more excelsior

I had the day off today, so I ran some errands that have piled up, as errands are wont to do. First on my list was a trip to the friendly neighborhood United States Post Office.

Now, let me say something upfront. Overall, I think the Post Office, on balance, does a very good job. I can get a letter to pretty much anywhere in the country in a few days, for 44 cents. What else costs so little and travels so far? I’ve also worked for several small businesses that relied on USPS for product deliveries, and I can count on one hand the number of times we had a screw-up. In general, the Post Office is good at what it does.

What it’s not good at, however, is making money.  As the Washington Post reported on Sunday, to plug a growing budget deficit, the Post Office is considering stopping Saturday mail delivery, which could save up to $3 billion per year. Even this change alone is unlikely to solve the USPS’s budget woes, however. Just last week, the Post Office needed a Congressional “bailout” to avoid making the full $5.4 billion payment due for its retirees’ health benefits.

What’s the problem? Well, Congress expects the Post Office to operate like a business, and for the most part it does, except that it’s a business that’s seen as providing a vital national service.  Despite the precipitous drop in mail volume, thanks primarily to the rise of e-mail, the Post Office can’t make the significant service cuts, office closings, and rate increases that it needs to be financially solvent. No Congressman wants the Post Office, that potent symbol of government authority, to close offices in their districts, particularly in rural America.  It also has a powerful postal employees union with which to contend, and significant health and pension obligations.

The Post Office is trying to valiantly fight on, but it’s hard to see how the situation can continue (though, never underestimate the power of government financial chicanery). One possible solution would be to remove the first class mail delivery monopoly enjoyed by USPS, and open the sector up to full competition.

The opposing argument, of course, is that the Post Office is a natural monopoly, and competing infrastructures for mail delivery would be a waste of resources. I don’t think this argument holds much weight, however. Unlike say, a sewage system, there’s no natural monopoly in mail delivery. We know this because there are already competing delivery services for all package and letter delivery, with the exception of first class mail.

Now, it’s true, FedEx and UPS might not see the value in providing the extent of the services currently offered by the Post Office. But that just means there would be a niche for a privatized USPS, with its existing infrastructure, to take advantage of. Prices might go up, but, with the long term domination of email all but assured, they probably wouldn’t go up too much. In the cities and major towns, prices for first class delivery might even go down as a result of the new competition.

The bottomline is that despite the historic role the Post Office has played in America’s story, it’s time to write a new chapter – one in which supply and demand and budget realities are the new main characters.