Yet another giant company has plunging sales, soaring debt, and
is weighed down by massive labor costs. Will taxpayers have to
pay for another federal bailout? Alas, it's already in the cards
because this company is the U.S. Postal Service, which has
estimated losses of $7 billion this year.
With email grabbing ever more market share from snail mail,
USPS's finances are steadily deteriorating. What should federal
policymakers do? They can't give USPS the General Motors
treatment and nationalize it, because it's already
government-owned. And they can't reform postal markets with a
"public option" because that's what the USPS already is.
Instead, Congress and President Obama should deregulate postal
markets and privatize the USPS. It's true that such pro-market
reforms are not in vogue these days, but Obama claims that on
economics, he doesn't want to "get bottled up in a lot of
ideology…my interest is finding something that works." For postal
reform, that means injecting competition by allowing "private
options" in the marketplace.
We know that postal deregulation works because it's already in
place abroad. Postal services have been opened to competition in
Britain, Finland, New Zealand, and Sweden. In those countries,
private operators are starting to challenge former monopoly mail
providers, particularly on business mail delivery.
In Germany and the Netherlands, the main postal companies
(Deutsche Post and TNT Post respectively) have been privatized,
allowing them to expand into foreign markets and diversify their
services. These two countries haven't yet leveled the playing
field for competitor firms, but that reform should be coming
soon.
That's because the 27 member nations of the European Union have
agreed to end their mail monopolies by either 2011 or 2013. Some
countries are dragging their feet, but it appears that the wheels
are in motion for the Europeans to soon have a much more dynamic
postal sector than the United States.
An analysis by the Consumer Postal Council found that U.S. postal
markets are the third most regulated among 19 countries examined.
The main regulatory shackle is the USPS's legal monopoly over
first-class mail. That restriction makes no sense in today's
economy. It simply deprives consumers of the innovations and cost
savings that could be brought to the mail business by
entrepreneurs.
The good news is that the choke-hold that the USPS has long had
over personal and business correspondence has ended. USPS's mail
volume peaked in 2006 and will probably never recover. These
days, people communicate via email, text messages, and other
electronic tools. The share of bills that U.S. households pay
online is already 38 percent and rising fast.
The bad news is that we've still got a 700,000-worker behemoth to
deal with. We can let entrepreneurs into the market to bring new
efficiencies to letter delivery, but we still need to downsize
the USPS. In most industries, businesses facing declining markets
can radically cut costs and innovate to survive. But the USPS
can't do that effectively because it is beholden to members of
Congress and their parochial concerns.
Plans to close down some of USPS's 37,000 retail locations across
the country are usually met with resistance on Capitol Hill as
members defend the facilities in their states. And recently, the
USPS floated the idea of cutting mail delivery to five days, but
members haven't embraced that cost-cutting idea either.
At the same time, USPS managers try to avoid tough financial
decisions. Right now, for example, the USPS is asking Congress to
suspend a legal requirement that it pre-fund its huge unfunded
health care liability. However, that would just dig a deeper
financial hole for the organization down the road.
And then there is USPS's difficulty in cutting its massive labor
costs. The average USPS worker earns $83,000 per year in
compensation, as union deals have delivered regular wage and
benefit increases over the years. The Government Accountability
Office recently noted that "compensation and benefits constitute
close to 80 percent of USPS's costs -- a percentage that has
remained similar over the years despite major advances in
technology and the automation of postal operations."
A privatized USPS would have the incentive and freedom to tackle
such long-standing inefficiencies. At the same time, competitor
firms would give households and businesses alternatives to the
USPS's regular postal rate increases. It's time to end America's
last great monopoly and free the mails.
(Cato economists Chris Edwards and Tad DeHaven maintain
www.downsizinggovernment.org.)
topics:
Bankruptcy, U.S. Postal Service
