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After running up billions of dollars in losses subsidized by the federal government from 1942-71, the postal service was made a quasi-independent non-profit enterprise (the United States Postal Service, or USPS) that no longer receives any direct government subsidy. Financially, USPS held its own until 2007, but since then cumulative losses have amounted to about $20 billion, and it is expected to lose another $8 billion this fiscal year. Obviously, this cannot continue much longer without a resumption of government subsidies, so this is an excellent time to consider major changes in the postal service and the economic environment in which it operates.

The most important factor behind its worsening financial fortunes is the sizable drop during recent years in the total volume of mail delivered. First class mail alone, although protected by a legal monopoly, fell by about 30% from 1998-2008, and has continued to fall rapidly during the past 3 years. The Great Recession is responsible for part of the decline in mail deliveries in recent years, but most of the fall has been due to the growing use of the Internet to pay bills, and to deliver newspapers, magazines, and books. The recession will end, but Internet use will only get more widespread, so the challenges facing USPS will continue to grow.

Defenders of the postal service correctly point out that part of its troubles is due to regulations that significantly raise its costs of operation. These include the requirements to deliver first class and some other mail 6 days a week at uniform prices to about 150 million residences, mailboxes, and businesses, including very remote locations that are costly to serve. Most mail prices can only be raised according to a formula fixed in 2006, and the USPS is restricted from entering new businesses.

The postal system would like to reduce costs by eliminating regular delivery of mail on Saturday, and by closing about 10% of it’s over 30,000 post offices. It would also like greater freedom in setting prices of first class and other mail delivery. The postal system should be given these and other requests to operate more freely. Regular Saturday delivery of mail is an expensive luxury that is no longer needed, and the cost of operating post offices in remote areas cannot be justified, especially given the growing use of the Internet to pay bills and receive news and advertising.

However, greater freedom for the USPS should be part of a sweeping reform of the environment in which the postal service operates. Certain major advantages given to the USPS should also be removed. The post office has had a monopoly for over 100 years on the daily delivery of first class letters and other mail, a monopoly that includes exclusive access to customer mailboxes. Eliminating this monopoly, and allowing the postal service to operate as a private for-profit company, would force the USPS to try to compete more fully against Fed Ex, UPS, and perhaps new companies that would enter the mail business.

Competition would do wonders for mail delivery in the United States since it would make the USPS improve its operations if it wants to survive against competitors. We have seen how the 1971 law that required the postal service to be financially self-sufficient forced the postal service to eliminate losses. It did this by cutting costs through large reductions in the number of postal workers, and by closing many small and uneconomical post offices. More at http://www.becker-posner-blog.com/2011/09/in-trouble-once-again-what-t
o-do-about-us-post-office-becker.html]


Hippie Operative Nikovich Nikita Nicovna Talibani,
Contracted Agent of Veritas Oilspillus, code name “Nike”,
signing off