The USPS Can’t Stamp Out Its Problems With Higher Prices

COMMENTARY

If the U.S. Postal Service was a business, it wouldn’t be in business for long. The agency lost $9.5 billion in fiscal year 2024, and expects to lose $6.9 billion in FY 2025.

America’s mail carrier has hiked prices on stamps six times over the past five years, and that clearly hasn’t worked to stop the tsunami of red ink. Ever eager to double down on disastrous policies, the agency plans to hike stamp prices five more times through 2027. Next up: a jump in stamp prices this July, from 73 cents to 78 cents per one ounce letter.

Instead of gouging the public, the USPS needs to cut costs, institute real reforms and deliver for taxpayers and consumers. 

According to recently retired Postmaster General Louis DeJoy, Americans need to get used to “uncomfortable” price hikes because the USPS has had “at least 10 years of a defective pricing model.” It is true that the USPS has underpriced packages by failing to account for parcels’ full delivery costs. But, postal price hikes on letters are also defective because of the ease of alternatives such as email, sending memes on social media, and yes, carrier pigeons. 

A March 2024 report by the nonprofit postal watchdog “Keep US Posted” concludes, “[u]nder the current process, the USPS proposes new rate increases before the impact of prior increases can be fully realized. USPS demand models, which are used to justify rate increases, have never been tested in this way. USPS stands to lose considerably from miscalculating its customers’ sensitivity to price.” Keep US Posted estimates that these flawed revenue projections cost the USPS $1.8 billion annually, or roughly one-third of projected 2025 losses.

The USPS should change its entire forecasting process and embrace greater transparency in pricing stamps. According to Keep US Posted, “Each January, [the] USPS publishes its new demand equations and documentation. In FY2024 there were 63 items in its change log. Such extensive modifications show the large degree of subjectivity when estimating the model.” 

The USPS should at least explain why such large-scale changes are justified and how such alterations will lead to improved accuracy. Additionally, it’s best practice for researchers to publish a “sensitivity analysis” showing how changes in forecast design (i.e., which variables are included and excluded) can lead to different results.

The USPS has failed to explain this, and, as a result, researchers have little insight into the strengths and weaknesses of the postal forecasting process. 

Most importantly, America’s mail carrier should finally admit that stamp price hikes are not effective for balancing its books. There is a possibility that a future price hike may cause first-class mail volume to completely bottom out. Instead of trying to squeeze more revenue out of taxpayers and consumers, the USPS should take another look at some of its costliest policies. 

For example, the USPS currently delivers mail Monday through Saturday, along with Sundays for some packages. However, some have argued for switching to a five-day delivery system to decrease costs and improve worker morale. Agency leadership suggested this idea (with some wiggle room for weekend package deliveries) in its “Five-Year Business Plan” in 2013 and concluded that it would save $1.9 billion per year.

In 2015, the inspector general surveyed consumers on whether six days of delivery was worth it at various stamp price points. The watchdog found that a large majority of consumers favored five-day delivery at any price point over 50 cents. Now that the price of a first-class stamp is 73 cents and about to jump to 78 cents, it’s reasonable to think consumers prefer five days of delivery over six. 

The USPS has no shortage of problems, but raising stamp prices will only make things worse. America’s mail carrier must deliver on low costs and high value for taxpayers and consumers.

Ross Marchand is a senior fellow for the Taxpayers Protection Alliance. He can be reached here.