The U.S. Postal Service (USPS) recently announced that it might cancelSaturday mail delivery in light of a projected $2 billion to $3 billiondeficit over the next year. This plan is a political ploy to obtain anotherincrease in stamp prices only months after the last one.
This scheme should be a wake-up call to the public and policy makers. Thetime has come for this government monopoly to go private and compete for itscustomers the way any other enterprise must.
The latest USPS plan should strike one as strange. If a private company wererunning huge deficits and its business was stagnating, would it raise pricesto its customers and cut back on its services? Of course not. Such astrategy would drive away customers and hasten the company’s demise. But thePostal Service in the short run doesn’t worry about driving away customers.It’s a government monopoly. You can’t switch to another postal service theway you can switch to another e-mail service.
Normally, a business faced with a deficit would try to hold down costs anduse labor more efficiently. But the Postal Service, with $65 billion inrevenues annually, has problems doing this because of its rigid laborregime. When the U.S. Postal Service was organized out of the old PostalOffice Department in 1970, about 80 percent of revenues went to cover laborcosts. Today, after billions of dollars of investments in new high-techequipment, nearly 80 percent of costs are still for labor. Further, over thepast decade the Postal Service has had significant increases in manpower. Sobecause the USPS has trouble controlling its own labor costs, it raisesprices and cuts services to customers. On this latter point, remember: Weused to have two mail deliveries per day and new homes used to get mailboxes at the door rather than cluster boxes at the road.
What’s worse, postal workers can’t be used efficiently to serve consumers.Consider: You walk into a post office. There’s a long line of customers andonly two windows open for service. If it were a grocery store the managerlikely would page some stock clerks to open up more registers. But in thepost office, because of inflexible work rules, it’s often impossible for amanager to tell workers in the back room to put down their coffee cups andget out there and serve customers.
The Postal Service wants to generate more revenue by offering new e-commerceservices, online security, and coordination of business orders, shipping,billing and inventory. But this is inherently unfair competition withprivate companies. The USPS pays no taxes. It can borrow from the Treasury.It is exempt from most government regulations under which private businessesmust operate and exempt from many of the safeguards that protect us fromabuses by government agencies.
Perhaps worst of all, the Postal Service has regulatory authority that ituses against competitors. For example, recently it imposed costly newregulations on private mailbox companies, driving many customers away fromthose enterprises.
In the long run people will find ways to avoid using the USPS. An exceptionto its monopoly allows private companies to carry emergency mail for nextday delivery, though at government-mandated high prices. The result: 90percent of overnight mail goes by private carrier. Now the USPS iscontracting out to Federal Express to carry USPS express mail. Further, morepeople will be paying bills electronically over the next decade, reducingUSPS revenues by some $15 billion.
Postmaster General William Henderson recently told Congress that America hasa third-world postal service compared with many European countries. Thenperhaps we should copy Germany’s Deutsche Post, which has been reorganizedand put under private management. It recently made an initial publicoffering of stock. Later this decade its monopoly will be repealed.
A private Postal Service, without special privileges, would have anincentive to operate efficiently and to offer innovative services thatprofit its stockholders, provide opportunities for its workers, and givecustomers the best service for the best prices.