Tag Archives: Postal Service

USPS Bubble Pop

Big corporations’ distortion of US Postal Service rates gets noticed by The American Interest:
Just as General Motors has in effect subsidized Big Oil by continuing to build gas-guzzlers in recent years, so has the USPS continued to subsidize Big Mail by shaping its operations to encourage what it now calls, revealingly, “standard mail”—that is, advertising junk mail. Most American citizens are blissfully unaware of the degree to which USPS subsidizes U.S. businesses by means of the fees it collects from ordinary postal customers. For example, if you wish to mail someone a large envelope weighing three ounces, you’ll pay $1.17 in postage. A business can bulk-mail a three-ounce catalog of the same size for as little as $0.14.

USPS management claims that “standard” mail makes lots of money, that the USPS makes a better margin delivering a “standard” mail package for $0.14 than it does a first-class one for $1.17. Why? Supposedly because of efficiencies produced by bulk-mail, machinable, zip-plus-four and zip-plus-nine standardization schemes. If you look at the revenue stream from advertising mail, it does look impressive, and it has been growing (for perverse reasons we’ll come to in a minute). But when you juxtapose next to that revenue stream the enormous transactional costs of maintaining a riotously complex rate structure to service it, you quickly reach a different conclusion: Standard mail, the costs of which are also generally tax-deductible for businesses, does not make money. It amounts to a corporate subsidy, which helps to explain why Congress, insofar as its members understand this, typically doesn’t object to the status quo. After all, these corporations have been known to contribute to electoral campaigns.

Actually, it’s worse than that. Not only are pennies shaved off the postage affixed to grandma’s letters routed directly into the pockets of direct-mail marketers, some 20 percent of direct-mail advertising volume is comprised of credit card, mortgage and other financial offers. So yes, the USPS has contributed in a subtle yet very real way to our burst economic bubble.

And the USPS’s own “standard mail” is about to pop. It’s worse than you probably think. An article well worth reading.