Side hustles won't save the US Postal Service

Getting the USPS into side businesses probably would fail. 

The holiday season came and went, and it appears the U.S. Postal Service did a good job. Yes, there were some reports of letter carriers getting swamped with packages here and there. And, yes, there were citizen complaints about delivery delays and mail theft. 

But on the whole, the USPS delivered in late 2023. There was no systemic crack-up as there was in December of 2020, when bad weather, sick mail workers and other factors slowed holiday cards and gifts for days and even weeks.  

The Post Office’s success this year was no accident. Postmaster General Louis DeJoy had the agency preparing way in advance. It ramped up its capacity by hiring thousands of seasonal employees and expanding its capacity to sort packages and shunt them to their destinations.  

For sure, the Post Office will benefit from postage on those billions of letters and parcels. Unfortunately, all those dollars will not change the fact that the USPS is going broke. 

A few months ago, the agency reported it had lost $6.5 billion over the past year. More distressing is the agency has $135 billion in unfunded employee health care and pension benefits and is warning it could lose another $70 billion by 2030. Postmaster DeJoy has warned the agency could run out of cash in 5 years, at which point it would either cease operations or require a massive taxpayer bailout. Presently, the agency self-funds its operations through the sale of postage. 

There is no mystery as to the causes of the agency’s fiscal distress: flagging revenues. The USPS’s revenues were $78.2 billion in 2023 and $74.9 billion in 2008, 15 years ago. That sounds like an increase, but it is not. Adjusted for inflation, last year’s $78.2 billion is equivalent to $54.1 billion in 2008 dollars. The USPS was built to deliver paper and the demand for that service has plunged 45 percent since 2008, from 213.1 billion pieces to 116.1 billion.

I have written about the USPS’s revenue problem for many years, and frequently the first response I hear from readers and elected officials is, “We can save the Post Office by letting it get into profitable side businesses. Some foreign posts sell banking and other services. We should do that.” 

Perhaps the most ambitious proponent is Christopher Shaw, author of the book, “First Class: The U.S. Postal Service, Democracy, and the Corporate Threat.” He would have the Post Office offer various internet services and operate an eBay-type platform, among other businesses. 

Certainly, I understand the appeal to trying to save the Postal Service by morphing it into the Sorta Postal But Also Non-postal Service. But it has a few problems. 

First, it is contrary to the law, which limits the agency to providing postal services and those very closely related, like selling greeting cards. Congress enacted this rule because it thought it was unfair to have a government agency compete with the private sector, and because a Government Accountability Office study showed the USPS’s forays into side businesses tended to fail.   

But even if one waved those matters away, there is another issue: Getting the USPS into side businesses probably would fail. 

The USPS was built over many decades to deliver paper. Its entire infrastructure, from the letter carrier’s bag to blue mail collection boxes to its delivery vehicles to its sorting machines, was designed for letters, catalogs and the like. This is why the agency is struggling and spending billions to shift operations to the adjacent business of package delivery. 

Indeed, when the USPS’s inspector general examined the prospects for having the agency sell banking services it suggested that the Post Office outsource some of the work to a private corporation. Why? Because the USPS lacks the infrastructure and internal banking expertise. Why? Because the USPS lacks the infrastructure and internal banking expertise. 

This is to say nothing of the union issues that would come with side businesses. For example, the USPS tried to open postal counters in Staples stores in 2013. The idea was to provide print-and-ship outlets just like the ones established by the FedEx-Kinkos merger. The effort was croaked because a postal union insisted postal counters be operated by unionized postal employees. It was an unworkable demand that would have made the venture unprofitable and left a customer visiting one counter to make photocopies, paying for them and then having to schlep to a separate USPS counter and engage in a separate transaction.  

Which brings me to my concluding point. As noted above, the USPS is losing billions per year, which means for any side business to be worth attempting it would have to bring in profits — not revenues — in the billions. 

Ask yourself, how likely is that? 

Kevin R. Kosar (@kevinrkosar) is a senior fellow at the American Enterprise Institute. He is the co-editor of “Congress Overwhelmed: Congressional Capacity and Prospects for Reform” (University of Chicago Press, 2020). He hosts the Understanding Congress podcast.