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Why We Must Rescue the U.S. Postal Service From the Brink of Death

The post office can still be saved, but its grave has been dug.

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For three years Congress debated what to do. Finally, in 2006 it passed a law that requires the Postal Service to pre-pay its health insurance fund by depositing an additional $5 billion a year for the next 10 years into the insurance fund to offset for the phantom accounting deficit under the unified budget. No other public or private agency is required to do anything remotely comparable.

In 2007, unsurprisingly, USPS suffered a $5 billion deficit. Today that deficit is over $20 billion and is used to justify the death of the post office by amputation of its work force, its processing centers and its local offices. The 2006 law also specifically prohibited USPS from offering new products that would create “an unfair or otherwise inappropriate competitive advantage for the Postal Service….”

Elaine C. Kamarck of Harvard Kennedy School of Government has observed the essential contradiction in Congress’ attitude toward the post office from the very beginning of its new life as a corporation. “Congress wants it to be self-sufficient but doesn’t want it to make money.” Kamarck continues:

“For example, in the mid-1970s, the post office was told to remove copy machines from post offices under pressure from lobbyists representing office equipment stores who feared that USPS was taking away its business. Later when the USPS initiated a 'Pack and Send' service, the outcry from Mailboxes Etc. and other private packing stores successfully challenged the service.

"Years later, when Internet shopping took off, the delivery of packages to individual households should have resulted in a dramatic increase in USPS business. But parcel shipments were generated by large organizations and the USPS was not allowed to negotiate discounts and thus lost business. It was forbidden by law from lowering prices to get more business. This resulted in the entirely incredible situation in the 1990s where the United States government negotiated an agreement for the delivery of U.S. government package services with Fed Ex because the USPS was not allowed to negotiate for lower prices!”

Today the strongest force in shaping the future of the Postal Service, aside from Congress, is the bulk mailers. Indeed, bulk mailers are formally represented in the USPS through the Postmaster General’s Mailers Technical Advisory Committee. Bulk mailers don’t care about post office closings because big mailers present their mail at Bulk Mail Entry Units. Saturday delivery is not a major concern either because advertising mail would do fine with even three-day delivery. Nor do they care about having a blue collection box on every corner, half of which have disappeared in the past 20 years.     

What bulk mailers do care about is price. They receive huge discounts for pre-sorting that is far in excess of what the Postal Service saves by receiving mail pre-sorted.  

Where Do We Go From Here?

So here we are, at the end game. Few any longer are even talking about saving the post office as is. Fewer still are talking about resurrecting the post office as an institution with a broad public mission. The debate now focuses on how many parts of the post office we can lop off.

Kevin A. Hassett, then director of economic policy studies at the American Enterprise Institute, has written, “The Postal Service owns or operates 33,000 facilities nationwide and owns 219,000 vehicles. If we were to auction it off to private investors, the bids would likely be enormous.”

Tad Dehaven of the Cato Institute insists, “The one-size-fits-all model where you have six-days delivery to every home in the country at a fixed price just doesn’t make any economic sense. What I envision is eventually consumers and customers dictate what they want and entrepreneurs figuring out how to satisfy those wants and needs.”

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