Let's Shut Down the Post Office!

Not too long ago, the New York Times lamented over the possibility that the United States Postal Service (USPS) might not be operating as of the beginning of the next calendar year.  The USPS has seen declining revenues for some time, mainly due to e-mail being a more-commonly used substitute good for going to the post office for first-class mail.  The other issue is that 80% of the expenses for the USPS are in labor, as opposed to the 53% at UPS or 32% at FedEx.

The fact that the contracts for USPS employees comes with no-layoff clauses only exacerbates the situation when labor accounts for most of the budget.  The USPS also has to contend with having to provide universal service, work six days a week, and keep open facilities, half of which, are not even needed.  Although there are those who criticize the passing of the Postal Accountability and Enhancement Act (PAEA) back in 2006, which mandated that the USPS pre-fund retiree health benefits, it is rendered moot by the USPS' admission (p. 22 of GAO report) that these benefits would have needed to have been funded regardless of the PAEA.  Therefore, it was not so much Bush's fault as it was the unionism of the USPS that put these lavishing retirement benefits in their contracts in the first place.

We also have to deal with the quasi-governmental nature of the USPS.  Although the USPS is an organization that is set up on a business model, as well as not receiving government appropriations, it nevertheless has oversight from the Postal Regulatory Commission (whose members are selected by the President of the United States) and has a federally mandated monopoly on first-class and standard mail delivery.

The real question here is what is to be done with regards to this issue.

It should be obvious that passivity will do nothing but close down the post office.  Cutting jobs by 120,000 has recently been proposed.  The USPS would have to find a way to break the no-layoff clauses in the contracts.  And even if they could, it would have a ripple effect by striking a coup fort to the labor movement.  Raising the stamp prices is an option, but it would not be viable in the long-run since that would push people towards using the Internet all the more.  Cutting out Saturday deliver service has been suggested before, but has yet to be implemented.  Cutting back on the health-care benefits brought about by collective bargaining, benefits that the GAO (p. 28) recognize as "more generous than most other agencies," will receive too much retaliation to ever get scaled back.  The backlash would be comparable for any attempt to close facilities that are costing the USPS money.

Being a libertarian, my prescription should not surprise any of us.  Let's privatize the postal service!  And I don't mean the quasi-private/quasi-governmental mess we currently have that ranks very low in terms of postal freedom.  Let organizations such as UPS and FedEx deliver my mail.  This idea is anything but original.  Other countries have tried it and succeeded.  Take Germany for example.  The Deutsche Post privatized back in 2000.  Guess what their profit report for 2010 was?  The actually made a profit of €2.541 billion ($3.58 billion USD).  The Dutch-based business that provides mail to Holland, also made a profit of €347 million.   

As much as I would love to see a postal system incentivized by competition to innovate, thereby bringing postage costs down and deliver in a more efficient manner, I regrettably predict that this fiasco will end in another bailout done under Obama's watch.

Addendum 3-13-2015: The Cato Institute published an article on why the U.S. government should get out of the postal industry.

Addendum 11-2-2015: While I don't agree with the author's conclusion of keeping the USPS, I do overall agree with the Brooking Institution's assessment of the USPS' obstacles.