Earlier this week, GOP presidential candidate Tim Pawlenty released some ideas on how to improve the economy. One of those ideas was to make government respect the “Google test”: If an Internet search reveals private businesses that provide a good or service, the government shouldn’t provide it as well. As an example, Pawlenty cited the United States Postal Service — a company that has a federally guaranteed monopoly on delivering letters, cannot make a profit on most of its services, and must deliver to all addresses in the United States.
Right now, the federal government is spending about a trillion dollars it doesn’t have every year. Fully privatizing the USPS won’t do much to fix that, and therefore probably shouldn’t be a priority. But it’s still a great idea.
It’s true that the Postal Service has its roots in the Constitution: Congress is authorized to “establish Post Offices and Post Roads.” The Constitution doesn’t require Congress to do that, however, and it certainly doesn’t forbid private companies to deliver letters. The USPS monopoly on letter delivery is the result of everyday laws that can be changed whenever Congress chooses to.
So what is it, exactly, that the USPS gives us that a free market in letter delivery couldn’t? And what costs come along with these benefits?
Several liberals have claimed that while the USPS delivers to all addresses, private package services such as UPS and FedEx don’t deliver to some rural areas. The unproven assumption, of course, is that these companies still wouldn’t serve certain pockets of the market if they were allowed to deliver letters in addition to packages. But more fundamentally, the claim is simply not true: The websites of UPS and FedEx confirm that the companies serve every address in the United States, although some services aren’t available everywhere.
A more reasonable argument is that while the USPS operates lots of post offices with daily pickup in rural areas and charges one flat fee for a stamp, a private system might force people in rural areas to drive many miles to the nearest office and to pay more for each item sent. This is obviously a downside for customers who reside in sparsely populated terrain, but the question must be asked: If that’s what a free market would do, what does it say about the current system?
The truth is that if it costs more per transaction — because of the lack of economies of scale — to deliver letters and run post offices in rural areas, and yet the USPS charges the same amount, then urban and suburban customers are subsidizing letter service for country-dwellers. There is nothing wrong with living in a rural area, of course — but every lifestyle has costs, and everyone should pay the costs of his lifestyle rather than pushing them off on others.
Another benefit of the USPS is that the government’s involvement allows us to secure preferential rates for good causes — for example, magazines. I’m inclined to agree with National Review’s management that this is a good thing. I can’t say I would still believe this if my twice-monthly paychecks didn’t come from National Review.
So, what costs come along with these benefits? Fortunately, there is little direct cost to taxpayers: The USPS, in addition to being essentially forbidden to earn a profit, receives no direct public funding. If it doesn’t make some changes soon, it may default on its debt to the federal government — but its debt limit is $15 billion, about a thousandth of the current federal debt.
But speaking of default, the biggest problem with the USPS is that it simply cannot cope with the implosion of the letter business the way a private company could. Despite facing no competition, it lost $8.5 billion last year. Every time it wants to raise prices or cut services, it has to go begging the federal government for permission. And because its ability to make a profit is so limited, it has little reason to fight its union as hard as a private company would.
This will only get worse: Now that we communicate mainly electronically, more than half of all mail is junk. Even Netflix, one of the Postal Service’s biggest customers, is slowly shifting its operations online. In a decade, if that, it will be self-evident that there is no need whatsoever for a federal role in this area. To survive without bailouts, the USPS will have to close down post offices, shed employees, hike stamp prices, and possibly cut service to five days a week — a situation that looks an awful lot like the doomsday scenarios that will supposedly strike if we end the USPS’s federal privileges and obligations entirely.
The USPS is inefficient, obsolete, and redundant. Any necessary service it provides can just as easily be provided in a free market. T-Paw may have his priorities mixed up, but his proposal is a good one.
— Robert VerBruggen is an associate editor of National Review.
Editor’s note: This piece has been amended since its original posting.