Post Office

Trump's Plan to Privatize the Post Office Deserves a Serious Look

The case for privatization is strong, but there are political hurdles.

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KEVIN DIETSCH/UPI/Newscom

Amid a sweeping plan to overhaul the structure of the federal government, the Trump administration is calling for the privatization of the U.S. Postal Service. It's an idea whose time has come.

The USPS is hemorrhaging money, with over $100 billion in unfunded pension liabilities and "no clear path to profitability without reform," according to President Donald Trump's document itself. With the advent of email and related technologies, the first-class mailing services provided by the USPS are being used less and less. The number of first-class letters sent has fallen by more than half since 2005, giving the state-run monopoly dim financial prospects. In the last four years alone, the USPS took a combined loss of $18.9 billion.

The 132-page government reform proposal reveals only limited information about President Donald Trump's intentions regarding the postal service, although it's clear that privatization is his ultimate goal. The plan suggests two possible avenues of market-oriented change: private management with federal regulatory oversight or selling off the postal service in its entirety, either through an initial public offering (IPO) or a direct sale.

The proposal hints that an IPO may prove difficult to achieve given the postal service's current condition, since few investors are likely to be interested in a highly unprofitable, bureaucratic mess. It says a sale would likely require changes and restructuring to first net a profit. Selling the USPS would also mean that the federal government would have to absorb its debt and unfunded liabilities. While these concerns are valid, an IPO is still feasible. Cornell University economist Richard Geddes found that a USPS IPO could raise as much as $40 billion.

Apart from raising money for the government, an IPO would have considerable advantages. Liberalization would grant the USPS greater flexibility in making business decisions, such as determining wages and benefits. Relief from regulatory and political pressure would enable the operation to make changes more rapidly and as necessary, increasing its efficiency.

The case for privatization is strong, but it there are political hurdles. Postal unions are vehemently opposed to losing generous federal benefits and are not stingy with their political contributions. The USPS employs more than half a million people, which means change will have real political consequences.

Opponents of denationalization say the experience of European countries illustrates the drawbacks of free enterprise: higher prices, lower wages, and mass layoffs. But those prospects reflect the economic bubble in which government-run postal services operate.

The USPS currently is free from any real competition (in the provision of first-class mail, at least), and its prices are largely unresponsive to demand, leading to an inefficient allocation of resources. Opening the postal services to more competition would reduce these inefficiencies.

If prices for first-class postal services go up after privatization, that means the USPS was holding prices below market levels. If jobs and wages are cut, that means the USPS was avoiding changes that would have made its operations more efficient.

It's clear that the solution to the postal service's ills is more capitalism. The president seems to understand that. He has signed an executive order establishing a task force to identify "reform consistent with this reorganization proposal." Its report, which will be available by August 10, should outline pragmatic steps toward demonopolizing the postal services.

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  1. Let us not forget that the USPS monopoly on first class mail delivery was a response to successful competition by none other than Lysander Spooner.

    1. Yes. The Constitution only allows the creation of a post office. It does not mandate it, not allow Congress to ban competition.

      To establish Post Offices and post Roads

      1. to establish absolutely does mandate it. It obviously doesn’t prohibit competition – nor should it imo as a policy goal.

        One thing I do find deeply offensive is the neoliberal (and given articles like this it will be called libertarian too) notion of privatizing the enumerated powers (the money stuff re the Fed is the other) to cronies while expanding government into non-enumerated areas.

        Personally I think the post offices should also be the distribution backbone for a money system that is competitive to the Federal Reserve. Banks raising trial balloons about eliminating cash or negative interest rates – following a multi-trillion bailout AND FDIC backstop AND eliminating their own branches so a significant part of the population no longer has access to even a payments/settlement system. That smacks of needing competition in place BEFORE the next ‘crisis’.

        1. Read the wording. Congress *may establish* – not must.

          1. The wording is exactly as I said – To establish. The only two ‘may’ anywhere in the entire Art1 Sec8 are related to governing militia when it is federalized and legislating over a future place yet to be ceded (DC).

            1. Your “exact” wording leaves out the entire sentence.

              Which is this:

              “The Congress shall have Power To establish Post Offices and post Roads”

              “Shall have power” is not a mandate to do anything. It simply means the federal government can establish a post office if it so chooses. it is not required to do so. And it can also subsequently undo to it if it has previously chosen to do so.

              1. Of course. The Constitution is entirely about creating a purely optional government.

                1. That would mean that Congress is also “mandated” to issue letters of marque, and maintain a draft

        2. A power to establish is not a mandate to establish.

          1. Exactly

  2. Nuke it from orbit. It’s the only way to be sure.

    1. Which, obviously, necessitates a Space Force. This 12-dimensional chess move only uses 4 dimensions so, please, try to keep up.

  3. If prices for first-class postal services go up after privatization, that means the USPS was holding prices below market levels.

    But that’s an explicit charge for the Post Office, same as other utilities, it’s a socialized service expressly to provide services to everyone at the same rate regardless of the cost of delivering the service to Asscrack, Arkansas as compared to the middle of New York City. Cable TV franchising was sold on the same promise which virtually every single one of them reneging on the deal – in exchange for a monopoly in the city or the county they would string cable to every last outhouse in the area, and as soon as they got the profitable high-density areas strung they weaseled out of hooking up the more remote areas. But the politicians made out good on pimping out the citizenry.

    1. they weaseled out of hooking up the more remote areas

      They did? I seem to recall them tacking on fees for exactly that purpose pretty much my entire adult life. Or maybe that was the phone company? Seems like they were all doing it.

      1. As far as I know, the monopoly phone company did in fact run phone lines down every little pig trail. The cable company here promised in return for the monopoly they’d have cable TV available to 90% of the county in 10 years. That was 30 years ago and cable’s only available in about 60% of the county. Unless if by “available” you mean if I want to pay $1500 for the cable I can have cable, or if I get 15 houses on my dirt road that only has 11 houses on it to sign up for service. And now the cable company and the county commissioners both make the same reply if you complain about the cable availability – it costs too much to be economically viable for them to run the cable out into the boonies. Well, yeah, no shit, that’s why you gave them a fucking monopoly, so “economically viable” didn’t prevent them from running cable into areas that weren’t “economically viable”. That was the whole goddamn deal – they’d get a monopoly in the profitable parts of the county specifically to subsidize the unprofitable parts. If they’re only going to serve the profitable parts of the county, what was the point of barring any competition? Everybody and their brother would be happy to compete for the profitable parts of the county, the profitable parts of the county don’t need any help getting cable made available.

        1. You can’t get satellite?

        2. “As far as I know, the monopoly phone company did in fact run phone lines down every little pig trail.”

          Yes, *eventually* everybody had phone service, but it still took them a long time to do it. In fact, there are stats that show how the expansion of rural phone service slowed down after the phone monopoly was established. But yeah, the cable monopoly deal was just more crap politics.

    2. As I understand it, and I could be wrong, first class postage subsidizes ‘junk mail’.
      4th class mail definitely does not cover its own costs.

      1. If this is true today, then it is a new occurrence.

        Back in early 2000, I did some work for catalog companies. The direct mail business was the only part of the post office that made a profit. And they ran it like a business. They had “sales people” in all but name go out to your business and give you training on the best ways to setup your mail. It actually made me respect a government institution other than the military for the first time in my life.

      2. Bulk mail *does* cover its costs–because the costs are so low.

        I used to do “medium” bulk mailings (40-60k pieces). In order to get the best rates, the mail has to meet a ton of criteria–including being sorted right down to the carrier’s delivery route. This means the USPS does *zero* sorting of that mailing. And labor is where all the cost is.

        You bring in big carriers filled with trays. Each tray is label with the PO and carrier to deliver it to. The only time it’s “touched” is when the trays are at central distribution for the region, and get placed on the correct truck to their destination PO.

        Bulk mail also requires a permit (it’s a small fee, but it’s still revenue for USPS).

        The final revenue source is the sorting list itself. You subscribe to a sorting software (updated quarterly, I believe) from a 3rd party (and I think they may have a monopoly). USPS makes money selling the sorting database to the software vendor.

  4. I thought Heaton was fired.

    1. I don’t know. I just know he left, and nothing to indicate why. And that also Ed Kray left at the same time, and best I can tell from his Twitter, it was not an expected departure.

      1. In some other thread, you said Ed was having a bad time, or that’s what you inferred by reading his Twitter. Is that really true? Because that makes me a sad panda.

  5. Good to see you still using Heaton for something. Nice of you to do so after getting rid of him.

  6. Each class of mail should be priced so that it recovers its own costs – no more and no less. The Postal Service is something that the Constitution explicitly authorizes (“Post Offices and Post Roads”), so privatizing it is really not appropriate. As for that “over $100 billion in unfunded pension liabilities”, does that still include health insurance benefits for people not even hired yet, something no private company and no other government agency is expected to cover? If so, that needs to change first before an honest economic analysis of the Postal Service can even be made.

    1. It only ALLOWS creation of a government post office. It does not mandate it and it does not allow it to be a monopoly.

      1. Establish means mandate

        1. No it doesn’t and it never has.

          Congress has the authority to establish an armed force – yet there was a pretty long time when we didn’t have one.

          1. No there wasn’t. We have had a continuous Navy since 1794 – a continuous Marine Corps since 1798. And in all likelihood a continuous Army since 1789 (the building burned in 1800 with all records destroyed so all we know now from before then is the Whiskey Rebellion deployment)

            1. Looks like we do have more sources for the early Army – Battalion of Artillery and Legion of the United States

              1. And the Legion of the United States was created in 1792 from the First American Regiment organized under the Articles of Confederation in 1784 and stationed in the Northwest Territory. So it was already operational (and fighting actually) before the Constitution – and still exists today as a mostly ceremonial unit (CinC guard, Tomb of Unknown Soldier)

        2. How do you figure?

        3. And you’re still wrong.

          “The Congress shall have Power To establish Post Offices and post Roads”

          “Shall have power” is not a mandate.

    2. The unfunded liabilities is the same as everywhere else: the expected pension payouts for all current employees. Nothing to do with unhired employees.

  7. But how could the post-apocalypse US government b rebuilt with no Post Office?

    1. Kevin Costner and Tom Petty hardest hit.

      1. Tom won’t mind so much now

  8. HEATON IS BEING KEPT AS A SLAVE BY THE JACKET
    SPREAD THE WORD

  9. If Reason were held to the same pension rules as the USPS is, you’d be bankrupt about 5 minutes later. No other federal agency or private business has to follow those rules, so why is the USPS special?

    Don’t forget, the act of Congress that imposed those rules on the USPS were proposed by a Congressman who has a long history of trying to abolish them outright. He finally succeeded by making it mandatory that they fund pensions in advance, up front, for employees they don’t even have yet, through 2050. A Fortune 50 company held to that standard might well wind up in bankruptcy court the next day.

    The only reason they are in the hole on pensions is that law. Prior to the law being passed, they were making a PROFIT every year, and didn’t need to keep raising postage every few months to do it!

    1. So…you’re saying that a government-run company subject to Congressional meddling is a bad idea?

      1. So far, 100% of the time.

    2. So trying to prevent a pension meltdown is a bad thing now?

    3. They were making a profit every year – because they weren’t meeting their pension obligations.

  10. If prices for first-class postal services go up after privatization, that means the USPS was holding prices below market levels.

    Note to self: Invest in more “Forever” stamps.

  11. Yes. Set them free!

    Don’t say you’re privatizing them. You’re setting them free from the shackles that Congress has put on them.

  12. Plus, AT&T is already spying on all the meaningful person-to-person communications in the USA for the federal government, so the original intent of having the government monopolize the postal service is long gone.

  13. It’s clear that the solution to the postal service’s ills is more capitalism. The president seems to understand that.

    This is the same president that doesn’t understand how tariffs and taxes are driving Harley Davidson to move it’s plants.

    So no, I doubt he understands that. It’s possible that he has some advisor who wrote the document that does understand that, but there is zero reason to believe President Trump actually understands how capitalism can improve a system.

  14. Privatize the Postal Service? Is there something it does, of value to people, that UPS and FedEx don’t already?

    BIlls? Why aren’t you paying electronically?

    Cheap junk mail delivery? No thanks. I recently moved and am pretty stoked that between the move and electornic payment my mailbox has been empty for two weeks.

    ‘First class mail’? Grandma can email you a vlog and transfer your birthday money money to your account with an app.

    Front door delivery? Apparently that’s not a requirement. I live outside of town, 5 miles from the post office, and I get USPS delivery to my box. When I lived in town I had to *pay extra* for a mailbox at the post office because they didn’t deliver to my side of town. Yet a block away, outside of town, they would.

    Is there some value in the USPS management? Their logistics systems? I honestly don’t know what value there is in anything the USPS has that would be worth buying the whole thing to get vice tearing off chunks (ie, buying used equipment or real estate holdings).

  15. Sounds like an idea worth exploring, at a minimum.

    The only real problem may be in the handling of official correspondence. In a completely private (and therefore optional) mail system, there may be people unable to receive court summons, etc., because they don’t have access to the private mail service for whatever reason. That might be a problem. But I don’t think it’s an insurmountable one.

    1. I don’t see this as a likely outcome. Short of “somewhere with inherent danger, like the inside of an active volcano”, I can’t see anyone living anywhere in the US that there would not be some price at which the privatized Postal Service would deliver to them.

  16. ~24 yrs. ago Howard A. Stern said that if Donald Trump were in charge, letters would cost half as much, & you could gamble w the stamps.

  17. “If prices for first-class postal services go up after privatization, that means the USPS was holding prices below market levels”

    Congress sets postage prices, not the USPS.

  18. I’d actually go for a compromise.

    The USPS remains part of the US government–but is not subject to Congressional meddling. Essentially the US Government the “non-voting owner” of all the stock.

    Put in place a legitimate Board of Directors who hire the Postmaster General–e.g., CEO. (Is Lee Iacoca still around?)

    Retain a few mandates, such as “must deliver to every citizen”, allow them to piggyback on any government contracts they want (e.g., “preferred vendors”), and maybe cover them under the government umbrella for business insurance.

    Otherwise, allow them to operate as a for-profit entity.

    I hate to hold them up as an example, but… China has several nationalized companies that make a profit–even without massive subsidies (and they have lots of those, too). For example, the Chinese version of USPS also has a banking division; so you can go to China Post to send your mail and do your personal banking (though you have to walk to a different counter).

  19. If the USPS is privatized, how will I receive subsidized junk mail?!? Has anyone thought of that!

  20. I am 100% certain Reason will find something to hate eventually. Probably call it cronyism

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