The Grand Illusion
Once, many, many years ago, I was the legislative director for a U.S. Congressman who served on the Appropriations subcommittee overseeing the U.S. Postal Service. Trying to make sense out of the Postal Service budget – and their twisted economic rationalizations for their pricing structure – led to two long and frustrating years, and the only reason I didn’t lose my hair earlier than I eventually did was that the USPS comprised only part of my legislative duties.
The latest cry for cuts and service reductions may look economically reasonable, but it’s not, because the USPS has been employing the wrong costing model for over forty years. The model is based on structuring costs, first and primarily, on first class mail, and then treating bulk mail and publications as marginal costs, and setting the rates, especially for bulk mail, based on the marginal costs.
Why is this the wrong model?
First, because it wasn’t what the founding fathers had in mind, and second, because it’s lousy economics.
Let’s go back to the beginning. Article I, section 8, clause 7 of the U.S. Constitution specifically grants Congress the power “to establish Post Offices and Post roads.” The idea behind the original Post Office was to further communications and the dissemination of ideas. There was a debate over whether the Post Office should be allowed to carry newspapers, and a number of later Supreme Court decisions dealt with the limits on postal power, especially with regard to free expression, with the Court declaring, in effect, that the First Amendment trumped the Post Office power to restrict what could be mailed. During the entire first century after the establishment of the Post Office and even for decades after, the idea behind the Post Office was open communications, particularly of ideas.
The idea of bulk mail wasn’t even something the founding fathers considered and could be said to have begun with the Montgomery Ward’s catalogue in the 1870s, although the Post Office didn’t establish lower bulk mail rates until 1928. As a result, effectively until after World War II, massive direct bulk mailings were comparatively limited, and the majority of Post Office revenues came from first class mail. Today, that is no longer true. Bulk mail makes up the vast majority of the U.S. Postal Service’s deliveries, and yet it’s largely still charged as if it were a marginal cost – and thus, the government and first class mail users are, in effect, subsidizing advertising mail sent to all Americans. Yet, rather than charging advertisers what it truly costs to ship their products, the USPS is proposing cutting mail deliveries – and the reason why they’re talking about cutting Saturday delivery is because – guess what? – it’s the lightest delivery day for bulk mail.
I don’t know about any of you, but every day we get catalogues from companies we’ve never patronized and never will. We must throw away close to twenty pounds of unwanted bulk mail paper every week – and we’re paying higher postage costs and sending tax dollars to the USPS to subsidize even more of what we don’t want.
Wouldn’t it just be better to charge the advertisers what it really costs to maintain an establishment that’s to their benefit? Or has the direct mail industry so captured the Postal Service and the Congress that the rest of us will suffer rather than let this industry pay the true costs of the bulk mail designed to increase their bottom line at our expense?
This is absolutely true. I worked for the USPS for 3 years a while back. The reason the Post Office is cutting bulk mailers a break is because they are afraid that if they do charge these people what their mail actually costs, that the bulk mailers will stop using the Post office. Without the bulk mail clients, the post office is afraid that they will have no business and will be closed down.
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The “affluent” are not the only ones who caused the issues we have now. Many people from all financial levels bought over-priced (for their income) homes with too good to be true mortgage options. The foreclosure rates are skyrocketing, but not just for the affluent. I somewhat blame the Realtors and mortgage lenders who were looking at fast profits instead of long term effects. Many home buyers are overwhelmed by the contracts and just jump in. I don’t approve of that, but that is the case in many of these foreclosures. They trusted the experts who were looking out after their own best interests. I still live by the saying “buyer beware”, though.
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Junk mail can be good as long as they include a self-addressed, stamped envelope. That way, I can mail it back to them, along with other “junk mail” I have access to. It keeps the US Postal Service busy and I keep down on what I have to recycle.
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The “affluent” are not the only ones who caused the issues we have now. Many people from all financial levels bought over-priced (for their income) homes with too good to be true mortgage options. The foreclosure rates are skyrocketing, but not just for the affluent. I somewhat blame the Realtors and mortgage lenders who were looking at fast profits instead of long term effects. Many home buyers are overwhelmed by the contracts and just jump in. I don’t approve of that, but that is the case in many of these foreclosures. They trusted the experts who were looking out after their own best interests. I still live by the saying “buyer beware”, though.
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Wow, hurtful comments from people who have obviously not walked in the shoes of these employees now without jobs. Don’t want unnecessary mail – contact the people directly who are sending it to you – don’t fault the places where they supply jobs and income for people in a struggling world. Walk a mile in their unemployed shoes, then place your unnecessary and unkind comments.