'Give Us More Money Or No More Mail!'
By Edward Hudgins
CNS Commentary from the Cato Institute
The U.S. Postal Service (USPS) recently
announced that it might cancel Saturday mail delivery in light of a projected $2 billion
to $3 billion deficit over the next year. This plan is a political ploy to obtain another
increase in stamp prices only months after the last one.
This scheme should be a wake-up call to the public and policy makers. The time has come
for this government monopoly to go private and compete for its customers the way any other
The latest USPS plan should strike one as strange. If a private company were running huge
deficits and its business was stagnating, would it raise prices to its customers and cut
back on its services? Of course not. Such a strategy would drive away customers and hasten
the company's demise. But the Postal Service in the short run doesn't worry about driving
away customers. It's a government monopoly. You can't switch to another postal service the
way you can switch to another e-mail service.
Normally, a business faced with a deficit would try to hold down costs and use labor more
efficiently. But the Postal Service, with $65 billion in revenues annually, has problems
doing this because of its rigid labor regime. When the U.S. Postal Service was organized
out of the old Postal Office Department in 1970, about 80 percent of revenues went to
cover labor costs. Today, after billions of dollars of investments in new high-tech
equipment, nearly 80 percent of costs are still for labor. Further, over the past decade
the Postal Service has had significant increases in manpower. So because the USPS has
trouble controlling its own labor costs, it raises prices and cuts services to customers.
On this latter point, remember: We used to have two mail deliveries per day and new homes
used to get mail boxes at the door rather than cluster boxes at the road.
What's worse, postal workers can't be used efficiently to serve consumers. Consider: You
walk into a post office. There's a long line of customers and only two windows open for
service. If it were a grocery store the manager likely would page some stock clerks to
open up more registers. But in the post office, because of inflexible work rules, it's
often impossible for a manager to tell workers in the back room to put down their coffee
cups and get out there and serve customers.
The Postal Service wants to generate more revenue by offering new e-commerce services,
online security, and coordination of business orders, shipping, billing and inventory. But
this is inherently unfair competition with private companies. The USPS pays no taxes. It
can borrow from the Treasury. It is exempt from most government regulations under which
private businesses must operate and exempt from many of the safeguards that protect us
from abuses by government agencies.
Perhaps worst of all, the Postal Service has regulatory authority that it uses against
competitors. For example, recently it imposed costly new regulations on private mailbox
companies, driving many customers away from those enterprises.
In the long run people will find ways to avoid using the USPS. An exception to its
monopoly allows private companies to carry emergency mail for next day delivery, though at
government-mandated high prices. The result: 90 percent of overnight mail goes by private
carrier. Now the USPS is contracting out to Federal Express to carry USPS express mail.
Further, more people will be paying bills electronically over the next decade, reducing
USPS revenues by some $15 billion.
Postmaster General William Henderson recently told Congress that America has a third-world
postal service compared with many European countries. Then perhaps we should copy
Germany's Deutsche Post, which has been reorganized and put under private management. It
recently made an initial public offering of stock. Later this decade its monopoly will be
A private Postal Service, without special privileges, would have an incentive to operate
efficiently and to offer innovative services that profit its stockholders, provide
opportunities for its workers, and give customers the best service for the best prices.
Edward L. Hudgins is director of regulatory studies
at the Cato Institute.