News / Small businesses fearful as DOGE has USPS revamp in its sights

© Vasile Bobirnac |

The news that postmaster general Louis DeJoy invited the US Department of Government Efficiency (DOGE) task force led by Elon Musk to find opportunities to cut costs has stirred up opposition.

And it has also led to speculation about potential changes at the US Postal Service (USPS), all the way to a hypothetical transformation into a private operation.

Small shippers that rely on the USPS for their business are watching with trepidation.

Mr DeJoy, who last month announced his intention to step down, has taken radical measures to cut the agency’s deficit in the five years of his tenure. Since 2021, streamlining networks, reduction of management layers, and cutting 30,000 jobs have saved billions of dollars, and another 10,000 employees are expected to leave over the next month through a voluntary early retirement programme.

At the same time, revenue has been increased, in part through the introduction of new package products under the Delivering for America programme.

Still, the USPS lost $9.5bn last year and remains a long way from Mr DeJoy’s financial targets, despite a $144 net income in the first quarter of the current fiscal year.

He decried costly activities the service had to perform without additional funding, such as operating rural, low-traffic outlets, six-day mail delivery and uniform first-class mail rates, which cost the USPS between $6bn and $11bn a year. You can read Mr DeJoy’s letter to lawmakers here.

There are a number of other hits to the bottom line Mr DeJoy wants to tackle, that add up to several billion dollars. These include retirement benefit calculations and investments, misallocated pension liabilities, and excessive charges in a workers’ compensation programme. Primarily it is these costs DOGE is expected to review.

“I can’t say everything DOGE is doing makes sense, but it is uncovering a lot of waste,” commented John Haber, chief strategy officer of Transportation Insights. After years of struggling to cut costs, it could be expected that the USPS’s financial calculations are bullet-proof, but auditing firms have different opinions and ideas, he added.

While members of Congress and postal labour organisations like the American Postal Workers Union have criticised the involvement of DOGE, the National Association of Letter Carriers welcomed the move, arguing that structural change is needed to achieve profitability.

In light of comments by Mr Musk and the US president in favour of privatising the postal agency, there is speculation that DOGE could also weigh in on the Postal Regulatory Commission (PRC), which determines the pricing of USPS services.

Mr DeJoy regards it as a primary obstacle to his plans and recently called it “an unnecessary agency that has inflicted over $50bn in damage to the postal service by administering defective pricing models and decades-old bureaucratic processes”.

In response, the agency called his statement false and argued that the USPS had wasted $100bn in financial assistance and had become less efficient, especially for rural Americans.

Mr Haber noted that UPS and FedEx had been lobbying for years against USPS pricing, arguing that it was below cost and that the postal agency’s sales reps did not have the leeway to make the price adjustments their competitors at the integrators enjoy.

He doubts, though, that DOGE would make serious moves toward dismantling or a serious cut of the role of the PRC, notwithstanding the Trump administration’s attitude toward it.

“I don’t think it’s clear how much room there is for DOGE to deal with the PRC. There are already lawsuits challenging its authority,” he said, adding that such a move would meet formidable resistance. The postal service has been a standalone entity since 1971, and Congress has resisted significant change to it, he noted.

Still, some observers wonder if the entry of DOGE could be a step toward some form of privatisation of the USPS. According to a recent advisory note from a large US bank, such a development would likely see a spin-off of the parcel operation, as the agency competes with private providers in that arena.

In such a scenario, the USPS’s parcel rates would undoubtedly go up, said Mr Haber. And it would affect small and mid-sized businesses.

“A lot of SMBs use the USPS because it’s much cheaper than FedEx or UPS. An increase of those rates would really hurt SMBs,” he said.

The impact on the parcel market in the US would be huge. Cathy Morrow-Roberson, founder and head analyst of Logistics Trends & Insights, noted that “an estimated 26 million US small businesses, 84% of total small businesses, engage in online sales, according to a PYMNTS Intelligence survey in 2023”.

Understandably, small online sellers are watching the involvement of DOGE with concern. But Mr Haber has some reassurance for them.

“A privatised USPS, or a privatised parcel arm of it – we’re not going to see that any time soon,” he predicted.