With the rise of electronic communications, the volume of snail mail has fallen precipitously, and the U.S. Postal Service (USPS) has been losing billions of dollars. The 600,000-worker USPS is an unjustified legal monopoly that is heavily subsidized. It is a bureaucratic dinosaur that Congress should put on the way to extinction.
In April, I highlighted an excellent study by Robert J. Shapiro that described USPS subsidies in detail. The subsidies include: exemption from taxes, low-cost government borrowing, monopoly protections, and other special benefits.
Shapiro completed another study in October, which is a great addition to the postal debate. He details how government-conferred advantages have translated into cross-subsidies from USPS monopoly products to products sold in competitive markets. The USPS uses its monopoly over letters and bulk mail to unfairly compete with FedEx, UPS, and others on express mail and packages.
Shapiro finds that USPS raises prices on its monopoly products, and uses those extra revenues to artificially push down prices on its competitive products. For USPS, this makes sense because consumers are less price sensitive for the monopoly products than for the competitive products. Shapiro concludes, “USPS has strong incentives to cross-subsidize its competitive products with revenues from its monopoly operations,” and it does so by $3 billion or more a year.