No Way to Stamp Out Post Office Deficits

By Daily Editorials

January 31, 2014 4 min read

Postage rates for a first-class letter rose Sunday from 46 cents to 49 cents, a 6.5 percent increase. The U.S. Postal Service says it needs to raise the rate to recoup money lost during the recession but this revenue will only put a dent in the Postal Service's larger financial problems.

The USPS has engaged in a number of cost-cutting measures in recent years and has cut annual expenses by an estimated $15 billion since the enactment of the Postal Accountability and Enhancement Act in 2006, but it has yet to stop the bleeding as e-mail, text messaging and online bill payment services continue to displace handwritten letters and payments by check. Total mail volume has declined 24 percent since 2001.

The Postal Service lost $5 billion in the most-recent fiscal year, defaulted on $5.6 billion in required retiree health care contributions and now has liabilities that exceed its assets by $40 billion. And while the USPS is essentially funded from postal revenues instead of taxpayer dollars, it has maxed out a $15 billion loan from the U.S. Treasury.

This clearly cannot continue. The Postal Service has outlined a Five-Year Business Plan to help it right the ship. This includes cutting mail delivery to five days a week, switching new employees into a defined-contribution retirement system similar to a 401(k), restructuring its health care plan, getting a refund on an overpayment to the Federal Employees Retirement System and reducing future FERS payments, obtaining authority to expand its products and services and reforming the workers' compensation system. This will require approval from Congress but still would only kick the can a little further down the road.

Some of the USPS' problems are out of its control. It is required to deliver mail to out-of-the-way, rural communities for the same price as delivery to urban, metropolitan areas. Also, its operations are oftentimes hamstrung by congressional micromanaging. But its inefficiency and inability to adapt to market conditions also stems from the fact that it has a government-protected monopoly on mail delivery that shields it from normal market competition.

During the 1840s, many private companies emerged to challenge the U.S. postal monopoly, which had become epitomized by high postage rates and political patronage. Henry Wells (of Wells Fargo fame), Lysander Spooner's American Letter Mail Co., and other private competitors were ultimately stamped out by the government, but they succeeded in forcing it to drastically reduce its mail prices and brought about innovations such as postage stamps, home delivery and prices based on weight.

Many other nations — including Denmark, Finland, Germany, the Netherlands, New Zealand, Sweden and the United Kingdom — have partially privatized or opened up their mail services to competition. Companies such as FedEx and UPS have shown that package and overnight deliveries are handled efficiently and effectively by the private sector. We think it is time for a new era of mail privatization in America.


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