October 19 2011

Time to Close Down Our Out-Dated Postal Service

Carrie L. Lukas

In the slew of depressing news about state governments struggling to make ends meet, our entitlement programs' bleak prospects, and mind-blogging government waste, it's easy to have missed reports about the pending failure of another U.S. government institution: the Post Office.

It's worth considering not only the horrible situation that the Post Office now faces, but why it has fallen to it's current state. Gary MacDougal, writing in the Wall Street Journal, recently reported on USPS's gloomy prospects: It lost $9 billion last year and soon has to make a $5.5 billion payment to prop its retiree health plan. The core problem is its business model simply doesn't make sense in today's world. As MacDougal explains, first class mail has dropped 22% since 2006—a natural, unavoidable consequence of the growing availability of online billing paying services and email.

The Post Office has tried to make up for its funding woes by jacking up the price of first class stamps, but that only drives more customers away. Additional service cuts are being considered—the end of Saturday delivery and the closure of numerous post office outlets—but they won't be enough to make the math add up.

The simple fact is that the Post Office, which enjoys a government monopoly for regular mail delivery, has long stopped making sense. Policymakers' discussions about the post office's future have long seemed to revolve around what to do for the more than half million postal workers, than what actually makes sense in terms of the entity's actual utility.

If USPS is to close its doors, there probably will be some initial hiccups for businesses and individuals. But clearly UPS and Fed-ex would quickly figure out a way to adjust their business models to pick up the slack for the delivery of mail. Other providers would emerge. It may cost a little more to get grandma her birthday card, and we may all receive a lot less junk mail (that's a fringe benefit in most people's minds). But there is simply no reason in the modern age that we need a government-monopoly to handle delivering Pottery Barn catalogs.

Policymakers can figure out a way to compensate Post Office employees who are laid off as a result of bankruptcy. Even generous severance and early retirement packages would no doubt be a better value than pouring taxpayer dollars into this doomed economic model.

If the U.S. is going to regain its economic footing, we need a growing dynamic marketplace that rewards innovation and progress. USPS, sadly perhaps, just doesn't fit into this future. It's time for policymakers to admit as much, and move on.

 

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