Commenting on possible US Postal Service (USPS) privatization a few months ago, President Donald Trump said, “it’s an idea that a lot of people have liked for a long time.” Indeed, they have. Cato has been making the case for privatization since the 1980s. Then with the rise of the internet in the 1990s, it became even more clear that a government-owned paper-delivery system was not needed.

In 2002, the Congressional Research Service (CRS) noted that Ruth Goldway of the Postal Rate Commission had

proposed privatizing USPS through an initial public stock offering that might bring as much as $100 billion to the Treasury … Privatization, she believes, is “the best way to save the institution from oblivion” as financial correspondence increasingly moves on-line.

The CRS also noted at the time that Postmaster General William Henderson

in his final interviews and public appearances, said that privatization has been adopted by much of the rest of the world and is inevitable here, as well. Shortly after leaving office, he explicitly endorsed privatizing USPS through an employee stock option plan.

Two decades later, the case for privatization is even stronger. The USPS has lost billions of dollars over the years, and the volume of mail continues to fall. Privatization would allow the USPS to cut costs, innovate, and find new markets.

We put together this table showing changes in USPS operations since 2000.

The data indicate that since the turn of the century:

• The volume of first-class mail, marketing mail, and periodicals has fallen continuously.
• Marketing mail—“junk mail”—has become the largest type of mail by volume.
• Post office visits are down by half since 2000 even though the US population has increased 21 percent since then.
• Despite the huge drop in visits, the number of post offices has been cut just 8 percent since 2000. Many post offices today get little traffic, with the average location receiving just 9 visits per hour—calculated by roughly assuming 2,500 hours per location per year.
• USPS management has cut the number of employees 29 percent since 2000, but total product volume is down 46 percent.
• Almost three-quarters of USPS costs are employee compensation. About four-fifths of the labor force is unionized.
• Operating expenses are higher than operating revenues.
• The USPS is a sharply declining part of the US economy.

Some cost-cutting approaches seem obvious. How about closing thousands of little-used retail post offices and those close to other locations? How about moving to three-day-a-week delivery (rather than six) to cut the USPS’s massive vehicle fleet? Such changes would save money and benefit the environment.

However, such reforms are difficult to make with the USPS in government hands. As Cato has long suggested, the best solution is privatization.

More on USPS reform here, here, here, here, and here.

Table compiled by the author based on data in USPS financial statements here, here, here, and here.

Yasmeen Kallash-Kyler helped research the article.

On April 5, the Senate approved a modified budget framework, which is a betrayal of the House’s more responsible fiscal stance. The Senate’s strategy is clear. They want to jam House Republicans with a massive debt-financed tax package with zero substantive offsets. The Senate’s budget resolution replaces the House’s $2 trillion in concrete spending reductions with $4 billion in spending cut instructions, adds $221 billion in new spending, and sets a dangerous precedent by adopting a scoring baseline that hides at least $5 trillion in deficit-increasing tax cuts. House Republicans should call out the Senate’s strategy for what it is—a blatant attempt to abandon any semblance of fiscal sanity.

As Cato’s Adam Michel, Director of Tax Policy Studies, recently put it,

If the House accepts the Senate version, they will in all likelihood have already lost the fight for a responsible bill.

If they don’t come to consensus now on the spending cuts, a few Senators’ unwillingness to cut anything meaningful will stall the process until the need to raise the debt ceiling becomes the forcing mechanism to back fiscal hawks into a corner and get them to vote for a bad bill.

At least a dozen legislators in the House who fought hard to tie tax cuts to real spending restraint have rightly expressed skepticism over the Senate’s game plan.

• Rep. Lloyd Smucker (R‑PA): “The leverage is right now. I just don’t believe that if we can’t set some kind of a floor for spending cuts now, we’re going to get them anytime later.”
• Rep. Chip Roy (R‑TX): “The Senate is making very clear it has little intent to reduce spending.”
• Rep. Keith Self (R‑TX): “House Republicans passed a strong budget with $1.5 trillion in cuts. The Senate budget offers only a measly $4 billion in cuts…nowhere near what we need to curb the deficit.”
• Rep. Josh Brecheen (R‑OK): “So many of us are GREATLY disappointed in the Senate budget resolution (that initiates the reconciliation process) effectively gutting what we sent over from the House!”
• Other skeptical House Republicans include Scott Perry (R‑PA), Andy Harris (R‑MD), Thomas Massie (R‑KY), Ralph Norman (R‑SC), David Schweikert (R‑AZ), Andy Ogles (R‑TN), Andrew Clyde (R‑GA), and Victoria Spartz (R‑IN).

House Budget Chair Rep. Arrington (R‑TX) perhaps put it best, saying in a recent interview:

Our children are going to inherit the whirlwind of our recklessness, now to the tune of $36 trillion in debt, $2 trillion annual deficits, $1 trillion just to service the debt. Those are all deferred taxes on our children. So we have to have offsets, we cannot increase the deficit, and we have to get our country on a sustainable and responsible path. That’s missing from the Senate bill. That was in the House bill.

Don’t Get Bullied by Leadership and Tumultuous Markets

Reportedly, President Trump and GOP leaders have been attempting to pressure House Republicans to swallow the Senate bill. This arm-twisting campaign is taking place as Wall Street has experienced a massive economic downturn—sparked by the president’s tariff-driven market panic. House legislators need to recognize that they hold the cards. House Republicans muscled the $2 trillion spending cut target through a razor-thin majority. They shouldn’t allow political and economic turmoil to steamroll fiscal accountability. Now is the time to hold the line.

Lawmakers have a choice. Accept the Senate’s resolution under pressure or insist on a better path—one that doubles down on the House’s stronger fiscal framework, goes big with spending cuts, and protects Americans from the hidden costs of debt and inflation. Let’s hope legislators buck the trend in Washington of consistently making the wrong fiscal choice.

President Trump’s anti-market impulses are taking center stage this week with his damaging tariff policies. But the president is occasionally supportive of pro-market reforms, such as his remarks on possibly privatizing the US Postal Service (USPS). A Trump reform push would be welcome because the USPS is an ailing dinosaur in the modern digital economy.

The figure below shows that USPS revenues are a shrinking part of gross domestic product (GDP). While revenues from packages and shipping have risen, revenues from letters, marketing mail, and periodicals have plunged. Excluding packages and shipping, USPS revenues have fallen to less than one-third the level of 2000, relative to GDP.

The volume of first-class mail has fallen 57 percent since peaking 2001, even as the US population increased 19 percent. Mail volume is falling year after year, relentlessly. While USPS package and shipping volume has grown, we do not need the government providing that service because it is provided by numerous competitive private firms. 

With its core products in terminal decline, the only way for the USPS to survive is to cut costs, innovate, and find new markets. However, those are difficult tasks for a government entity, and we also don’t want the government to expand unfairly into private industries. Therefore, the best solution for the USPS to survive and add value to the economy is privatization.

More on USPS reform here, here, here, and here.

Chart based on author calculations from USPS financial statements here, here, here, and here.

After five rounds of voting, the pass-through tax deduction was chosen as the worst tax expenditure. The 20 percent business deduction arbitrarily favors certain types of businesses over others and adds tremendous complexity to the tax code. The results from the Tax Expenditures Madness bracket suggest that Congress fundamentally rethink how the United States taxes business income.

You can read more about the contest here and find descriptions for all 32 tax expenditures in the bracket here. 

What is a pass-through business?

Businesses are broadly taxed in two different ways. A pass-through business passes its profits through to its owner’s income tax return and thus pays taxes at individual income tax rates—the top individual income tax rate is 37 percent in 2025. C corporations pay the federal corporate income tax rate of 21 percent on business entity-level profits. When those profits are distributed or realized through stock sales, the 20 percent top tax rate on capital gains and dividends applies.

C corporations tend to be the larger, publicly traded businesses most Americans know as household names. Pass-through businesses tend to be smaller, privately owned, and take the legal forms of partnerships, sole proprietorships, limited liability companies (LLCs), Subchapter S corporations, regulated investment companies (RICs), and real estate investment trusts (REITs). 

Over the past half-century, the pass-through sector has grown as a share of businesses in the United States and as a share of all business profits. The Tax Foundation’s Huaqun Li shows that in 1980 C corporations comprised 17 percent of businesses and earned 75 percent of business profits. In 2020, C corporations were 4 percent of businesses and earned 42 percent of business profits. Pass-throughs also employ a majority of the private sector workforce.

What is the pass-through deduction?

Congress created the Section 199A deduction for pass-through businesses as part of the 2017 Tax Cuts and Jobs Act. The provision allows individuals to deduct 20 percent of qualifying net business income. Certain high-income service providers in health, law, consulting, athletics, financial, and brokerage services are denied the deduction. Phaseouts and other complicated limitations also apply. For qualifying businesses, the deduction lowers most pass-throughs’ top marginal income tax rate from 37 percent to 29.6 percent.

Passive income from pass-throughs and C corporation shareholders above a $200,000 threshold ($250,000 for married filers) is also subject to the 3.8 percent net investment income tax (NIIT). 

Proponents of the 199A deduction argue that it is necessary to create tax parity between pass-through businesses and C corporations. Often, the comparison is made between the 21 percent corporate tax rate and the 37 percent top individual income tax rate. However, the comparable rate for large C corporations must also account for the 20 percent capital gains and dividend taxes assessed on realized and distributed profits. Taken together, the total tax rate on corporate income is 36.8 percent, which is very similar to the top rate of 37 percent paid without the special pass-through deduction.

This simple comparison abstracts away from many other intervening particularities in how different business forms distribute or retain profits, pay employees, and finance capital raising. Attempting to account for many of these variations, Kyle Pomerleau concludes “that under current policy, pass-through business profits face a lower tax burden than do other forms of income, such as wages and certain types of corporate profits. In addition, pass-through business investment, on average, faces a lower tax burden than does corporate investment.” Using different assumptions and assuming tax rates go up in 2026, some pass-throughs could be disadvantaged next year relative to larger C corporations whose tax rate reduction is permanent.

The differences in business tax rates, depending on organizational structure, violate key principles of tax design, namely that we should treat similarly situated taxpayers similarly (horizontal equity). To fix this disparity for some taxpayers, the pass-through deduction adds additional tax complexity, includes perverse economic incentives as guardrails phase in, and creates new opportunities for economically costly tax planning. A deduction cannot fix our tax system’s structural flaw that applies two vastly different sets of tax rules to similar business types. 

Fixing business taxation

The remedy to the bifurcated business income tax is some form of “corporate integration” that treats all business profits similarly. Policymakers could tax all business income at the business level, tax all income at the individual level, or pursue a hybrid system. Travis Nix and I reviewed eight different forms of full or partial business integration, each with different advantages and complications.

Kyle Pomerleau describes how integration would go a long way towards equalizing the tax treatment of businesses and “can also eliminate the incentive for business owners to reclassify income for tax purposes, greatly reduce the tax code’s bias in favor of borrowing, and could generally improve investment incentives, which would lead to a larger economy and higher incomes for Americans.”

The results from our Tax Expenditure Madness bracket emphasize how the 2025 expiration of the pass-through deduction is an opportunity for Congress to more fundamentally reconsider how the US tax code treats all business income. 

On April 2, the Senate unveiled a new budget blueprint, a crucial step in using reconciliation to enact President Donald Trump’s agenda. This budget isn’t just a missed opportunity; it actively worsens our nation’s debt trajectory. The resolution abandons the House’s concrete spending reductions desperately needed in today’s high-debt environment, sets a dangerous precedent by adopting a so-called current policy baseline that hides the very real deficit impact of extending tax cuts, and adds hundreds of billions in new deficit spending. The Senate should go back to the drawing board.

Under the amended budget framework, the Senate allows for $1.5 trillion in new tax cuts plus $500 billion in new spending, primarily for immigration and defense. That’s on top of the $3.8 trillion in tax cuts that will be magically waived away by using a current policy baseline—roughly the equivalent of pretending it doesn’t cost anything to extend a streaming subscription because you’ve been paying for it for a few months already. The graph below shows the change to the deficit over ten years under the amended resolution.

Together, the Senate’s amended resolution would add $5.8 trillion in new deficits over ten years. Per the Committee for a Responsible Federal Budget, that would double the growth of the debt-to-GDP ratio, with public debt reaching an astonishing 211 percent of GDP by 2055. To offset new tax cuts and spending, the Senate proposes a paltry $4 billion in spending cuts. Shameful.

For comparison, the current House budget resolution, while allowing $2.8 trillion in new borrowing, provides concrete instructions for $1.5 trillion in spending reductions and contains a binding measure to encourage $2 trillion in savings. That’s hardly a full offset tax package, but at least the House attempts to bend the arc on rampant federal spending. The Senate doesn’t even try.

Fiscal Hawks Should Hold the Line

As the House Appropriations Chair Tom Cole (R‑OK) has said, “[I]t’s time to put up or shut up if you’re serious about spending.” House Budget Committee Chair Jodey Arrington (R‑TX) concurred, noting, “When you’ve got the appropriations chair and the budget chair singing off the same song sheet, people need to pay attention in terms of what is needed in this fateful hour.” Other House deficit hawks, including Reps. Schweikert (R‑AZ), Smucker (R‑PA), and Roy (R‑TX), have rightly warned that the Senate isn’t being ambitious enough with their spending reductions, and it may not pass muster in the House.

Federal spending in fiscal year 2025 is projected to be $7 trillion, or nearly $90 trillion over ten years. Americans cannot afford for Congress to not only kick the fiscal can down the road but, worse, strap it to a rocket and blast it directly into a fiscal black hole.

Cato Scholars Offer Their Perspectives

As with the House and prior Senate budget resolutions, we reached out to our fellow Cato scholars to assess the Senate’s fiscal framework. Here’s what Cato Institute experts had to say in reaction to the Senate’s latest proposal.

The Senate dodges needed spending cuts and accelerates fiscal decline. As Adam Michel, Director of Tax Policy Studies, explains:

The Senate budget avoids making any of the hard decisions that are necessary to ensure permanent tax cuts. This framework doesn’t even bother to cut spending to match the new tax cuts, let alone begin to rationalize the growing gulf between revenues and outlays. The Senate’s framework sets the stage for capitulating to the business-as-usual Washington pastime of cutting taxes and increasing spending—kicking the fiscal can down the road. Without meaningful spending reforms, tax cuts will necessarily be temporary as the pressure of mounting deficits builds.

Permanent, pro-growth tax reform is more necessary now than ever. However, a more than $5 trillion reduction in revenue without any offsetting spending cuts is a recipe for fiscal collapse, not the foundation for an economic revival.

The Senate baseline rescues Biden’s health care spending spree, forcing taxpayers to overpay for low-quality health care. As Michael Cannon, Director of Health Policy Studies, explains:

As the United States government barrels toward a debt crisis, both House and Senate Republicans seem content to keep forcing taxpayers to overpay for low-quality health care. Senate Republicans especially are blindfolding the passengers while slamming on the gas. The Senate GOP budget would rescue Joe Biden‘s spending spree. Obamacare premium subsidies for households earning up to $600,000 per year would stay. Biden‘s 14 percent increase in Medicare spending and 20 percent increase in Medicaid spending over the pre-Biden baseline—that is, new spending above and beyond the typical year-to-year increases—would stay. The House Republicans’ budget could at least reduce annual growth in Medicaid spending from 6 percent to 3 percent; by the 10th year of the budget window, it could just barely eliminate that one portion of the Biden Bump. Meanwhile, Senate Republicans’ phony “baseline” would preserve all of Biden’s unnecessary spending. It is perhaps the largest, most dishonest, and most shameful budget gimmick in U.S. history.

When a debt crisis arrives, it will bring drastic cuts to federal health programs. Not reductions in the rate of growth. Actual, deep cuts. Mostly to Medicaid. Democrats who continually expand government health programs and Republicans who continually expand federal debt are putting the health care of low-income patients in a precarious situation.

The Senate uses budget gimmicks to avoid tough decisions while enabling Trump’s destructive tariff policy. As Policy Analyst Tad DeHaven explains:

The Senate Budget Resolution is the latest evidence that Republicans’ talk about downsizing government and cutting spending to head off a debt crisis is all just talk. Instead, the Republican majority Senate is proposing no serious spending cuts and trillions more in debt, and it intentionally obfuscates the cost by gaming the budgetary score. At the same time, all but a few Senate Republicans are enabling President Trump to usurp Congress’s constitutional responsibility to set tariff policy. As a result, so-called pro-growth tax cuts are set to be undermined by the president’s unilateral imposition of a massive tax hike on American consumers and businesses.

The Current Policy Disaster

The Senate plans to rely on an unprecedented scoring framework under which the extension of expiring tax cuts would score as costing $0 (the deficit will still go up). Extend this framework to a future Democratic Congress. On a party-line vote, the Senate could pass a one-year, temporary Medicare-for-All package and then extend it in the subsequent year, claiming it costs nothing. Are Senate Republicans so short-sighted that they think this won’t come back to haunt them?

The Senate should not be playing budget games with America’s fiscal future. The current policy gambit enables new deficit spending and reduces the pressure to repeal costly laws, such as the Inflation Reduction Act’s energy subsidies. Legislators should reject the current policy baseline gamble.

Go Back to the Drawing Board

The Senate should be stepping up to the present fiscal challenge and embracing spending cuts that are bolder than the House plan as part of a truly pro-growth tax cut strategy. Instead, Senate leadership is dropping the ball, abandoning any semblance of fiscal responsibility. Americans continue to suffer from inflation, high interest rates, and economic uncertainty. Further fueling the rising debt will boost inflation, eroding Americans’ purchasing power and pushing interest rates higher—making mortgages, car loans, and everyday expenses more difficult to afford. To bring about economic stability and unleash opportunity, Congress must rein in spending and pair tax relief extensions with real fiscal discipline. Otherwise, today’s deficits will become tomorrow’s tax hikes and inflationary pain for American families.

As the United States government barrels toward a debt crisis, both House and Senate Republicans seem content to keep forcing taxpayers to overpay for low-quality health care. Senate Republicans especially are blindfolding the passengers while slamming on the gas. 

Former President Biden went on a health care spending spree. He created Obamacare premium subsidies for households earning up to $600,000 per year. He opened the floodgates to improper enrollment in Obamacare. He increased Medicare spending by 14 percent and Medicaid spending by 20 percent over the pre-Biden baseline—that is, new spending above and beyond the typical year-to-year increases. The House Republicans’ budget might at least reduce annual growth in Medicaid spending from 6 percent to 3 percent; by the 10th year of the budget window, it might just barely eliminate the Medicaid portion of the Biden Bump. 

The Senate GOP budget is an effort to rescue Biden’s spending spree. Obamacare subsidies for those earning up to $600,000 would stay. Biden‘s Medicaid and Medicare spending increases would stay. And Senate Republicans would accomplish all this through what is perhaps the largest, most dishonest, and most shameful budget gimmick in US history.

Decades ago, Congress enacted budget rules to prevent runaway deficits. But no Congress can bind future Congresses. Profligate legislators have rewritten those rules, including by subterfuge. The result is a record federal debt equal in size to the entire US economy, which Congress increases by another 6 percent of GDP each year. 

The Senate GOP budget would rescue Joe Biden’s spending spree. But Senate Republicans don’t want to face accountability for that decision. So they devised a novel and massive subterfuge that would enable them to pass their irresponsible budget with fewer votes and would effectively throw all congressional budget rules out the window.

Their subterfuge is literally to pretend that tax and spending laws that Congress has already passed aren’t real. Senate Republicans want to pretend that Congress has already renewed Biden’s spending spree, that Congress has already cut taxes, and that the federal debt is already heading as high as Senate Republicans want to raise it. None of those things are true, of course. But if the Senate passes a resolution that pretends they are, Republicans can enact those policies without facing accountability from voters. After all, if those things have already happened, there’s no need to cast unpleasant votes for the tax increases and spending cuts necessary to pay for them. Senate Republicans’ phony “policy baseline” is perhaps the largest, most dishonest, and most shameful budget gimmick in US history.

The United States government is heading toward a debt crisis. The House Republican budget would keep barreling down that road. Senate Republicans are blindfolding the passengers while slamming on the gas.

When a debt crisis arrives, it will bring drastic cuts to federal health programs. Not reductions in the rate of growth. Actual, deep cuts. Mostly to Medicaid. Democrats who continually expand government health programs and Republicans who continually expand federal debt are putting the health care of low-income patients in a precarious situation.

President Trump is moving to shut down the federal Department of Education. Congress will need to make any cuts permanent, but downsizing the federal education bureaucracy is a long-overdue reform. The department, however, is not the only way that the federal government intervenes in the nation’s schools.

The government also spends $35 billion a year on school food programs through the Department of Agriculture. The school lunch program was enacted in 1946 and has morphed into an array of breakfast, lunch, after-school, and summer food programs that now cover 30 million children.

My new op-ed at National Review discusses four reasons to axe federal school food programs and allow the states to adopt their own policies.

My full study on the issue is here.