By Edward Hudgins

‍Exclusive to The Economic Standard

Will the U.S. Postal Service deliver mail in the future? That is the question facing new postmaster general, David Steiner. Since 2007, USPS has run up a total of some $100 billion in losses.  Steiner’s public remarks during the November 14 board meeting announcing the Postal Service’s FY 2025 financial results ($9 billion net loss) offered both reason for concern and optimism.  On the one hand, Steiner’s remarks suggest he is doubling down on his predecessor Louis DeJoy’s failing Delivering for American plan, declaring that a “fundamental reassessment” of the plan is not needed.  On the other hand, Steiner stated that the Postal Service needs to focus on its core mission of final mile delivery and must embrace public private partnerships to reduce costs and improve service.

The latter comments suggest that Steiner may realize that accelerating technologies make the future of ecommerce and the economy quite uncertain and, thus, make tweaking a bloated government enterprise untenable; what happens when transformational artificial intelligence is added into the mix? Steiner needs to future-proof the Postal Service by partnering wherever possible with private companies that, unlike USPS, have maximum flexibility to change quickly to meet future challenges.

FedEx Inspiration.

Steiner can look for inspiration to Fred Smith, founder of Federal Express, one of the country’s most innovative companies and on whose board Steiner served since 2009 before helming USPS.

In 1965, student Smith wrote a Yale class paper suggesting a private express delivery company to serve businesses that could not wait days for time-sensitive documents to be delivered, too late, by normal snail mail. Smith received a mediocre grade from a professor who didn’t appreciate true entrepreneurship.

But Smith saw the future and created it. In 1971 he founded FedEx. The Postal Service, then and now, has a government monopoly on first- and third-class mail delivery and is required to deliver to every address. But private companies, thanks in part to Smith’s efforts, are allowed to provide delivery of documents marked as "extremely urgent." For years USPS tried to hinder FedEx. For example, it tasked postal inspectors to attempt to determine whether items shipped via FedEx were really "extremely urgent."

But the future caught up with the Postal Service. The advent of internet communications and ecommerce are responsible for much of the Postal Service’s financial woes.  First-class mail revenues, USPS’s traditional cash cow, fell from $37.6 billion in 2007 to $25.4 billion in 2024 while revenues from package delivery, from which USPS faces competition from Amazon, FedEx, and others, soared from $2.3 billion to $32.3 billion during that period. Current FedEx revenues are around $88 billion compared to USPS receipts of $80 billion.

In the end, a synergy emerged in which, for several decades, up until 2024, USPS used FedEx planes to transport many of its packages long distance.

The wrong route taken.

The lesson for Steiner is that inflexible government enterprises cannot anticipate changing market realities much less quickly change, while private companies can; after all, because their profits are based on meeting customer demands, those companies have the strongest incentives to innovate.

Steiner’s predecessor made the worst possible mistakes in the face of future challenges: he brought functions that were in part provider by private companies in-house, reducing flexibility and building a gold-plated processing and logistics networks, and he reversed a USPS downsizing trend by converted 190,000 non-carrier and pre-career employees into permanent, career, unionized workers. By contrast, the number of FedEx employees has fluctuated in past years, though is generally on a downward slope, as market realities change.

Even more dramatic, Amazon, with employees numbering 1.2 million, plans to avoid hiring 160,000 otherwise needed new workers by 2027 through more automation and use of robots. It expects to double the number of packages it delivers by 2033 yet avoid hiring some 600,000 employees that it would otherwise require to handle that increase. It expects to pass along savings to customers. Such flexibility and efficiency through automation to meet customer demands is impossible for the Postal Service.

‍Private provision to “future-proof.”

USPS has a current competitive, value-adding advantage delivering items “the last mile,” since its mail carriers go to every address in the country. But apart from this function, Steiner, through work-sharing and contracting out, should partner with private providers for functions including:

• Presortation;
• Transportation – long haul, intra-plant, plant-to-delivery units;
• Maintenance;
• Equipment repair;
• IT/payment solutions;
• Security.

It allows the Postal Service to meet its delivery obligations. And it ensures maximum flexibility as technologies drive ecommerce and the whole economy into a future that is not predictable, but which can predictably bring increased efficiencies with Fred Smith-inspired innovations and mindsets.  Steiner’s comments today recognizing these benefits are encouraging, hopefully he will execute on them.

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Edward Hudgins, Ph.D., is founder of the Human Achievement Alliance. He has worked at the Heritage Foundation, Joint Economic Committee of Congress, the Cato Institute, Atlas Society, and Heartland Institute. He has taught at universities in the U.S. and Germany.

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