As we all know by now, the U.S. Postal Service is beset by many problems - rising costs, falling volume, a difficult mandate, and ... the U.S. Congress.
I never really thought the 1971 transformation of the U.S. Post Office (a government entity) into USPS (a nominally private entity) made much sense. Universal service is a valid - even necessary - goal for any country's mail. And I submit that, even before we knew e-mail was coming down the pike, this model would not have stood up to a careful business feasibility study. Nevertheless, Congress decided mail could flow cheaper and more effectively by changing "office" to "service" and making it more like a private business.
The trouble was that it was only "more like" private, in other words, a halfway measure. The new USPS was at best a quasi-private institution, with Congress still defining its mandate and approving its management decisions, including pricing and service standards. At the same time, Congress opened package delivery to a host of competitors, thereby presenting the new entity with an immediate challenge while stripping it of its most profitable and growing element, which could have provided a lot of flexibiilty to perform the mission.
Now we are forced to consider cutbacks in service, increases in costs. These aren't the end of the world. In fact, my basic point here is that these changes could have come sooner, and losses over the years considerably curtailed, if USPS had been completely unfettered from the apron strings of Ma Congress. Some studies have suggested that the USPS's current financial shortfalls could be resolved entirely if the basic rate for a letter were 65 cents. This is not expensive by comparison to other countries' services, in fact, it's cheap. Why doesn't a letter cost 65 cents today? Because Congresspersons fear public backlash if the rate goes up more than a penny at a time. If USPS were free to make its own decisions, we would probably also be without full universal service by now. That may be regrettable, but it's a decision Congress really made for us in 1971, without realizing it. I doubt we can correct it now. Meanwhile, pity the postal service, stuck in a no-man's land with 535 CEOs calling the shots.
Incidentally, the Postal Service story is a clear case study that explains a great deal about the problems of privatizing government functions -- cases like Amtrak, as well as various new proposals now being floated in light of expressed concerns about the costs of government: If we continue to think of privatizing government functions only when they show clear profit potential, we leave the government to handle the difficult and profitless aspects of the process (for example, the mandate for universal and six-day service). And that's why government seems inefficient and expensive, no matter how well it does its job.
Pity indeed! The USPS has thousands of post offices around the country. Many are in small towns where it is uneconomical to keep them open, but these small post offices are gathering places for local residents who fight against their closure. USPS is also obliged to deliver to rural areas where the cost of delivering the mail is much higher. UPS and FedEx have the option to charge more to deliver to these places or simply not deliver to these locations at all. The USPS doesn't have that option. And there are many other examples where the USPS has it's hands tied by congress.
Posted by: Mark Delman | February 16, 2012 at 05:20 PM