Liberating the Postal Service

Government bailouts of high-profile private corporations have obscured the fact that one of the largest government enterprises, the U.S. Postal Service, is also in dire financial straits. In the case of the Postal Service, however, the fundamental problem is not money or credit, but its "business model" -- that is, the basic organization and purpose of the Postal Service.

In essence, what the Postal Service needs is to be free of congressional interventions and allowed to operate as a regulated corporation in a competitive delivery services industry. Ever since 1970, when it was created by Congress to succeed the old Post Office Department, Congress had said that it wants the Service to operate like a business. Yet ever since 1970, whenever attempts are made to respond to that mandate, some old congressional hobby horses ride forth and interfere.

Postmaster General Jack Potter has asked Congress to accept the fact that we might not need the mail delivered six days a week to every address in the nation -- the universal service level as it is currently defined. Potter asked for nothing more than flexibility for the future, yet several members of Congress immediately cried "Foul!" and insisted on retaining such service.

However, six-day postal delivery was not invented by the Founding Fathers as many today seem to suppose. Until the Civil War, almost all Americans had to come to the post office to collect their mail. Not until the last third of the nineteenth century was postal delivery gradually extended to the main cities. Postal delivery in rural America (where most Americans still lived in 1900) was introduced in the first third of the twentieth century. Even so, as late as 1950, one in six Americans still collected his or her mail from the local post office.

In the late 1970s, the country hit a rough economic patch. Inflation surged, and the federal budget turned red. To save money, Congress decided to renege on its promise to cover the costs of the Postal Service's unprofitable services. Worried that this might force the Postal Service to cut back on Saturday delivery, Congress "fixed" the problem through an appropriations rider that ordered the Postal Service to maintain six-day service without public funds. Presto, something for nothing!

The problem is that almost 30 years later, the same temporary fix is still attached to the postal appropriations bill. After the first couple of years, Congress did not even bother to update it. The provision still requires that the Postal Service maintain delivery frequency at 1983 levels even though no one in Congress, and no one in the Postal Service, can say what the service levels in 1983 were. Furthermore, about 75% of those commercial mailers and households surveyed in the George Mason University study done for the Postal Regulatory Commission said they would be happy with five day delivery. The Postmaster General had a good understanding of what the public wanted.

The annual postal appropriations rider has become a bad habit. It is time to stop the rider and give the Postal Service freedom to adjust delivery frequencies to the actual levels of mail and the real needs of addressees. Not unlimited freedom, but flexibility subject to oversight by the independent Postal Regulatory Commission and, of course, ultimately by Congress.

Yet this only illustrates one facet of a much larger problem: how to equip the Postal Service to meet the needs of the twenty-first century.

The base problem confronting the contemporary Postal Service is that the environment in which it operates has changed drastically. It is less and less a conduit for exchanging first class letters and more and more a broadcast medium, primarily for the distribution of advertisements, periodicals, and parcels. None of these classes of mail is covered by the monopoly on first class mail, a monopoly adopted by Congress in 1872! Today, the reasons for establishing the Postal Service as a government monopoly are fast disappearing.

We need to think seriously about transforming the Service from a government monopoly into a regulated, competitive enterprise. There are numerous examples from abroad on how the transition might be made. The European Union has ordered the end of virtually all national postal monopolies by the end of the year 2010. And there are ample precedents and lessons to be learned from regulatory reform in other industries in this country.

A restructured postal system would give the Postal Regulatory Commission, an independent and impartial body of experts, the authority to define the truly public interests which must be protected. For example, the Commission might require delivery of individual first class letters to, say, 98 percent of all addresses in the U.S. within three business days at a maximum rate of 50 cents for the next five years. It would be up to the Postal Service to figure out how to do that. If the Postal Service cannot do the job at a profit, the Commission might contract with a private carrier to provide the necessary service. Meanwhile, the Postal Service might find it commercially sensible to reduce rates for some types of letters -- for example, local utility bills. If it can offer lower rates in some places or to some mailers (without unfair price discrimination) it should do so. And if mailers want enhanced service, they should be able to get it and be willing to pay for it. We need to get away from the idea that the same level of service should be provided to all mailers everywhere. The true public interest lies in a guarantee of a reliable nationwide delivery service at an affordable maximum price.

Public policy towards the Postal Service has grown unwise by not changing with changing times. We now have a system in which Congress feels obliged to oversee the execution of a public monopoly granted in the nineteenth century, while the Postal Service is struggling to adapt to life in the twenty-first century. This mismatch between policy and reality endangers the future of the Postal Service. It is time to allow the Postal Service to manage itself subject to clearly stated and impartially implemented rules that protect -- and where necessary pay for -- the essential minimum level of nationwide postal services required by the people.

A. Lee Fritschler, Professor, School of Public Policy, George Mason University, was Chairman of the U.S. Postal Regulatory Commission. With colleagues James I. Campbell Jr., Robert H. Cohen, and Christine Pommerening, Professor Fritschler recently completed a study on the development and future of universal postal service for the Commission.

Comments

[garin3]

Any talk of privatization of the postal service is the beginning of the end of a form of communication that is available to all citizens regardless of financial status and would compromise the security and sanctity of every piece of mail sent. The current structure of the postal service lends itself to abuse at the highest levels similar to current corporate models due to the last round of postal reform allowing it to be run as a seperate quasi-federal company. The solution is really quite simple if you look at the fact that management receives large financial bonuses and compensation in the form of almost unlimited moving expenses in a "company" which is technically not supposed to turn a profit. The amount of money currently being lost by the post office could easily be made up for if an investigation of the current management structure was made by congress. Cutting jobs at the ground level and reducing days of delivery is asking for trouble. The average postal carrier regardless of mail volume must still walk the same distance and is limited by normal human ability. You can only walk so far in a day. Either cuts must be found at the top or rates must be raised. Privatize and you might as well triple current numbers just to account for profit margin.

[bmora]

Maybe if they stopped sending me bulk crap that goes immediately into the garbage, they could save some money.

[pete54]

It would not be in the countrys interest to have a private company deliver mail. Look at the costs for delivery of a letter, in the countrys of Europe that have privatized (Germany, England etc...), double our current costs,for delivery in an area the size of one of our states. Can you imagine what the cost would be for a letter from Maine to Hawaii, if a private company were to carry it and had to make a profit.

[doctorkosan]

The USPS is suffering from many problems. The first is that its business model never moved to the shift in electronic transfer of info as have a number of European postal services. The Postmaster general is as blind to this as anyone.
First class mail is now only 4% of what is delivered. How much of what you find in your mailbox goes immediately into the trash? And that bulk crap is costing more to deliver than is being charged - it is a tax subsidy of the advertisers.
Raise the bulk rates, Stop Saturday deliveries. Reduce staff. Move into the 21st century with new management.
Even with these problems, the USPS is better at their job than many other gov't agencies.

[sposton]

It is hard to be selling the benefits of free enterprise these days. I am not opposed in principle to unshackling the post office if that will make them better but I suspect there are other reasons at work here. As a consumer I am perfectly happy with USPS service which is more than one can say about the quality of service from most corporations of the USPS size. Just witness the spread between the basic cost of a postage stamp and the delivery from those other carriers. I have a nagging suspicion that the end result of what is being proposed will be greater costs for basic mailing and lower level of service, exactly the opposite from claimed benefits. I say wait and see how well this works in Europe, draw lessons from their experience and then act in a more intelligent manner.

[BitterClinger15301]

Real Postal reform cannot happen in the current political environment. There is one key reason for this - UNIONS. If six day delivery was no longer required, the USPS would be able to cut staffing of dues-paying letter carriers and mail processing clerks substantially (usually accomplished through employee attrition rather than layoffs) - the NALC, APWU and Rural Carriers' Union are calling in their chips to the Dems in Congress to prevent this from happening.

[RoloTomassi]

USPS is frankly a US INSTITUTION--good luck in modifying any aspect of it that those who run it don't agree to.

[petef59]

The author suggests reducing rates for some local mailers(utility bills). USPS, in fact, DOES offer lower rates to most corporate mailers (just look at the meter price that replaces the stamp), often 33 cents. And many advertisements receive very low rates and are more difficult to handle, rejected by automated sorters, etc,etc.
Another thing-USPS mangement and 'support' staff effectively have 2 supervisors or managers for 25 or fewer employees. Teachers would be in heaven if staffing levels in classrooms were that generous.

[KillTheMessenger]

While UPS might offer those rates, it has to be at conditions that are impossible to meet... for I have never seen a single corporate mail item sent out at that rate.

Looks like a bait and switch to me that nobody in their right mind uses. But I am glad to hear about customers who actually do.

[KillTheMessenger]

Ooops... apologies... I misread UPS for USPS... and assumed this was a trolling attack. My bad.

[Binckeslaw]

Here's a thought when the privatization pirates come a callin'. .42 cents or $13. dollars. That's the spread between Fedex, UPS, and the United States Post Office.

[KillTheMessenger]

So what, exactly, is the postal service competing against? Only itself. It can't go bankrupt, after all. It can't expand, either. And a business that can't go bankrupt and can't expand is not a free enterprise by any definition.