to assume some skullduggery here.
Same here but 2 carriers cover over 135 miles of route , out of this one country office.