Of Public Interest

Volume 4, Number 9
May, 2002

The Postal Service has recently announced another hike in rates, with first class mail rising by nine percent from 34 to 37 cents. The Postal Service claims that these increases are necessary to cover the postal deficit that currently runs about $2 billion per year. The Postal Service would have us believe that it is doing the best that it can in light of a bad competitive situation. It claims, for instance, to have lost many billions of dollars because people have shifted from using the mail to using their computers to write letters and pay bills.

The Postal Service is right to note that it has been losing business through competition from computers and the electronic transmission of messages. However, it draws the wrong conclusion from such circumstances as these. It concludes that there is nothing wrong with it that more money won’t fix. The truth, however, is that the Postal Service is not up to the task of facilitating the communication requirements of a fast paced, highly competitive society. The Postal Service should die, or at least be allowed to fade away gracefully.

To be sure, the postal monopoly has been crumbling in various ways, as such businesses as UPS and FedEx have expanded their market presence. The Postal Service asserts that it must maintain a continued presence in American life, and that we must pay more money to it to keep this presence. We can pay this either as higher taxes to subsidize the losses or we can pay it as higher postal rates. However we end up paying this additional money, we will be covering up postal ineptitude. The plain fact of the matter is that the Postal Service is not remotely competitive with what privately organized businesses could provide, and in many cases already do provide. According to the federal government’s own Bureau of Labor Statistics, productivity within the Postal Service has grown by only 11 percent over the last 30 years. This is a pitiful rate of progress when compared against the 53 percent rate of growth within commercial firms.

Long ago, there was a place for government to deliver the mail. Roads were poor, traffic moved slowly, and population was sparse. The postal service provided a valuable service in providing a means of communication to link the nation. There was a strong public interest in providing those communication links that would not readily be provided through commercial enterprises anywhere but in large cities. The postal monopoly was a reasonable solution to a difficult problem in a setting where commerce could not operate with universal vibrancy.

We are now a long way removed from those times. Electronic communications move instantly throughout the nation and, indeed, the globe. We order goods and pay our bills through our computers. We do a growing share of our banking on our computers, and even read newspapers on computer. Moreover, such private companies as FedEx and UPS has developed extremely efficient networks throughout the land that are far superior to anything the Postal Service can provide.

For instance, the Postal Service recently contracted to have FedEx carry some of its mail, claiming that this would save the Postal Service about $1 billion in transportation costs. There is surely something terribly wrong with this picture. The Postal Service admits that FedEx can deliver mail in less costly fashion than it can, so it hires FedEx to do some of its work. Why doesn’t it hire FedEx and other competitors to do all of its work? How many times over could we save $1 billion if it were to do so?

The inefficiency of the Postal Service becomes particularly glaring in light of the commercial head start that it has over private companies. The Postal Service is exempt from all forms of tax, and is exempt from all sorts of zoning and other types of regulation that raise costs to private businesses. Despite these strong commercial advantages, the Postal Service is demonstrably inferior to the competitive options that are already available. That inferiority would become even more strongly apparent were it not for its Congressionally-sanctioned monopoly over the delivery of first class mail.

The Postal Service’s monopoly actually extends to our very own mailboxes, which we pay for ourselves. These are our mailboxes, and rightfully we should be free to allow UPS, FedEx, or anyone else to deliver communications to them. If this were done and the postal monopoly abolished, the Postal Service, like General MacArthur’s old soldier, would just fade away in the presence of competition. Unfortunately, the Postal Service has strong political support despite the high costs it imposes on the rest of us. It was many, many years before the Tea Tasting Board was finally abolished, which is truly sorry testimony about how slowly the winds of progress blow through the corridors of government.

A Publication of:
Public Interest Institute at Iowa Wesleyan College
600 North Jackson Street
Mt. Pleasant, Iowa 52641-1328
Phone: 319-385-3462 Fax: 319-385-3799
E-Mail: public.interest.institute@limitedgovernment.org Web Site: www.limitedgovernment.org