How the Postal Service Subsidizes The Wall Street Journal -- and Why It Should Stop

In an error-filled editorial, The Wall Street Journal chided the U.S. Postal Service Saturday for not acting more like a business and for being too slow to cut costs. Be careful what you wish for.

"If this were a private business, the obvious response to these losses would be urgent cost-cutting to avoid insolvency," the editorial said in response to USPS's latest quarterly numbers. Good point. Let's start with cutting the Postal Service's subsidization of the Journal.

Within the Postal Service, the Journal is famous for complaining vociferously if any of its newspapers are delivered a day late, even if the Journal misses the deadline for getting the papers to a postal facility. Postal managers generally acquiesce, creating special (and labor-intensive) procedures to expedite handling of the Journal.

"Wall Street Journal gives the USPS all of the addresses that they can’t service with alternate delivery and then expects to receive next-day delivery regardless of the arrival time. I’ve witnessed this first hand at USPS facilities," says an executive for a major Postal Service customer.

Such unofficial "Hot 2C" or "Hot Periodicals" expedited mail-processing programs are a major reason that so much Periodicals mail is sorted manually rather than on machines, according to a recent USPS Office of Inspector General report.

"These informal procedures increase mail processing costs and may distort service performance measurements for Periodicals," the report said.

Over the years, magazine-industry representatives have been nearly unanimous in pleading with the Postal Service to stop such manual processing of Periodicals mail. The added cost helps make the entire Periodicals class unprofitable for the Postal Service, creating pressure on USPS to jack up postage rates for all publishers.

“Periodicals publishers have repeatedly made clear that they do not desire and are not willing to pay for 'hot' processing," Jim O'Brien of Time Inc. wrote in response to the OIG report. But people inside the Postal Service said they would catch hell if they stopped hot processing of the Journal and certain other publications.

If the Postal Service were a private business, it would charge customers for such special handling. If the Postal Service were a private business, it would realize how much money it is losing on such customers. If the Postal Service were a private business, it would conclude that losing such customers would be better than continuing to subsidize them.

(Side note: Critics of five-day delivery have noted that if daily newspapers had to find another means of delivering their Saturday editions, they would probably use that network for other days of the week as well. Is it possible that postal executives are viewing that as a benefit of ending Saturday delivery rather than as part of the down side?)

The Journal editorial was written by someone who hadn't bothered to do much research -- or who purposely misrepresented the Postal Service's situation. It mentions the small pay raises for current employees in the recently ratified contract with the largest postal union, but not the huge savings USPS will get in return -- such as "eat your young" pay rates for new hires and the increased use of part-time employees.

It also calls ending the prefunding (really, overfunding) of postal retiree health benefits "a taxpayer bailout" when no tax money would be involved. And it completely garbles the issue of the Postal Service being overcharged for its share of pension payments to employees who used to work for USPS' government-run predecessor.

If the Postal Service were a private business, it would not be subsidizing The Wall Street Journal.