DeJoy: U.S. Postal Service plans to keep raising prices

The U.S. Postal Service has kept unhealthy businesses alive because of its low prices, Postmaster General Louis DeJoy says. He wants to change that.

The mail chief is committed to dramatically increasing postage rates as he enters the third year of his plan to transform the Postal Service from an aging letter courier to the backbone of the e-commerce economy.

That could spell trouble, DeJoy warned, for some businesses relying on mailing and shipping costs that have been kept low at the expense of the Postal Service’s financial stability.

“If we have kept alive things by a false business model—which is what we have done for 15 years, and we have abused the organization—well, that’s not something we’re supposed to be doing,” he said in an interview. “That has to change.”

Much of that plan is underway: Congress has relieved the Postal Service of $107 billion in liabilities, and granted it $3 billion to purchase electric delivery vehicles.

But economic and social head winds—persistent inflation, a looming recession and court rulings surrounding mailed abortion medications—are clouding the path forward, DeJoy said.

DeJoy sat down with The Washington Post to discuss the state of the Postal Service and questions about its future. The conversation has been edited for clarity and brevity.

Q: Is the Postal Service in a better place than it was two years ago, when you announced a plan to slow service and increase prices while rebuilding the delivery network?

A: I think we’re 10,000 percent better than we were two years ago. For 15 years this place had been constructively destroyed with an operational strategy that was devoid of any logic. We couldn’t keep people, our infrastructure was falling apart, there was no real plan to stop it and we were in the middle of a pandemic.

Q: Your goal was for the Postal Service to break even in 2023. Is the agency on track to meet that goal?

A: We’re behind. I have to reconcile where we started from. The pandemic took longer to get out of. Inflation is significantly higher than we thought it would be.

We thought we’d break even in two years. That was a big haul, and we almost did last year. We’re keeping service up, and that’s a cost and a priority to me.

Q: What effects have you seen from inflation?

A: There’s inflation, and then there’s what the government’s going to do about it. That creates a whole bunch of volatility. A businessperson would enjoy stability over a whole lot of other things.

I think in the mailing industry, inflation has been an issue. Paper costs are higher. I think a bigger issue is the uncertainty of the market in terms of advertising. People try to attribute my price increases to reducing mail volume. I don’t buy that for a second. The overall advertising market is down 10, 11, 12 percent.

What one would do to save money in an inflationary economy in a different industry is stop doing things. That’s not an option for me. I have to look past it.

Q: What about on individual consumers like people who are buying items online? What impact on them have you seen due to inflation?

A: Demand is less, but it’s less for a lot of reasons. You’re allowed to go out. You can actually go to a store. Stores are open. There was an event-driven period of higher e-commerce demand.

One thing you can count on is that we’ll eventually, over I don’t know how many years, get back to that level of demand, because e-commerce is here to stay and it will grow. The dips we’re seeing today are part of the overall change in how the consumer shops.

But our strategy is twofold: capture a disproportionate share of the growth; and recover what we’ve lost.

Q: A major part of your plan to recover costs increasing prices. In July, a stamp will cost 66 cents. It was 55 cents when you took office in 2020. What will a stamp cost at the end of your 10-year plan?

A: Whatever it costs, it will still be the cheapest in the industrialized world. It can go up to 90 cents, and it will still be the cheapest. And higher prices will be a contributing factor to why we will still have the United States Postal Service. For those who want to reach the American public and want to do it with a mail piece, we will be the best and only way to do it. That’s what the law requires me to do. It doesn’t say, “Go do all things at all costs.”

Q: Since 2019, the price of a first-class stamp is up 32 percent. You ran a business before taking office. If one of your core costs went up 30 percent over five years, wouldn’t that have an effect on your business?

A: Once we take care of the American public and we fulfill our mission, to everybody else, we’re a third-party service provider. The major mailing companies, they’re out to make a profit. I’m all for profit, but it shouldn’t be on the back of the U.S. Postal Service in terms of our existence.

Q: Mailers often pass on the cost of rate increases to consumers. That could be a bank charging a fee to provide paper statements, or a small business raising its prices to account for higher postage costs. How do you account for that?

A: That’s not the Postal Service’s role. The system that’s set up means we have to cover our cost. If we have kept alive things by a false business model—which is what we have done for 15 years, and we have abused the organization—well, that’s not something we’re supposed to be doing. That has to change.

Yes, at some point, things come out of the marketplace. But is it the U.S. Postal Service’s job to support and fund those things with its own resources? I think that’s a recipe for disaster.

Price matters, and some things are going to get chased from the marketplace, but I think that’s just a matter of time. I’d rather get on with it now, because that time should have been seven, eight, nine years ago.

Q: Part of your plan involves moving delivery depots out of local post offices into larger facilities. What does the future local post office look like for retail customers?

A: I’m putting self-service kiosks out in these places. I’m putting package lockboxes out in these places. We’ve got access to the space that gets cleaned up from where the delivery unit used to be. I’m out selling the national infrastructure to government agencies and state agencies. We can stock national emergency supplies there. We’ve already proven that we can do that with the covid-19 test kits.

We can open up for small businesses. By being in local markets, I see customers being able to pre-stock items, offer same-day delivery by stocking simple things in our locations. I don’t want to be a big centralized fulfillment house. But if you have a kit of anything—that could be a box of shoes or a T-shirt in a bag—that you want to position for immediate delivery or pickup, that’s a big market.

Q: A federal judge in Texas issued a ruling earlier in April placing severe restrictions on abortion medication, including if it can be sent through the mail. That ruling is currently stayed and under review at the Supreme Court. What is the Postal Service’s role in enforcing laws around mailed abortion pills?

A: We follow the law. Whatever we get told to do, we’re going to do. And if the law in fact gets changed, we will have to follow that law instead. It’s that simple. And if the law gets changed, we’re going to have to deal with, “Are we actually effectively able to respond to it?” At some point you’re just totally eroding the mission of the Postal Service, and its ability to support itself.