Postal Service to Privatize? First Class cost to rise again in July

SBINSIDER NEWS\ANALYSIS | February 23, 2025

Once upon a time in America the United States Post Office played a vital role in our national commerce. Deliveries of regular mail correspondence, post cards from far away lands, air-mail from the fighting men overseas, medicine, seeds for crops, even live animals were acceptable cargo. Government did all its official business by mail, send millions in dollars of checks for individuals and business; Social Security checks were highly anticipated each month, and the annual massive Sears catalog was a boon to many rural citizens.

The “check is in the mail” was a common delaying of payment tactic for business or the enhancement, “the check must have gotten lost in the mail” became more common as recessions stretched cash flow. Eventually, checks that “bounced” via the mail became a prosecutable offense as mail fraud.

United States Post Office (USPO) was established in the Constitution as Article 1, Section 8 in 1789.  But it actually began on July 26th, 1775 and apparently people liked the service. Ben Franklin was the 1st Postmaster General. The awarding of the postmaster jobs were very competitive in that it was a sinecure for whoever got the job. Yet, the tenure dependend on the Party in power as those jobs were part of the “spoils system” rewarding your supporters and showing the door to the current occupant.

The Big Flaw

The system worked extremely well with delivery rates in the very high 90th percentile. But, there was a huge flaw in the pricing system. The politicians decided that a one ounce letter, no matter the distance it traveled, would be priced uniformly. So, a letter across the street cost the same as one sent from New York to Los Angeles. For heavier letters the solution was to add a few more stamps.

So, the letter service deliberately was subsidized by cargo shipments and other services-like money transfers. Plus businesses got volume breaks for pre-sorted and pre-stamped mail. But as the volume increased for letters, the USPS was forced to increase its prices across the board and cargo shippers like United Postal Service and DHL, Federal Express increasingly picked away at the USPS core functions.

Then came mass email via CompuServe in April of 1981 and 95% of first class letters were obsoleted.

The Unions

The postal unionization began in 1906 but got its teeth in 1970 when its first effective strike was held. Businesses suddenly realized they were prisoners of a system that could cut off their livelihood at anytime. Ergo, they pressured Congress to negotiate big contracts with huge pensions on the condition that the unions agree to a no-strike clause.

The combination of large pay and pensions, the loss of profitable service to private companies and the stubborn refusal to charge letters by weight and distance (as UPS does) and the ubiquitous use of email, lead to the downward spiral we see today.

Too, in 2013, the Federal government decreed that to get any funding, you must have a personal Social Security number or IRS issued EIN and that number was used to deposit transfers into Federally regulated bank accounts. No longer would grandma wait by the mail box for a check,  to go the bank, make a deposit and get cash for her shopping money. With the advent of online banking, another big portion of postal volume went away. Less volume, higher prices, never works in the long term.

As to funding, every year or so, the Congress has to allocate more money to prop up the pension system and\or the postal operations-yet the goal of the unionization was to free the USPS from the need to be subsidized.

The United States Postal Service said it intends to hike the price of stamps five times through 2027 after punting on an increase that would’ve gone into effect in January.

Some Service Savings

The obvious (?) fix for first class letter is to charge by weight and distance. In asking a postal worker about this the reply was “people are too stupid to figure it out” to which I replied, but they do it all day at United Parcel Service. The reply to that was it works “because you must go to a UPS store to get the price for an unknow weight and distance and then pay the fee.” So, to mail a letter from here to Boston, with a new system, you would have to know the weight and go online and get the price and then affix the correct number of stamps, or print one stamp from the USPS online store!

Or, maybe we could revert to the original system where the recipient of the mail had to pay the postal carrier!  Correspondents of Thomas Jefferson (like John Adams) had to hand over lots of dollars to read his letters, which were frequent. Probably not practical today, unless the postal service could scan the letter and automatically debit your bank account….

We could also end the six day a week residential deliveries. Going to a Monday, Wednesday, Friday schedule would hardly be noticed in SaddleBrooke. This proposal has been on the table for years, but like ending the issuing of the three cent penny, it takes a disruptor like Trump to get it done. Likely, politicians would be highly resistant as direct mail is an effective campaign tactic and timing is crucial.

Or, Put it out to Bid to Private Carriers

Finally, Congress could take a great leap and devise a scheme to privatize the entire mess. Perhaps the letter carriers union could purchase the first class portion of the service, and UPS, Amazon, FedEx could divvy up the smaller cargo. Larger cargo is already being carried by private carriers very effectively.