July 16, 2019

The Postal Service has been promising a new “ten-year plan.”  Some have called it a “strategic plan” or a “business plan.”  We think it will be more of a political document, designed to prompt Congress to act on postal reform legislation that USPS has been pursuing for about ten years.

In fact, from what we’ve heard, it sounds very similar to the last Postal Service “ten-year plan.”  Released in March 2010, it was called: “Ensuring a Viable Postal Service for America: An Action Plan for the Future.”

We think the new plan will have important elements very similar to the old one:

• It will predict large losses of volume, revenue, and net income over the next ten years. We have heard the figure $125 billion.  The Postal Service is likely to cite how accurate its 2010 predictions were, and the fact that it is having outside experts “validate” its numbers.  In reality, however, both forecasts are very speculative, covering long periods of time during an era of rapid, massive change.  Statistically speaking, the chances of getting two such guestimates in a row right are low.
• The plan will then list a series of actions that it says would close the massive loss gap it forecasts. We expect that the actions will not be new, as they were not ten years ago.  Many, perhaps most, of the remedies will require new law to be passed by Congress.  And most will hurt one or more of the stakeholders in the future of our postal system, except perhaps postal management.
• The Postal Service will tally up numbers that exceed the projected $125 billion losses, and then urge Congress to pass comprehensive reform encompassing enough of the list to at least equal $125 billion. It will assert that the numbers are rock-solid because they have been “validated” by outside experts.

A few reflections we have about the expected USPS plan:

• It won’t be a strategic business plan. Few, if any, viable business plans start with $125 billion losses.  Moreover, business plans normally project a bright, viable future for the organization, built on a model to provide goods and services that are in demand and to make reasonable profits for the foreseeable future.  If the existing model is not working, a new way to make money must be proposed.  And almost by definition a business plan contains actions that the business can take on its own volition and with resources it has or can obtain.
• It’s OK that it’s not a business plan. Perhaps the first step the leaders of the Postal Service should take is to put the kibosh on the idea that it needs a “business plan.”  In our capitalist system, it is not a business.  Its main purpose is not to make profits for its owners.  USPS is a necessary component of our national infrastructure, solidly in the executive branch of the federal government.  It always has operated with a legal monopoly on delivering mail to all U.S. mailboxes, and as a federal government service.
• The USPS plan probably will not address the elephant in the room: the “self-funded or customer-funded model.” The 1970 concept of a “business-like” postal system funded mostly or entirely by fees paid by customers no longer works.   The “customer-funded” USPS, or “self-funded” as some like to call it, worked in the 1980s through the early 2000s only because mail volume grew at an unprecedented, and never to be repeated or approached rate.  Consider this: from 1789 to 1980, U.S. mail volume grew to 100 billion pieces.  So, over its first 191 years, mail volume grew an average of 523 million a year.  From 1980 to 1999, mail volume doubled to 200 billion, growing by 5.3 billion a year.
• There is a growing disconnect between who pays and who benefits from our postal system. At the same time volume growth has reversed, it happens that most of the American public pays very little in postage or other fees to USPS.  Most of the “customer-funding” is by organizations and businesses, not households and consumers.  And the majority of the growing public services provided by USPS, and they say driving their costs up, primarily benefit those who are not paying: for example, seven-day delivery of packages and mail, many more post offices than needed, and universal free delivery to the ever-growing number of addresses.  (It would be difficult to get useful results from a survey of Americans about what they want from USPS due to the free-rider problem.)
• It will be a mistake to not take head-on the failed “customer-funded” model and the disconnect between the growing public services and the users paying for the system. But if the USPS plan comes out as expected, we are likely to continue down that (dead end?) road.
• The “business-like, customer-funded” Postal Service model really worked well for about 25 of the 230 years we have had a U.S. postal system. It’s not working now.  Limiting consideration to making that failed model work could be a big mistake.