New Report Refutes Trump’s Claim that USPS Should Raise Package Delivery Rates

June 18, 2018

WASHINGTON—Contrary to a tweet from President Trump, a new report released today by the Information Technology and Innovation Foundation (ITIF), the world’s leading think tank for science and technology policy, shows that the U.S. Postal Service (USPS) is not subsidizing package delivery. The report finds that the “profits” from package delivery and other competitive products play a critical role in shoring up USPS finances by offsetting financial losses from its declining traditional mail business.

“The Postal Regulatory Commission and the U.S. Court of Appeals have shown USPS is not competing unfairly with commercial package shippers,” said ITIF President Robert D. Atkinson, author of the report. “Consumers and the overall economy will be better off if USPS is allowed to continue competing effectively in package delivery, which raises overall U.S. productivity.”

USPS operates two lines of business: a traditional monopoly business that includes first-class mail and a competitive business that includes package delivery. Using its traditional mail monopoly business to subsidize package delivery would give USPS an unfair competitive advantage over private shippers.

To determine whether USPS is charging too little for package delivery, the report examines two central issues: whether USPS is abiding by the requirements in the 2006 Postal Accountability and Enhancement Act (PAEA), and whether the law itself is designed in a way that allows USPS to undercharge for package delivery. The report finds that USPS abides by the provisions in the statute and, by using its nation-wide delivery network, keeps package prices lower than they would otherwise be, in turn lowering the total costs of package delivery in the United States.

“Forcing USPS to raise the prices it charges to deliver packages is a solution in search of a problem,” Atkinson said. “If the Trump administration and Congress want to fix the Postal Service’s finances, they should focus on cost cutting on the market dominant side of its business, not reforming the competitive products side.”

Read the report.