Monopoly

Privatize the Postal System, Abolish a Monopoly

Neither snow nor rain nor billion-dollar losses

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Dmitry Kalinovsky / Dreamstime

Making a profit by selling goods and services that consumers want to buy at given prices is the first goal of any business. If consumers aren't interested and the business doesn't adapt, it will go under. That's unless you are the U.S. Postal Service.

The Postal Service is a major business enterprise operated by the federal government. Thanks to Congress, it has something many business owners would love to have— protection from competition. Its monopoly on access to mailboxes and the delivery of first-class and standard mail means it doesn't have to worry about someone offering a better service at a lower price. But that's not all. In a new Cato Institute study, Chris Edwards explains that unlike private businesses, the Postal Service has access to low-rate loans from the Department of the Treasury, effectively pays no income or property taxes, is exempt from local zoning rules and even has the power of eminent domain.

Yet the government still can't make the postal system work very well. Though it was created to be a self-sustaining entity, since 2007 it has lost more than $50 billion, and the losses will most likely continue unless radical reforms are put in place. These financial problems are mostly the result of a 40 percent decline in mail volume between 2001 and 2015, thanks to the increasing use of email, online bill payment, Facebook, and other electronic tools—services that consumers can get free once they have internet access.

In 2006, Congress mandated that the Postal Service start making payments to fund the generous retirement health benefits it has promised workers. This was an important reform because the Postal Service has built up an unfunded liability for these benefits of nearly $100 billion. Ideally, postal workers should be paying for these benefits from payroll contributions rather than leaving the liabilities to federal taxpayers down the road.

Sadly, Congress is too timid to take on special interests that benefit from the inefficient status quo, such as postal unions, and won't support serious reforms this year. As Edwards notes, Congress stopped the Postal Service from closing unneeded post offices "even though the bottom 4,500 rural locations average just 4.4 customer visits a day," and it blocked the consolidations of mail processing centers. Even such a small reform as ending Saturday delivery, which would save an estimated $2 billion a year and is supported by both the Obama administration and the majority of Americans, isn't going anywhere.

Still, many people recognize that something must change. A few years ago, President Barack Obama called for a $30 billion bailout from the federal government, a five-day delivery schedule and an increase in the price of stamps. Unfortunately, that would be a bad solution from the perspective of customers and taxpayers. It also would perpetuate the blatantly unfair competition with companies such as FedEx and UPS. The Postal Service doesn't pay taxes and receives other benefits, and it uses earnings from its monopoly letter business to subsidize its package and express services in unfair competition with the private companies.

What should be done? Some centrist scholars have called for partial privatization under which a government Postal Service would continue delivering to all homes but that mail collection and transportation and other parts of the industry would be opened to private competition. But numerous European countries—including Britain, Germany and the Netherlands—have fully privatized their systems and opened them to competition. The dominant postal companies in those countries continue to deliver to every address. Full privatization works.

One bad idea that "reform" Postal Service supporters are pushing is to allow the government service to compete with private firms in other industries, such as banking. That would be hugely unfair to taxpaying private businesses, and do we really believe that such a bureaucratic agency as the U.S. Postal Service could out-compete private businesses in other areas if there were a level playing field?

Both liberal and conservative economists think that monopolies are bad because they're inefficient and harmful to consumers. The government enforces antitrust laws to prevent monopolies in other industries. So why does the government itself enforce a giant mail monopoly? It's time to put an end to this gift to special interests, privatize our postal industry and open it to competition. If the Europeans can do it, then so can we.

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76 responses to “Privatize the Postal System, Abolish a Monopoly

  1. If you convert the local price into dollars, the UK is the fifth most expensive in Europe. The 60p it will soon cost for a first class stamp is $0.96, behind Finland, Switzerland, Denmark and, in first place, Norway – where a comparable stamp costs $1.67 (?1.05 or 9.5 Kroner).

    http://www.bbc.com/news/magazine-17614367

    Doesn’t sound so awesome to me.

    1. But why shouldn’t it cost a dollar or more to send a piece of mail from Maine to California?

      1. And why should it cost the same to send a letter to the next town over or to Nowhere, Alaska?

        1. What, like, historically? Because they did the math. Averaging out the costs for the whole system and just having a flat rate was cheaper then having postal workers sit there and calculate out the individual costs between any given two points.

          Now-a-days we could have a computer system that made the calculation easier and quicker, but it would require that either you already know the current cost between where you’re at and the destination and have the various stamp-values to slap on the envelop, or go to the post office for every letter and get service at the counter instead of just slapping a “forever” stamp on the envelop and dropping it in the box.

          So I’m kind of skeptical that changing it to a individual-cost system would actually have any over-all savings, especially since letters to Nowhere, Alaska are relatively rare and won’t ever be big cost drivers in the system.

          1. Because they did the math.

            I’d wager it was more a political decision.

            There was never anything stopping them from calculating by state or groups of states. That is essentially how it’s done in smaller countries around the world except the zones are “countries” not “states”.

            Also, if rural locations aren’t driving costs then why do most of my utilities tack on a surcharge specifically meant to subsidize them?

          2. You really are fucking stupid.

            1. Because I know history?

          3. Why do the “postal workers” have to do the math?

            I worked as a shipping clerk at a picture frame company in 1982. We had a convienient chart (that UPS gave us for free!) to determine the shipping costs to various zip codes based upon their locations and UPS assets in that area. From Columbus OH, NYC was “zone 2”. So was Philly, PA. Meanwhile, anywhere east of the Lexington metro area in KY was “zone 3 or 4″. And all of us ‘barely over min wage stoners” handled it easily… Postal workers are such useless fucks, we would literally use Greyhound buses for shipping before we used the USPS.

      2. Perhaps it should, but we shouldn’t pretend that privatization is going to make it cheaper. Perhaps $1 is the more appropriate price so that they can fund pensions.

        Distance isn’t really the issue, so much as servicing remote locations. It’s more of a utility.

    2. all those nordic countries should have anisotropic postage.

    3. What is it post-Brexit?

  2. While I would support taking away the USPS’ monopoly, I wouldn’t be so hot to abolish it quite yet. For people who live in East Bumfuck, the actual cost of package delivery is so damn expensive that I don’t see private deliveries happening. Take the outer reaches of Alaska for example, where the only access is by air. They depend on subsidized deliveries to survive. At least give them a chance to figure out something different before taking away their lifeline.

    1. You should probably take this into account before deciding to move to a place called Bumfuck.

      1. What about the people who are born there? Or is it like the social contract?

        1. I’m guessing the birthrate in Bumfuck is pretty low.

          1. You might be surprised. In places that remote, there really isn’t much to do other than fuck.

            1. I don’t think you are getting my juvenile humor.

              1. +1 That is the wrong hole, son!

              2. “Bum”, in this context refers to a person who is a bum, not a person’s bum.

      2. Not everybody finds the quality of life to be all that great in our cosmopolitan urban anthills, either.

        1. Then we should stop hiding costs from everybody and let them decide for themselves.

    2. Privatization is not abolition. Continue the subsidies to the privatized version to make them do those deliveries, for some transition period. Worst case, the subsidies will probably go on forever, but at least we have gotten rid of the monopoly and the army of untouchable unionized federal employees.

    3. UPS delivers to virtually everywhere.

      When you live on the frontier, you might have to give up mail. It is been that way for all of US history.

      1. Lysander Spooner, where art thou?

        There are plenty of ways to make rural postage delivery affordable to the people who live there without paying for it out of the government trough. But that would require some changes, which are apparently the greatest sins known to mankind.

        1. I said UPS not USPS.

      2. I wish I could give up mail. 95% junk.

        1. So much this. Who the hell even uses mail anymore?

      3. UPS also depends on the USPS for much of the end delivery.

    4. Yeah, it would be a bit cruel to do it all of a sudden. I’d say take away the first class mail monopoly, then gradually take away the subsidies and require the USPS to survive or fail on its own eventually. You’d have to let them determine postage rates without congressional approval too.

  3. Reason staff is on crack if they think either UPS or FedEx or any combination thereof will be able to scale up to the size of USPS. It is the one thing that is pretty reliable that the government is (indirectly) involved in. Also, much of the USPS losses were forced upon it by Congress to fully fund its pension plan. Compare that to standard practice in industry.

    1. Time for real civil service reform – including moving all new employees off the pension plan and into 401K / 403b plans just like us peasants.

    2. You’re retarded. Amazon went from nothing to having warehouses in every city in under 10 years.
      Yes, UPS can scale up to USPS.

      BTW, corporations that don’t fully fund their pension plans are committing fraud. The only people underfunding their pension plans are governments, because they exempted themselves from the law.

      1. “You’re retarded.”

        NTTAWWT

        1. Crippled, lame, handicapped, it’s going to be hard to convince people it’s just as good to not have legs, or a functioning brain.

        2. Hazel has been working on shriek levels of civility for a while now. I mean, why say “Wouldn’t a good example be Amazon?” when you can call someone retarded!

          1. What’s the point in being civil if Trump gets to call Mexican’s rapists and nobody gives a shit?

            1. Being persuasive instead of making people instinctively recoil?

              When you start off with sneers and insults, you’re basically self-selecting into “preaching to the choir”. Few people that don’t agree will bother with the merits.

            2. Um, not being like Trump?

              What’s the point of not eating babies if Hillary could eat a baby on live TV and nobody* gives a shit?

              *As with Trump’s xenophobia, “nobody” in this context means “the majority of people”.

            3. Well sweet pea,

              Trump gets away with it because there are loads of criminals crossing from Mexico that we catch, release, and never deport. He uses “rapists” as shorthand because a bunch of them showed up in the news and pissed normal citizens (not you of course) off.

              That does not make him uncivil, it means he uses hyperbole to make rhetorical points. Now, he may well be uncivil at times, but your “rapists” example would not be one of them.

              Now uncivil, would be if you were called a “low life scum sucking cheap ass $2 whore who overcharges”. See the difference?

    3. The standard practice in most industries is to phase out defined benefit pension plans and move to defined contribution plans such as 401 K’s.

    4. Others don’t need to scale up. Privatizing a govt-owned corporation can be done by selling that corporation (whole or in parts) to private investors. Viola! A private company of sufficient size has appeared overnight.

      1. That worked so well with with Fannie Mae and Freddie Mac

        1. For how many generations did they last again? Meanwhile are you trying to imply that communism is better because centrally-planned systems never fail like that? Bankruptcy is a key part of capitalism. Creative destruction.

    5. There are about 620k postal workers in total, including temps. I honestly believe Amazon, FedEx, UPS or some combination thereof could do the same work with fewer.

      Auto companies like Ford only have a couple hundred thousand domestically, but exceed the worldwide total easily. Pretty sure scale isn’t an issue.

      Of course, porting envelopes is such an advanced skill it would probably take decades to train the workers.

    6. much of the USPS losses were forced upon it by Congress to fully fund its pension plan

      THE HORROR! THE HORROR!

      Heaven forbid an enterprise be forced to account for its known future liabilities! Then we might discover that they are actually unsustainable fantasies.

    7. I agree with Milton Friedman on this one.

      It may be the case that the postal service needs to be run by/subsidized by the government in order to work effectively.

      We can’t know that, though, unless we break the monopoly and allow private companies to at least attempt to compete on level footing. We might find we don’t need a government postal service, after all.

      Worst case, we realize that we still do.

  4. But government is just what we all choose to do together!

    Or so I have been told.

  5. Fresh from her triumph over the Export-Import Bank, Ms. de Rugy girds for battle against the Post Office.

    1. Fortunately, she remains nice and silent re the $13 trillion or so that has been delivered to the privatized money monopoly in the last 8-9 years. Apparently some monopolies just aren’t worth talking about as long as they regularly deliver their benefits to the donor class of libertarian institutes.

    2. Yeah, after reading so many of Ms. de Rugy’s articles, my expectations have become so low, nothing she can do disappoints.

  6. Thoughts;

    1) Delivering the mail is one of the few things the Federal Government is specifically given authority to do by the Constitution.There is so much that the Government does, and does badly, that ISN’T authorized by the Constisusion that I hesitate to relieve it of one of the few it’s actually supposed to do.

    2) Didn’t Franklin warn against privatizing the post office? Anyone know what his arguments were?

    3) How about we throw the post office completely back onto the Feds, and reduce the price of a first class letter of under six sheets to 5?? That way any wino who can find one returnable bottle can pester his congress-critter.

    1. Sounds reasonable to me.

    2. Like patents and copyrights, I oppose all 3 on principle, but they are at the bottom of the list.

      1. At least patents and copyrights serve some positive function, even if some of us don’t think they are worth the downsides.

    3. Franklin was a postmaster, so maybe he just liked the government checks. I think he had some experience with a rival refusing to deliver his newspaper, so perhaps that was his concern. A “federal” post office couldn’t discriminate. Kinda like the net neutrality of 1789?

      The USPS serves as a form of infrastructure and utility that doesn’t completely suck. It needs reform, sure, but privatizing it doesn’t obviously make for a better product for the end customer, as illustrated by the much higher prices in Europe.

      1. From what I’ve read, Franklin thought that infrastructure itself created a community identity. He certainly believed that his work as Kings colonial postmaster (even while he was in England for a decades or so) is what enabled him to see the colonies themselves as having a common future separate from Britain. And every colony that then made him their agent in London, confirmed that belief for him. That is the main reason he refused to ever resign the position. He assumed, probably correctly, that if he did resign, that the job would be split into pieces and the effect would be to split the colonies – divide et impera.

    4. 1) Delivering the mail is one of the few things the Federal Government is specifically given authority to do by the Constitution No. The Constitution requires the Gov’t to provide the roads (Somalia!).

      2)White dude from 100 yrs ago- who gives a shit? /Ezra Klein

      3)It’s called “bulk rate”- and it’s why 99% of what enters my mailbox is in a landfill.

    1. FWIW, I have noticed that somebody at the USPS is doing something right lately. There is sunday delivery of packages and there are some pretty cool stamps lately.

      1. Not here. I get mail delivered when the post office feels like it.

        1. Recently I had two identically-sized and -shaped packages mailed via DHL and USPS last mile – from an Amazon seller in Philly to me in NYC. One arrived 15 days after the other. I wonder where the 2nd package sat for two weeks…

          “When they feel like it” is pretty accurate.

      2. I think sunday delivery is a special contract with Amazon.

        http://www.geekwire.com/2014/a…..l-service/

  7. there is already a privatized mail system they are called email and UPS and fedx. just let the postal system die

    1. Ron,

      No, please don’t. I married a techie, and live in a Pennsylvania, and I still run into people all the time who do not like computers and could not use email. People younger than me, even. What the situation is like in West Nowhere North Dakota I hesitate to think. I have had extensive dealings with UPS and FedEx, and while in some places they are great, I have had serious and apparently insoluble problems with both in the far off and exotic State of Massachusetts. God alone knows what the people in Montana put up with. Yes, the Post Office, being Government, is inefficient. I’m unconvinced that that is sufficient reason to ashcan it.

      1. I live in East Almost-Somewhere, North Dakota, and I have to rely on shitty satellite internet. I live among a group of about 30 houses, about five miles outside a large (by ND standards) city and the local cable company refuses to hook us up. Meanwhile, my parents live in a tiny town, pop. about 200, 50 miles away and they have fiber optic internet. I’m definitely not a techie, but if I understand correctly, this happens because it’s more efficient for them to run fiber instead of wire when they have a small number of users spread out over large areas.*

        This is anecdotal, but it suggests that in the right conditions, people halfway to Bumfuck can actually receive better service than people in/near the bigger cities.

        After re-reading your post, it seems you were actually questioning the capability of Western North Dakotans to use internet, not their access to it… yeah, those people are too busy fending off the injins and going to barn raisings to learn how to use computers.

        *As stated, I am not a techie, so if this explanation makes no sense I’d love to know.

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  11. Surprised there are so many USPS fanboys here. I can understand viewing it as a low priority, but FFS. Every argument in favor of a postal monopoly is merely the result of allowing a shitty institution to live long enough that it becomes inconvenient to replace. Can’t wait until I’m 60 so I can read libertarians arguing that privatizing the by then-socialized medical system is untenable and impractical.

  12. RE: Privatize the Postal System, Abolish a Monopoly
    Neither snow nor rain nor billion-dollar losses

    Privatizing the USPS is a terrible idea.
    First, it will end a government monopoly that has drained the money from our treasury for decades if not centuries. Making the USPS a private entity will only allow the untermenschen of this country to choose their own form of postal service, and they will save money. Not to mention they will have the possibly opportunity of not getting that highly anticipated junk mail we all love, want and need.
    Secondly, the postal employees will not be able to enjoy their lucrative benefits and salaries off the masses’ tax dollars. Our socialist slavers have correctly stated we all spend our money on unnecessary items as food, rent, clothes, etc. This must stop if we are going to be a true socialist paradise. We must allow our obvious betters to do our thinking and purchasing for us. Excess capital only produce excess happiness. No progressive turd worth his copy of “Das Kapital” wants that for the little people.
    Lastly, the USPS must continued to be subsidized by the unwashed masses because it sets a dangerous precedent. If the USPS is privatized and sent to the private sector, who is next? Social security? Medicare? Medicaid? What government entity will be next? The Commerce Department? The Department of Education?
    One can see where privatizing the USPS is headed, and it is not a road any socialist would want to go down.

  13. Hey, give the Post Office a break. Where I live, in a large city, they deliver mail four out of six days?usually ? and almost eight in ten packages get delivered.

  14. That would be unconstitutional and it would increase costs on consumers.

  15. uptil I saw the paycheck four $4289 , I have faith that my mom in-law could actualie bringing in money part-time at there computar. . there sisters neighbour had bean doing this 4 only about thirteen months and by now paid for the mortgage on there condo and bought a brand new Alfa Romeo .????????? http://www.factoryofincome.com

  16. uptil I saw the paycheck four $4289 , I have faith that my mom in-law could actualie bringing in money part-time at there computar. . there sisters neighbour had bean doing this 4 only about thirteen months and by now paid for the mortgage on there condo and bought a brand new Alfa Romeo .????????? http://www.factoryofincome.com

  17. Wrongo! Privatization, for the most part, is Pure Evil!
    NO private company will ever practice the most important parts of the USPS- Privacy and Sanctity of the mail.
    The USPS is Very Dependable and efficient. As a small business owner- I know they will do a great job for me and my customers.
    “Privatize”?… We need to start Nationalizing more stuff. Let start with health care (vs the criminal enterprise it has become), energy, and banking.
    Also- a 1? per share stock transaction fee…. with no expiration or cap.

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