The United States Postal Service has run up $4 billion in losses so far this year, on top of last year’s $15.9 billion deficit. Washington should get out of the mail business.
Congress created the Post Office in 1792, turning it into an important patronage tool. Legislators also passed the Private Express Statutes, giving the government a monopoly over first class mail.
Washington imposed fines on early competitors, including the famed Lysander Spooner. Uncle Sam continues to rigorously police his monopoly.
The Postal Service boasts that it would rank number 42 on the list of the Fortune 500—but that is only because the other 499 companies on the list, as well as everyone else, are barred from competing to deliver mail. Unfortunately for USPS, government lawyers cannot force people to send letters. The number of pieces of mail delivered dropped from 213 billion in 2006 to 160 billion last year.
In 1971 Congress voted to turn the post office into a quasi-private company. However, Washington preserved the monopoly, retained control over system operations, and preserved a variety of indirect subsidies. For instance, USPS is exempt from taxes, regulations, and even parking tickets.
No matter. As I explain in my latest Forbes online column:
The post office has lost money most years since becoming self-financing. Last year the Postal Service ran a $15.9 billion deficit and maxed out its borrowing authority. Reported the Government Accountability Office: “Given its financial problems and outlook, USPS cannot support its current level of service and operations.
System advocates, most importantly the unions which represent a bloated work force made up of people once called the highest paid semi-skilled workers in America, complain that the post office is forced to prefund its employees’ retirement. Although the practice is common in the commercial world, since most enterprises cannot count on government bail-outs, no other federal agency is forced to set money aside for future obligations. Which is why the latest estimate, released last month, of the national government’s unfunded retirement liability is $761.5 billion, an increase of $139 billion over the previous year. The prefunding provision attempts to protect taxpayers from having to bail out USPS in the future.
Price increases aren’t the answer, since they have increased 50 percent faster than the rate of inflation for years. The system’s principal response to financial crisis is to propose cutting services, especially ending Saturday delivery, closing small post offices, and establishing “cluster box” delivery for neighborhoods.
There are other ideas for cost-cutting, but many would require congressional authority or collective re-bargaining. And there have been some very strange proposals, such as turning post offices into “centers of continuous democracy.” That would not be a sight for the faint-hearted.
Two postal reform measures which emphasize cost-cutting are moving through Congress. But neither offers a long-term solution. Instead, Congress should open the postal marketplace to competition and innovation. Australia, Finland, Germany, Great Britain, Indonesia, Israel, the Netherlands, New Zealand, Russia, Spain, and Sweden all liberalized their postal regimes. The European Union also has forced its members to open their markets. The Organization for Economic Co-operation and Development concluded that such reforms had yielded “quality of service improvements, increases in profitability, increases in employment and real reductions in prices.”
The Postal Service needs money, lots of it. Washington has none to give. Instead, mail delivery should be turned over to market competition.