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Jeffrey Miron is a senior lecturer in economics at Harvard University and vice president for research at the Cato Institute. Jonah Karafiol is a student at Harvard College.
President Trump has reportedly showed a strong interest in privatizing the US Postal Service. Proponents of the Postal Service applaud its mandate to provide mail service to every American at uniform rates; critics claim it is less efficient than private competitors and no longer financially viable (if it ever was).
From its inception, the Postal Service was intended to be a public good, not a profit-making entity. Indeed, in 1958, federal law declared it “clearly not a business enterprise conducted for profit.” But nonprofits should not be financial black holes, and universal service should not require billions in annual losses, as demonstrated by private providers.
At present, the Postal Service is a failing monopoly. Title 39 of the US Code hinders private carriers’ ability to compete by requiring weight minimums. The agency also receives substantial financial aid from taxpayers: $120 billion since 2020.
Despite its federally protected monopoly on letter mail and extensive taxpayer support, major private competitors— UPS (founded in 1907) and FedEx (1971) — have thrived, significantly growing their US parcel and express delivery businesses.
In 2022, USPS generated $79.5 billion in domestic revenue; UPS and FedEx followed closely behind at $60.4 and $48.4 billion, respectively. However, the Postal Service has run a deficit every year since 2007, accumulating a total loss of $108 billion. Service quality continues to decline — between 2022 and 2024, the percentage of packages delivered on time fell substantially. Without its monopoly protections and taxpayer subsidies, USPS’s financial and operational performance likely would have been substantially worse.
These financial issues are in part due to rules and regulations that Congress and other federal bodies have established for the postal agency. While most private sector mail services use pay-as-you-go systems, Congress requires the Postal Service to prefund retiree health benefits, creating cash flow problems. It also must adhere to a six-day delivery schedule regardless of mail volume. Mail must be delivered at uniform rates — even reduced for certain users like nonprofits — meaning costly rural routes must be subsidized by profitable urban ones.
The agency faces a cap on price hikes, an outdated debt limit, and a ban on expanding services into areas such as banking. At the same time, Congress has blocked efforts to close underutilized locations. Collective bargaining combined with public sector employee compensation creates rigid labor costs and rules.
One approach short of privatization would be to repeal or reform the most burdensome regulatory restrictions currently imposed on the Postal Service. Eliminating the retiree health benefit prefunding mandate and adopting a traditional pay-as-you-go method would have produced an average of $5.65 billion in additional cash flow per year through 2016 alone, and removing the mandatory six-day delivery requirement would save the agency as much as $2 billion annually.
These reforms, however, merely make the Postal Service resemble a private business; an even better response is to privatize the agency entirely. Privatization would not only free it from prefunding and six-day delivery requirements that hurt liquidity and raise costs, but it would also remove burdensome regulations like uniform pricing and rigid labor agreements, allowing it to respond to market demands. Without artificial restrictions, the agency could set prices based on actual costs, streamline operations, close inefficient locations, and pursue innovation and new revenue streams such as logistics, financial services, or expanded e-commerce partnerships. Privatization would also open the postal market to full competition, allowing private carriers to compete without barriers such as mailbox monopolies or weight restrictions.
A key aspect of this privatization is that it must be complete, or nearly so. Since Britain sold a majority stake in its national postal service, the share price has fallen about 25 percent. But Royal Mail retained its prior inefficiencies such as uniform pricing and service obligations. In contrast, fully privatized mail services like FedEx and UPS show that private mail couriers, unencumbered by unnecessary government regulation, can deliver reliable services while adapting to market changes. Complete privatization would thus not only reduce financial burdens on taxpayers but also provide higher-quality service to consumers and businesses alike.
Ultimately, the debate over privatizing the Postal Service centers on market-based efficiency. Maintaining the status quo imposes a growing financial burden on taxpayers and results in declining service quality. Partial reforms would help, but full privatization offers the most effective path forward.
