In 1897, a year when mail was still largely delivered by horse and wagon, construction began on an innovative scheme beneath the streets of Philadelphia. Using an intricate network of compressors and metal pipes, the new system could shoot a capsule holding a few hundred letters across a city in several minutes, far faster than a postman could get it there—a speed that matched the increasing velocity of American commerce. The investor in this new technology wasn’t some kind of delivery startup, the FedEx or UPS of its day. It was the U.S. Post Office.

Behind the experiment was Postmaster General John Wanamaker, who was inspired by Paris, London and some other European cities that were already trying out pneumatic posts. It seemed a natural fit for America’s growing metropolises, where mail was hauled by horse cart and carried on foot. Wanamaker had the sense not to try to concoct such a system in-house, since the agency had no such expertise. So he did something clever: He called for private proposals to build pneumatic tube systems.

The Pneumatic Transit Company of New Jersey was the winning bidder, and a public-private partnership was born. It agreed to pay to build the system, then to charge the Post Office for its use. The first tube could shoot a capsule of mail nearly three-fifths of a mile through a 6.5-inch tube from the city’s main post office to the East Chester Street post office. Soon, similar systems were installed in Boston, St. Louis and Chicago. New York City’s system, the largest, could move 6 million pieces per day at 30 miles per hour from the Bronx to Manhattan and Brooklyn. Collectively, the Post Office’s pneumatic tube system ran more than 120 miles, with 130 postal “rocketeers” feeding mail into it every 15 seconds.

LEFT: As Americans flocked to cities in the late 19th century, the Post Office Department experimented with a groundbreaking way to deliver mail: pneumatic tubes, which could shoot a capsule holding hundreds of letters across a city in seconds. RIGHT: The Postal Service considered shipping mail on missiles like the Regulus I, which is shown being launched off the coast of Florida, but eventually abandoned the idea. | Courtesy of Smithsonian's National Postal Museum

When Americans think about the most innovative agency in the government, they think about the Pentagon or NASA. But throughout much of its history, that title could just as easily have fallen to the Post Office, which was a hotbed of new, interesting, sometimes crazy ideas as it sought to accomplish a seemingly simple task: deliver mail quickly and cheaply. The Post Office experimented with everything from stagecoaches to airplanes—even pondered sending mail cross-country on a missile. For decades, the agency integrated new technologies and adapted to changing environments, underpinning its ability to deliver billions of pieces of mail every year, from the beaches of Miami to the banks of Alaska, for just cents per letter.

CHECK OUT A PHOTO GALLERY OF POST OFFICE INNOVATIONS

We think a lot about how innovation arises, but not enough about how it gets quashed. And the USPS is a great example of both. Today, what was once a locus of innovation has become a tired example of bureaucratic inertia and government mismanagement. The agency always faced an uphill battle, with frequent political interference from Congress, and the ubiquity of the internet has changed how Americans communicate in unforeseeable ways. But its descent into its current state was not foretold. A series of misguided rules and laws have clipped the Post Office’s wings, turning one of the great inventors of the government into yet another clunky bureaucracy. As a new administration once again takes up the cause of “reinventing government,” it’s worth considering what made the Post Office one of the most inventive parts of the nation’s infrastructure—and what factors have dragged it down.

IN A SENSE, innovation was baked into the Post Office from the beginning. America’s national postal service precedes the founding: It was born in July 1775, a year before the Declaration of Independence was ratified. During the American Revolution, the U.S. postal system’s duty was to deliver communications between Congress and the military commanders fighting the British. And for the first postmaster general, Congress appointed an inveterate tinkerer, Benjamin Franklin. He rigged up a system of contractors to haul mail by horse and on foot. It worked.

The Post Office, as it was called until 1970, would be a national communications network, delivering personal correspondence and newspapers to all the nation’s settlers. It was both a public service and a commercial enterprise and was given a monopoly over the delivery of letters, financing itself through user fees.



During World War II, the Post Office adopted V-Mail, a convenient way for families to correspond with soldiers. Letters were scanned to microfilm, which was shipped overseas and then printed and delivered to GI recipients. | U.S. Postal Service

From the start, the Post Office Department had to be innovative. There was little money to fund the startup agency, and its task—delivering mail to anywhere in the country—was immense. In turn, Congress, often at the request of postmaster generals, gave the agency a good amount of operational freedom, and the Post Office Department took advantage of that freedom. In 1785, Congress authorized the Post Office Department to hire private stagecoaches to deliver mail. It was a smart idea that leveraged private-sector investments in transportation but did not commit the agency itself to bearing the great cost of purchasing horses and coaches and hiring riders. Later, the Post Office would contract to have mail carried by steamboats, railroads and private delivery companies (“star carriers”).

The agency also had the authority under the Constitution to erect post offices, but at first it often declined to do so, licensing tavern owners to provide postal services to thirsty customers instead. That changed during the 19th century, when the postal service expanded massively. In 1790, the nation had 75 post offices; by 1900, there were more than 76,000. Then came home delivery: Mail reached many city-dwellers at home by the mid-1860s and expanded to farmhouses and remote houses in the 1880s. Henry Ford built his first car in 1901. Four years later, the Post Office was experimenting with mail delivery by automobile.

Like many pieces of large-scale government infrastructure, the Post Office spawned piggyback innovations such as the catalog mail-order industry, which bloomed at the fin de siècle, bringing goods from Sears, Roebuck & Company and myriad other retailers to families no matter where they lived. The agency also accelerated the growth of commercial aviation in the early 20th century by contracting with private plane owners to carry mail. Fledgling airline companies struggled to sell enough tickets to passengers, but Post Office delivery contracts supplied dollars that kept them afloat.

The first half of the 20th century was a dynamic time for the Post Office. It immensely improved mail receipt and delivery by adopting innovations from the private sector and abroad. Train cars were designed to mesh two separate aspects of mail delivery: mail sorting and delivery. Rather than have mail delivered to a post office in a jumble and then sorted by postal clerks, clerks on rail cars sorted the mail while it was en route. Bags of sorted mail were hung on posts outside train stations and post offices without the train even needing to stop. The Post Office also experimented with a “highway postal bus” from the late 1940s through the early 1960s. The nation’s highway system was growing, and the agency saw an opportunity to reduce costs. Like the mail-train cars, a driver would drive the bus while mail sorters separated letters and such by address.

Much like the pneumatic tubes, some of the schemes incorporated new technology we no longer even associate with mail. During World War II, the Post Office adopted V-Mail, an idea pioneered in England. Families wishing to correspond with soldiers overseas would write the letter on a V-Mail form, which was placed in a capsule and shipped to a facility, where it was scanned to microfilm. The hundred-foot rolls of film, which could hold 1,700 letters, were carried overseas, unsealed, and the letters individually printed and delivered to GI recipients.

The agency even toyed with moving mail by missile. Why schlep over ground when letters could be launched through the air at 600 miles per hour? “Before man reaches the moon,” Postmaster General Arthur A. Summerfield proclaimed in 1959, “mail will be delivered within hours from New York to California, to England, to India or to Australia by guided missiles.” This experiment was a dud, however. Few places could handle the landing of a 30-foot Regulus I missile, and the perils of a misdirected rocket ensured the experiment remained just that.

OVERSHADOWING ALL THE invention, however, was the creeping sclerosis of the Post Office as an institution. As a monopoly, it was insulated from competitive pressures, allowing inefficiency to creep into its operations and management. Worse, political interests had sunk deep, with Congress setting postage rates too low and too frequently trying to dictate the location of post offices and mail-sorting facilities.

Political pressures had been a challenge for the department from the start. President George Washington criticized Postmaster General Ebenezer Hazard when he tried to save the department money by switching mail carriers from stagecoaches to lone horse-riders. Private companies, eager to sell products or services to the department, lobbied Congress for postal contracts. Lawmakers inserted hacks into postal jobs. Everybody wanted something from the Post Office Department, and Congress proved all too happy to satisfy these political pressures.

In the late 20th century, the Postal Service came under steep competition from companies like FedEx and UPS as Americans shipped record numbers of packages and mailings. | Courtesy of Smithsonian's National Postal Museum

Booming business, however, enabled the postal system to avert a crisis for decades. In 1900, 7 billion pieces of mail were delivered; by 1960, the agency was moving 63 billion letters and parcels. The department often ran a profit, and it sowed those profits into new mail-delivery technologies. Buggies and snow sleds were replaced by mail-delivery trucks designed to allow carriers to deliver mail nearly everywhere.

Things began to change in the 1960s. Postal workers unionized, and President John F. Kennedy authorized them to bargain collectively in 1962. Despite growing mail volume, the Post Office ran perennial deficits, and its investment in the guts of the system—mail receipt and sortation—lagged. The system broke down in Chicago in 1966, and 10 million pieces of mail were backlogged for days.

After a wildcat strike broke out in New York City in 1970, Congress abolished the Post Office Department and replaced it with the U.S. Postal Service, an independent agency. The Postal Reform Act removed some of the congressional involvement in its operations. In exchange, policymakers reduced the agency’s dependency on the U.S. Treasury and demanded it become self-sufficient.

This new-look Post Office had been conceived by a Nixon-appointed corps of braintrusters and businessmen with the aim of turning the agency into a public corporation with minimal political interference. Instead, the plan infused the new agency’s DNA with some of the same clashing political interests that were hobbling the agency. Big mailers benefit from subsidies written into the law. Postal workers must be unionized and are entitled to bargain collectively over wages, compensation and working conditions. Folks in far-flung Alaska and Hawaii are entitled to the same postage rates and services as everyone else—no matter the cost—and Congress continues to insist that mail be delivered six days per week to appease certain big mailers, postal unions and some rural residents. The baroque rate-setting structure meant the USPS had to plod through quasi-judicial proceedings lasting many months each time it needed to raise postage prices.

In turn, innovation at the agency flagged. Upgrades in mail-processing machinery were delayed over union objections that jobs would be lost. So, too, were attempts to contract out more postal work to private carriers or delivery companies. USPS operations became increasingly governmental as collaboration with private-sector companies flagged.

At the same time, technology rapidly was catching up to the Post Office. The first threat was actually a miss: Although the electronic fax arrived in the early 1970s, it did not eat into the USPS’ business. So when cellular-phone technology arrived in the late 1980s and the internet erupted in the mid-1990s, USPS officials mostly shrugged. Annual revenues climbed, and the USPS’ employee cohort rose to nearly 800,000 before the end of the 20th century.

The USPS did upgrade some of its internal technology. Its letter-sorting machines have sensors with optical character recognition. As envelopes whizz through sorting machines, their addresses are read and a bar code is sprayed on them. Sensors further down the line read the bar codes and shunt the mail into sacks for different ZIP codes.

Yet relative to the world around them, these technical improvements are nothing compared to the Post Office Department’s innovations in the 18th and 19th centuries. Some of the new sorting machines have not been reliable, and the agency’s parcel logistics lags behind private-sector companies like FedEx and UPS. Take tracking packages: For some time, customers have been able to track the movement of the parcels they sent via private companies. But the Postal Service had no such option for many years, and even today, its tracking service is much slower. The USPS has seemed, at times, oblivious to the reality of changing communications technology. It was as if the agency had given up on innovation and was utterly confident that mail volumes and revenues would grow forever.

WHICH WAS A huge mistake. In 2008, the Great Recession’s teeth hit the mail business. Most mail is sent by big mailers, many of whom slashed their postal budgets and accelerated transferring their communications to less costly online means. Mail volume is down 25 percent since 2008, and the agency has hemorrhaged money. More and more of what USPS carries is advertising mail, which generates low profits. The mail-volume crash laid bare the cost of the USPS’ loss of innovation mojo. It is a labor-intensive, paper-toting company in a digital age, and USPS leadership has belatedly awakened to the reality that mail is not a growing business.

Private-sector companies may soon eat even more of the Postal Service’s lunch, or a good portion of it. Amazon is building a delivery network of its own, with lockers instead of post office boxes, and experimenting with drones. Uber also has nosed into the delivery business, and other companies are experimenting with autonomous delivery vehicles and robots.

USPS so far appears unable to innovate its way out of the mess it is in. The agency has $15 billion in debt and has shown little imagination to find ways to make mail matter to people or fundamentally transform the way it does business. When Outbox, a small private company, established a service several years ago to scan folks’ paper mail and send it to their computers or smartphones, the company proposed what it thought was a mutually profitable partnership with the USPS. The agency turned up its nose at the company and reportedly refused to forward mail to it, despite postal customers’ wishes. Outbox shuttered in 2014, unable to operate. Now the USPS is piloting its own version of Outbox’s service.

The agency has piloted a grocery-delivery business, despite the 2006 congressional prohibition on the agency entering new nonpostal businesses. To date, the USPS has not released any financial results for this experiment, which seems doomed to fail. Why grocers would rather pay highly compensated letter carriers, rather than less costly bicycle delivery people or Uber drivers, is anything but obvious.

Nothing may sum up the Postal Service’s inability to innovate more than its failed partnership with Staples. A few years ago, the Postal Service agreed with Staples to expand consumer access to its shipping services. Upon entering select locations of the office-supply chain store, shoppers would “find a familiar looking counter resembling a mini post office containing the most popular postal products and services,” the agency crowed. Customers who went to Staples to get photocopies, booklets and signs printed now could have them shipped by the Postal Service. It was “one-stop shopping and shipping,” and Staples postal counters would be open seven days a week.

The agreement was an attempt to turn around the Postal Service’s financial fortunes by increasing sales of pricier premium shipping services, like Priority and Express Mail. To be sure, this partnership was not invented whole cloth by the USPS. Big shipping companies had already sought profitable synergies through such arrangements. For instance, FedEx had purchased Kinko’s 10 years earlier, and UPS inked a deal to have its big brown trucks scoop up parcels daily from Staples. For the USPS, the postal counters were an important step toward modernizing its practices to compete in the 21st century. The agency began piloting the Staples arrangement in November 2013 in Boston. More than 500 Staples stores nationwide had retail postal counters by the end of last year.

Post Office workers protest outside a Staples in 2014 after the Post Office agreed to a deal to allow people to ship packages directly from the office supply store. Earlier this year, the National Labor Relations Board killed the USPS-Staples agreement. | Getty

At first blush, the USPS-Staples partnership looked like a win-win arrangement. But the American Postal Workers Union did not see it that way. It decried the deal as an effort at union-busting, because Staples personnel would man the postal counters. The “American people have a right to post offices staffed by highly-trained, uniformed Postal Service employees, who are sworn to safeguard the mail and who are accountable to the people,” the union declared. The USPS balked at APWU demands to staff the counters with unionized postal employees, who earn about $25 an hour. So the APWU picketed Staples stores and sued the agency.

Earlier this year, the National Labor Relations Board killed the USPS-Staples deal. Too weary to fight or fearful that it could not win in court, the USPS capitulated, and the Staples postal counters are being dismantled.

Pneumatic tubes didn’t survive, either: They became a victim both of their design and the Post Office’s success. Mail volumes grew fantastically over these decades, and the tubes could only carry so much. Ripping them out and replacing them with bigger tubes was deemed too pricey. Moving mail by truck would be more efficient. So the Post Office shut down its pneumatic mail tubes on December 12, 1953.

That was an investment decision—the kind any company would have made, and one that allowed the Post Office to keep growing. The Staples deal, by contrast, drowned in a bureaucratic swamp, tangled up in politics and labor relations. Absent fundamental changes to these kinds of structural obstacles, the odds are long that the USPS will become the innovator it once was. The agency continues to be led by longtime postal people rather than those who move fluidly through the increasingly digitized world; Congress also has not been much help. The postal reform bill currently moving before Congress might sound like the right idea, but its fixes are superficial: It would force the USPS to create an “innovation officer,” an official with little authority to bring about genuine change at the agency, and wouldn’t do much to dislodge the entrenched political interests from the basic structure of the USPS. Which means the Postal Service—once one of the most impressive and fast-moving information networks ever devised—may end up as a lesson in how not to meet the future.

Kevin R. Kosar is vice president of policy at the R Street Institute and edits LegBranch.com.

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