Some critics of the US Postal Service argue that delivering packages only loses the organization money. From their perspective, this “money loss” is the reason why service standards and delivery times have fallen in recent years. While it’s true that USPS has faced historical backlogs due to record volumes and complications from COVID-19, arguing that packages only lose the Postal Service money is a false sentiment. In reality, it’s the exact opposite.
Delivering Packages and Letters is a Win/Win for Efficiency and Cost Reduction
Congress designed USPS to be the most efficient when delivering letters and packages at the same time. By combining these operations, USPS is able to leverage its network efficiencies to decrease costs across the board.
An easy analogy to show how this works would be splitting taxi fare (or the cost of an Uber) between two passengers.
Imagine that two passengers enter into the same taxi, and both are going to different destinations. On top of the cost to transport passenger #1, the cost for the taxi driver to drop off passenger #2 is incremental. The cab doesn’t charge both passengers for two rides; instead, it only charges for one slightly longer one. The passengers split the cost down the middle, and they save money while reaching their respective destinations.
For USPS, letters and packages work the exact same way. Thus, by “doubling up,” USPS is able to leverage its network to optimize efficiencies and reduce costs.
The Postal Regulatory Commission Conducts Yearly Audits to Determine Whether USPS Packages Cover Costs
Every year, an expert independent federal regulatory agency known as the Postal Regulatory Commission does a deep dive into USPS operations. The purpose? To determine whether the Postal Service’s package business is covering its costs and contributing to USPS institutional costs.
In 2006, Congress enacted statutory pricing requirements for the Postal Service. Every year since then, the PRC has held that the USPS package business is not only operating without subsidization; it is more than covering its costs. In fact, the PRC maintained that the USPS package business contributed over $11 billion in profit during the fiscal year 2020.
The PRC isn’t the only government agency that has come out with these same findings. Federal courts—including the United States Supreme Court— have repeatedly upheld that USPS does not use revenue from mail to subsidize its package business.