Washington is broke: why a monopoly government post office?
The U.S. government is effectively bankrupt. This year’s deficit is $1.3 trillion, the national debt is $13.5 trillion, and the unfunded liabilities for Social Security and Medicare likely exceed $100 trillion.
Unfortunately, the U.S. Postal Service also is effectively bankrupt. The USPS expects to lose about $7 billion this year. The post office already has borrowed roughly $13 billion from Uncle Sam. At the end of 2009 USPS had $33.5 billion in outstanding liabilities and another $54.8 billion in unfunded retiree health and pension obligations.
In early July the post office, which can hike rates on its own if the increase doesn’t exceed the inflation rate, filed for a special increase of two cents for first class mail and varying increases for other services with the Postal Regulatory Commission. The commission rejected the hike in September, ruling that the Postal Service’s problems were structural, rather than a result of the recession. In any case, raising rates won’t save the Postal System.
The USPS is in crisis. It is locked in a declining market. It can only survive with indirect taxpayer subsidies and a ban on private competition. Instead of forcing Americans to pay more for less service, Congress should open mail delivery to all comers.
The Constitution authorizes Congress “To establish Post Offices.” But Congress is not required to institute government mail delivery, let alone a public mail monopoly. Today there is competition only in packages and urgent delivery. For regular mail, you must use the USPS, or else.
In 1844, for instance, the noted libertarian Lysander Spooner set up a low cost delivery service among Boston, New York, Philadelphia, and Baltimore. Congress responded by imposing fines on private mail carriers. More recently the post office threatened to sue Boy Scouts who proposed delivering Christmas cards during the holidays. When the USPS learned of companies sending international mail abroad with traveling employees, it demanded payment for services not rendered.
All the while postal rates steadily rose, more than 50 percent faster than the rate of inflation. A first class stamp today would cost 27 cents rather than 44 cents had rates merely matched the inflation rate since 1960. In contrast, bulk mailers enjoy artificially low rates due to the political clout of these businesses.
The post office also takes care of its own. In September came revelations of no-bid contracts to former postal executives for “knowledge transfer.” One former vice president received a $260,000 contract to talk to the man who replaced him.
In short, the post office has a “customer last” philosophy. Americans exist for the postal service, not the other way around.
Whatever the theoretical arguments for a public mail monopoly in the past, they have been superseded by a rapidly changing marketplace. Opening the postal marketplace to competitive innovation would not be as radical as some might think. Years ago Australia, Germany, Finland, the Netherlands, New Zealand, and Sweden liberalized their postal regimes. The result, reported the OECD, was “quality of service improvements, increases in profitability, increases in employment and real reductions in prices.” Since then the European Union has pushed continent-wide liberalization, especially by reducing the forms of mail “reserved” to government operations. By the start of next year most EU members must open their markets to competition; newer member states have until the end of 2012.
There are almost as many models as countries. New Zealand and Sweden have competing postal operators. Finland also has dropped the national monopoly. Spain’s Correos y Telegrafos faces private competition in many areas, including letters within cities. The Netherlands privatized its postal service in 1994 and fully liberalized its delivery market last year. So has Germany, though the government remains a significant shareholder in Deutsche Post. In Great Britain deregulation began in 2000; the Royal Mail still delivers most mail but the market has been fully opened and private operators are increasingly providing delivery services.
Russia dropped its state monopoly in 1996, though Pochta Rossii continues to handle the bulk of mail. Indonesia officially followed suit last year; private companies had long ignored state-owned Pos Indonesia’s monopoly. Israel allows competition to Israel Post, though the latter receives government subsidies. Austria and Belgium have partially privatized their postal operations; the former also has been reducing categories of mail reserved for state delivery. Poland similarly has limited the scope of the state monopoly. Bulgaria, the Czech Republic, Estonia, and Romania all are considering allowing postal competition. Even Greece plans partial privatization of the national post.
At the same time, the USPS has run out of options.
In 1970 Congress set the post office on its nominally independent course. However, the system remained bounded by regulations, cushioned by subsidies, and protected by its monopoly. In particular, USPS is exempt from taxes, regulations, and even parking tickets. Nevertheless, since 1971 the post office has lost money in 24 of 38 years. Starting in 2007 the bottom fell out of the postal system’s finances. Reports the GAO: “Given its financial problems and outlook, USPS cannot support its current level of service and operations.”
Retiree health costs continue to rise, but that problem afflicts many companies. More important, notes economist William F. Shughart, are “[g]enerous salaries for Postal Service employees, restrictive work rules negotiated by the labor unions that represent them, the continued operation of thousands of obsolete, small-town post offices and failure to adapt to a world in which people communicate by email rather than by first-class mail and pay their bills online.…”
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
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It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?