Chris Edwards
President Trump’s anti-market impulses are taking center stage this week with his damaging tariff policies. But the president is occasionally supportive of pro-market reforms, such as his remarks on possibly privatizing the US Postal Service (USPS). A Trump reform push would be welcome because the USPS is an ailing dinosaur in the modern digital economy.
The figure below shows that USPS revenues are a shrinking part of gross domestic product (GDP). While revenues from packages and shipping have risen, revenues from letters, marketing mail, and periodicals have plunged. Excluding packages and shipping, USPS revenues have fallen to less than one-third the level of 2000, relative to GDP.
The volume of first-class mail has fallen 57 percent since peaking 2001, even as the US population increased 21 percent. Mail volume is falling year after year, relentlessly. While USPS package and shipping volume has grown, we do not need the government providing that service because it is provided by numerous competitive private firms.
With its core products in terminal decline, the only way for the USPS to survive is to cut costs, innovate, and find new markets. However, those are difficult tasks for a government entity, and we also don’t want the government to expand unfairly into private industries. Therefore, the best solution for the USPS to survive and add value to the economy is privatization.
More on USPS reform here, here, here, and here.
Chart based on author calculations from USPS financial statements here, here, here, and here.
