Steve Pociask is president of The American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information, visit www.theamericanconsumer.org. Twitter -- @ConsumerPal
The U.S. Postal Service's latest financial report is being called upbeat, but a closer look provides a far less optimistic assessment. While revenues grew this quarter, it lost $754 million – outpacing the loss incurred this period last year by $400 million.
The Federal Times' recent story effectively highlights the poor fiscal outlook facing the Postal Service. Yet the piece primarily focuses on the remedies proposed by the Postal Service and its advocates to grow the agency, mainly through expanded package delivery services, added 'flexibility' to change prices, and consolidation of mail processing centers.
However, this approach disregards the fact that the actual cost of providing added postal services continues to be a problem that the Postal Service is unwilling to fix, and that the agency, in truth was created to handle the task of delivering letters anywhere in the country a flat low rate.
Their highly-touted holiday package services only edged up 1.43 percent on volume from a year ago despite the omnipresent "this is our season" ad campaign. Revenues for their monopoly-protected products, like standard mail, continue to outperform other offerings while consumers face new sets of rate hikes each year.
If saving the post office means higher prices, consumers are not for it. A recent survey released by the Postal Service says that consumers prefer not to face cuts in service, but they are also not willing to pay for it. To be clear, if those using the service do not want to pay for it, then why should taxpayers potentially be on the hook to sustain their operations in the face of escalating debt?
The sad part is that the Postal Service could actually be solvent. In fact, its core business products, particularly first class and standard mail delivery, appear profitable. However, its massive losses continue to mount as its mission becomes distracted by expansion into other endeavors, including products in spaces that are competitive, which potentially require financial support through gains realized by core products.
On paper, the Postal Service is not allowed to subsidize its competitive services with its monopoly dollars, but it is not obligated to confirm if and how this requirement is met by only having to attribute a limited portion of costs to its products, leaving the rest categorized as "institutional overhead." This preference for incomplete cost attribution not only hinders the Postal Service's ability to accurately price its products in fluctuating markets, but enables the risk of the agency using its monopoly power to prop up other products that are losing money.
While Postmaster General Megan Brennan unjustifiably praises the group's weakened financials, she also sadly calls for more efforts in grocery delivery and packages. Another Postal Service venture, Metro Post, lost $100 per package it delivered to retail businesses. Sunday delivery was also a bust, and now the Postal Service wants to enter the financial services business. In other words, the Postal Service can't get its own finances straight, but they want to get into banking?
I think this can be summarized succinctly -- there is a lot of money to be lost out there, and it seems the Postal Service just wants its share.
These poor management practices harm private businesses and the jobs they create, but they also hurt postal consumers who expect the Postal Service to provide reliable and affordable services. Consumers and taxpayers would be better served if the agency focused on its core competency of letter delivery instead of meandering its way into new unprofitable and unfamiliar markets.