Part 1, Part 2, Part 3, Part 4
The cost of the postal service, when posts were used solely by kings and nobles, was borne by the public and defrayed by regular taxes; but when the people were permitted to use them, they were charged for the privilege a postage sufficient to defray the expenses not only of their own, but also of all franked letters. The theory of the postoffice in America has been that the revenues from postage should equal or exceed its expenditures; in other words, that it should be self-supporting. The financial history of our post – office is intimately connected with the rates of postage. It may be divided into three periods: the first from 1775 to 1820, a period of forty-five years, in which the revenues uniformly exceeded the expenses; the second, of thirty-two years, or until 1852, in thirteen of which, the revenues exceeded the expenditures, though for the whole term there was a small excess of expenditure; the third, of twenty-two years, until 1874. In this term the expenditures have uniformly and largely exceeded the revenues, excepting in one year of the war. The revenue from 1789 to the 1st of October, 1819, thirty years, was $26,889,003, expended as follows: —
Compensation to postmasters $7,974,072
Incidental expenses 902,662
Transportation expenses 16,369,665
Net revenue paid to the treasury 1,642,604
Total $26,889,003
The revenue from 1819 to June, 1857, was $99,346,000, and the expenditures $99,578,000.
Transportation expenses $60,715,000
Office expenses 38,863,000
Total $99,578,000
Deficiency, $232,000. The revenue from 1851 to 1874, both inclusive, was $306,199,866; the expenditures were $385,033,611; the deficiency was $78,833,545; transportation expenses, $191,309,000; office expenses, $193,724,000.1
The whole income of the department for thirty years ending in 1819 was little more than its income for the current year. This, however, fails to give a correct idea of the great increase of correspondence, for it does not take into account the reduction in the average rate of postage, from fourteen and one half cents to less than three cents. To Great Britain we are indebted for the evidence that cheap postage may be more profitable than high rates. For over one hundred years the Post-Office Department of Great Britain has been a regular source of income to the treasury; but about forty years ago it was observed that while the population had increased in the preceding twenty years from 19,500,000 to 25,600,000, the postal revenues had decreased, though they should have increased $2,500,000 to have kept pace with the population. This diminution of revenue did not arise from a decrease in correspondence, but from the greater number of franked letters (franks being often given away and sometimes sold for less than the postage), and from the fact that vast numbers of letters were sent by other conveyances, though contrary to law. The rates of postage ranged from eight cents to thirty-six cents; the average being nearly eighteen cents.
Rowland Hill was the chief advocate of postal reform. He showed that the great portion of the expenses of the postal service was for office expenses, and that these were nearly the same whether few or many letters were sent; that the difference in the cost of transmitting a letter fifty or a hundred miles was insignificant, and entirely disproportioned to the increased charge; that a low and uniform rate, by stimulating the business and securing to the mail the correspondence which had been diverted from it, would, with the abolishing of the franking privilege, in a short time yield as large a revenue as that derived from high rates, without a proportionate increase of the expenditures. His proposition was opposed by the post-office officials, who denounced it as ruinous and ridiculed it as visionary. The Postmaster-General said in the House of Lords, “ Of all the wild and visionary schemes which I have ever heard of, it is the most extravagant.”
Notwithstanding this opposition the measure was carried, a penny postage was adopted, and the franking and transmission of letters by private conveyance prohibited. The number of letters transmitted in 1839 was 76,000,000; in 1840, the first year of cheap postage, it was 168,000,000, an increase of one hundred and twenty-two per cent.; while the expenses increased only fifteen per cent. The second and third years showed an increase on each preceding year, respectively, of about sixteen per cent, in the number of letters. After that, the average increase for many years was five per cent. a year, though for the last three years it has been only two and one half per cent. a year. The net revenue was reduced from $8,000,000 in 1838, to $2,500,000 in 1840; but since then has continued to increase, until it is now $12,500,000, or fifty per cent. more than with high rates. In 1873, the population of Great Britain had increased to 31,390,000, and the number of letters to 907,000,000.
The favorable results of a penny postage in Great Britain were soon known in this country. Cheap postage was at once agitated, and numerous petitions were presented to Congress. The PostmasterGeneral considered it an unfortunate time for trying experiments, as the expenditures of the department for several years had exceeded the receipts. He admitted the expediency of some reduction, but opposed any radical change in the rates, on the ground that the department would become a heavy charge on the government. He recommended the abolition of the franking privilege, equalization of postage by an increase on newspapers and other printed matter of one hundred per cent., and a reduction on letter postage of twenty-five per cent., with a prohibition against sending letters by express. “ If any doubt could exist in regard to the power of Congress to control the interchange of correspondence for hire, it must vanish upon reference to the tenth article of amendment of our constitution. The power to establish the post-office and post-roads is plainly and distinctly delegated to the United States. It is therefore not a power reserved to the States respectively, nor to the people, the right being in Congress; and it has power to protect that right.” In 1844, the Senate committee on post-offices made a report, and said: “ Government is brought more constantly and immediately in contact with a larger portion of the people by the operations of the post-office than by the exercise of any other of its powers or duties. It is believed that in consequence of the disfavor with the present rates and regulations, not more than one half the correspondence passes through the mails, the greater part being carried by private hands or by means of the recently established private expresses. it is impossible to believe that there are only about 24,000,000 or 29,000,000 letters per year sent in America, and 204,000,000 in Great Britain.”
For nearly three years the discussions were continued in and out of Congress. Bills were twice introduced, and defeated either in the Senate or the House, and it was not until March, 1845, that the first act was passed, making material reductions in the postage. The rates for letters under three hundred miles were fixed at five cents, over three hundred at ten cents ; rates for newspapers were also reduced. Under thirty miles they were free; over thirty and under a hundred miles, or within the State, the rate was one cent; for greater distances, one and a half cents. The carriage of letters by express was prohibited unless the postage was prepaid. The average rate was reduced from fourteen and one half to six and one half cents, or fifty-six and one third per cent. No regular record of the number of letters mailed is kept, but since 1860 the number of stamps issued shows the mailed letters; from a very careful estimate made in 1843, it appeared that 27,831,000 letters and 57,810,000 newspapers were mailed that year; in 1847, 57,173,000letters,57,000,000 newspapers and pamphlets; the letters increased one hundred and five per cent., almost entirely because of the reduction in letter postage. The number of newspapers remained as before, the postage being reduced but very little. In 1860, the number of letters was 245,650,000; in 1874, 905,457,305. The ratio of increase averaged ten per cent, a year from 1860 until 1872; since then it has been seventeen per cent. The number of letters in proportion to population has increased from one and a half in 1840, to twenty-two. The revenue during the six years prior to the reduction in 1845, was$26,954,115; expenses, $27,884,513: during the succeeding six years the revenue was $28,828,377, and the expenses $28,353,060; showing a very small increase in expenditures. In March, 1851, the rates were reduced to three cents for distances under three thousand miles for prepaid, and to five cents for unpaid letters, with double rates for greater distances. Slight modifications were made in 1855 and 1863, the first requiring prepayment, and the second establishing a uniform rate of three cents. The number of letters, the revenue, and expenditures have increased regularly since 1851, interrupted only by the war. A comparison of the business for two terms of seven years prior to and succeeding the war will show its growth.
Letters. Expenditures. Revenue. Balance of Expenditure over Revenue.
1867-1873 3,971,032,400 $169,793,000 $135,493,000 $34,300,000
1855-1861 1,460,000,000 88,047,000 57,446,000 30,600,000
Increase 2,511,032,000 $81,746,000 $78,047,000 $3,700,000
Percentage 275 per cent 92 per cent 142 per cent 12 per cent
Although the balance of expenditures was a little greater from 1867 to 1873, yet in proportion to the number of letters the expenses very greatly decreased, for while the letters increased two hundred and seventy-five per cent., the balance of expenditures over revenue was only ten per cent. greater. A comparison of this statement with one of the Post-Office Department of Great Britain for corresponding periods shows that there the number of letters and the revenue increased about eighty per cent., the expenses sixty-six per cent., and that the profits nearly equaled the expenditures. It is generally known that with cheaper letter postage and a larger correspondence in Great Britain, there is a large annual surplus there and a large deficit here. From these facts the conclusion is drawn that our post-office is managed with less system and economy than that of Great Britain. A more careful examination will disclose causes which account for such different results. In 1873 there were 33,214 post-offices in the United States; 790,000,000 paid, foreign, and official letters; 581,000,000 newspapers and parcels; total, 1,371,000,000 packets. The revenue was $23,000,000, the expenses $28,360,000,2 the average postage per packet 1.68 cents. The transportation expenses were .01, the office expenses .0104, total expenses 2.04 cents. The same year there were 12,500 post-offices in Great Britain; 979,000,000 letters and postal cards, 125,000,000 newspapers, and 129,000,000 book parcels were sent ; total, 1,233,000,000 packets. The revenue was $26,740,000; the expenses were $14,230,000;3 the average postage per packet was .0217; the transportation expenses were .0038; oflice expenses .0077; total expenses .0115. The average postage is higher in England, the office expenses per packet are nearly the same, while the transportation expenses are only one third as much. In England they are about thirty-three and one third per cent., in this country fifty per cent. More letters are sent in Great Britain, more newspapers in the United States. There are seven States in America comparatively thickly settled. The postal service in these States will compare favorably with that of Great Britain in financial results and in the proportion of letters to population. The postal revenue from these States is $10,000,000, or forty per cent, of the entire revenue; the expenses are $7,580,000; the profit $2,757,230, or nearly twenty-five per cent. The expenses of transportation are about thirty percent., the proportion of letters to population twenty-eight to one. If the correspondence of the remaining States was in the same ratio, the postages would fully equal the expenses.
The statistics of seven other States and Territories show different results. In these the revenue was $1,855,773, or seven and one half per cent. of the entire revenue, and the expenses were $4,260,000. Transportation expenses were $3,138,800, or seventy – five per cent. Forty per cent. of the deficiency of the whole service was in these States. This loss should not be charged to the mail service any more than the subsidy paid steamships. ” The idea that the Post-Office Department can be self-sustaining in the present condition of the country is absurd. It cannot and ought not to be. The increase must go on as long as the country prospers. The mines are not yet all developed; the lands are not all cultivated; the railroads are not all surveyed: our country is not finished. Until it is finished, he is not a wise man nor a sagacious man who assumes that the post-office will pay for itself.” In 1873, in Great Britain, the postage from letters was about $20,000,000; from 254,000,000 newspapers and parcels it was about $5,000,000. In the United States the postage for the same year from letters was $20,673,000; from 581,000,000 newspapers and parcels $1,214,000; that is, the postage on twice as many newspapers and parcels in America was only one fourth as much as in England. If newspapers and parcels paid the same postage here as there, the service would be self-sustaining. If due allowance is made for the extent of territory, for the cost of three times as many offices, for the greater number of miles which the mails are transported, for the sparseness of population and the greater weight and bulk of our mails, it will be seen that the service is performed with greater economy in the United States than in Great Britain. A great disparity between the expenditures on account of newspapers and the postages derived from them has existed for a long time, but it has increased enormously within a few years, arising from the greater size, weight, and number of papers. Any one who remembers what the New York Herald, The Tribune, and The Independent were, when they first appeared, and what they now are, will fully understand this great difference.
We find frequent complaints, in the reports of the Postmaster-Generals, of the burden of newspapers to the mails; but the principle of carrying them at very low rates, and less than the actual cost, has never been departed from. The report for 1838 says, “ The weight of letters is only three per cent. that of newspapers, while the postage is ten times as much; ” the report for 1840, “ Printed matter constitutes ninety-five per cent. of the whole mails, while it pays about twelve per cent. of the gross revenue. The low rates of postage on papers and other printed matter originated in consideration of public policy, and were designed to promote the general dissemination of intelligence among the people.” By the law of 1845 newspapers were transmitted free to subscribers living near the places of publication.
Part 1, Part 2, Part 3, Part 4
References:
- Hubbard, Gardiner Greene. Our Post Office. United States, Riverside Press, 1875.
