Magazine March 11, 2013, Issue


We never needed a postal monopoly

In 1691, Thomas Neale was given a 21-year concession on postal services in Their Majesties’ prospering American colonies. Neale never set foot in the New World and was an epically inept manager: In spite of the fact that his royal charter cost him only 80 cents a year, he lost his jerkin on the deal and died hopelessly in debt. A monopolistic political boondoggle that hemorrhages money in spite of both implicit and explicit subsidies and the power to throw unwanted competitors in jail: Thomas Neale would certainly recognize the modern United States Postal Service as the natural continuation of the tradition he established.

The Postal Service did not begin its life as a monopoly, and it is not clear that it was intended to be one. While the Articles of Confederation granted the federal government “sole and exclusive” right to manage the post, the Constitution dropped the “sole and exclusive” language, and in reality letter delivery in early America was far from a federal monopoly, instead involving dozens of formal and informal agencies ranging from the famous express services to the “penny post.” In practice, the Post Office was the original template of the public-private partnership — one that went horribly if predictably wrong. If you would like to understand how well-intentioned government programs grow into out-of-control behemoths or to get a foretaste of what the unwinding of those programs will look like in coming years — and our unsustainable finances ensure that many familiar government programs will be eliminated or radically reduced in the near future — then consider the case of the Post Office. As an exemplar of financial and political dysfunction, the USPS is not a monster — it’s just ahead of the curve.

Until the 20th century, letter-carrying was an issue closely bound up with the related project of road-building, thus the constitutionally enumerated power of the federal government to “establish post offices and post roads.” Thomas Jefferson, among others, was skeptical of the new federal Post Office, worrying that it would turn into a “bottomless abyss” of patronage and corruption, which of course it did in very short order. By the middle of the 19th century, the Post Office accounted for about 80 percent of the civilian employees of the federal government, and postmasters’ positions were prized plums handed out to political cronies. At the time, local postmasters had their own independent franking privileges, an arrangement that led to the common practice of their hiring deputies who would do all of the postmaster’s work and collect the postmaster’s salary, while the postmaster himself would profit handsomely by renting his frank to businesses and politicians. The post became a machine for subsidizing such politically connected businesses as the railroads, the steamship lines, and the newspapers, and a magnet for rent-seeking federal contractors. Postal scholar Kelly B. Olds estimates that in the early 19th century the Post Office was paying steamship operators and railroads about 16 times the cost of freight to ship mail, while newspaper publishers were charged about 1/16th the postage collected on letters. Then as now, junk mail was a problem: The abuse of franking meant that the post was flooded with transcripts of congressional speeches, political tracts, and other campaign material — the antebellum equivalent of the Ikea catalogue — most of which went unread.

For a long time, private competitors to the Post Office were broadly tolerated, in no small part because they did the heavy lifting and the hard trailblazing. Levi Pease, a blacksmith who had become a supply-route specialist in the Continental Army, put his transportation knowledge to good use after the Revolution by founding the first regular stagecoach service between the commercial centers of Hartford and Boston. He ran his route along an old Indian path that had been adopted by earlier post-riders; today, we call that U.S. Route 1, still known along many stretches as the Boston Post Road. (In some areas, presumably old Tory strongholds, it is still the King’s Highway.) Pease organized a network of letter-carriers, stagecoaches, and taverns, which at the time served as post offices, and was the father of such innovations as the general-ticket office and express service. He was so successful that he was later brought in to clean up the mess that Benjamin Franklin’s successors had helped to make of the Philadelphia–Baltimore postal route, and ended up contracting to run the whole thing. He convinced the federal government to make the change from single mail-riders to delivery by coaches, and then designed the coaches that would carry the mail. At the height of his business, his coaches moved mail from New Hampshire to Georgia. (And bitter complaints about the rigging of postal contracts were an inescapable part of political life.) Meanwhile, the express services were establishing postal routes to frontier towns and mining camps not served by the Post Office. Such standard practices as prepayment via stamps, home and office delivery, and weight-based (rather than distance-based) postage all came from the private carriers. The Post Office did not make prepaid postage standard until the eve of the Civil War.

#page# The Post Office often followed an opportunistic and parasitical pattern of allowing private competitors to establish services for a period of time and then stepping in and declaring its monopoly. As late as the 1840s, four-fifths of the commercial mail exchanged between New York, Boston, Albany, and Philadelphia was handled privately, through agreements among merchants’ associations. In theory, the Post Office enjoyed an exclusive right to deliver mail only along designated post roads, but the definition of a post road turned out to be remarkably elastic. The Post Office had long been losing revenue to the penny post, the private letter carriers that operated within the confines of a single city, so in 1860 Postmaster General Joseph Holt simply declared “all the avenues, streets, lanes, alleys, roads and highways in all that part of the City of New York lying south of and below Fifty-Fifth Street” post roads, taking over the letter-carrying business in the city entirely.

The move to effectively nationalize every alley in Manhattan was part of the Post Office’s mid-19th-century push to consolidate and enforce its monopoly. Government-chartered monopolies were common at the time, part of the period’s misguided vogue for purportedly scientific efficiency practices (what would come to be known as Taylorism) and central economic planning. In the late 1830s, the Post Office had begun to face more serious competition from organized private services taking advantage of the new steamship lines and railroads. The most famous challenge came from the eccentric anarchist agitator and abolitionist Lysander Spooner, whose American Letter Mail Company openly challenged the postal monopoly in the hopes of taking a test case to the Supreme Court. Spooner sent the postmaster general a detailed confession to the crime of violating the postal monopoly, but what really commanded the authorities’ attention was his offer of stamps at 6¼ cents, about half of what the Post Office was getting at the time. Spooner placed ads in the newspaper he published inviting the Post Office to test its monopoly in court, but the Post Office responded by simply crushing him — first with fines, criminal charges, and litigation, and then, when that failed, by seizing the mail his company was attempting to deliver. Spooner’s act of commercial disobedience lasted less than a year. Henry Wells of what would come to be Wells Fargo found himself facing charges as well. But the private firms could not be squashed entirely — far-flung settlements in the West were served almost exclusively by the expresses, and it proved politically impossible to move against them. The Post Office eventually was forced to lower its rates in the face of private competition, but it also succeeded in getting Congress to triple the fine for violating its monopoly.

The private mails came to be considered an existential threat to the postal monopoly. A congressional report quoted in the Commercial Review in 1844 describes the situation: “It is clear that a crisis has arrived requiring decisive action. Temporizing expedients and half-way measures will not answer. Pressing evils demand an immediate and efficient remedy. What remedy shall be applied? The first object to be accomplished, clearly, is to get rid of the expresses, or private mails. Any measure which will not accomplish this object is unsuited to, or at least insufficient for, the occasion. . . . Any sacrifice necessary to accomplish this object ought to be made unhesitatingly.”

The answer would come in the postal-reform law of 1851, which for the first time allowed the previously self-financing Post Office access to general Treasury funds. The results were predictable: With the ability to help itself to the public fisc, the Post Office went from being a profitable or break-even proposition to being one that ran enormous deficits: As Professor Olds documents, in 1855 postal spending was under $10 million per year, but by 1860 it was more than $19 million a year — with only $8.5 million in revenue. The Post Office would eventually be partly weaned from the Treasury, but it would never again become a financially responsible organization.

#page# The Post Office — now the U.S. Postal Service, a quasi-autonomous government enterprise — has been in decline for many years. First-class mail deliveries peaked in 2001, and today are down by nearly one-third. Saturday service is to be eliminated. USPS finances are a mess. Gone are the days when postal workers accounted for four-fifths of the federal civilian work force and the title “postmaster general” commanded a measure of awe. And the private firms are still out there: The USPS has never quite managed to achieve reliable service for residents of the remote River of No Return Wilderness in Idaho, and so it continues to pay a private firm, Arnold Aviation, to deliver the mail. And even though online retailing means that American shoppers receive more packages than ever, private couriers get most of that business — Amazon is running out of UPS tracking numbers. Fights over the future of the USPS are mostly about holding on to make-work jobs for otherwise marginally employable postal functionaries and trying to shore up the bloated postal-pension system. The USPS is a bleak anachronism.

To the Founding Fathers, a government-run system of post offices and post roads was practically a given — and they put it right there in the Constitution, along with the Navy and the Mint and other former royal prerogatives that were to be entrusted to the people’s representatives in our radical experiment in self-government. And as recently as a few decades ago, most people could not imagine life without the Post Office — without somebody in charge of delivering the mail. But in 2013, many of us have gone many years without seeing a paper bill or bank statement, and the residential mailbox — though still protected by federal law making it a crime for you or me to put a letter into it — is just one more thing to clean out, one more chore. And there’s nobody in charge of the new system: We have online banking and UPS and FedEx and e-mail and ProPay and a thousand other things that do what the Post Office used to do. If there were not already a Post Office, nobody would bother to invent it. If you were evaluating it as a business, you’d probably calculate that its real estate was worth more than all of its business operations combined.

Those with a financial stake in what remains of the USPS will fight tooth and talon to defend their faltering fiefdom, but they are done, and we know that they are done, and they know that we know that they are done, and it is just a matter of time, which has passed the Post Office by. The Post Office will not be the last federal enterprise to go ungentle into that good night. Just as the Post Office once represented 80 percent of the federal government by work force, the major entitlements — Medicare, Social Security, and Medicaid — represent most of the federal government by dollar outlays. It may be difficult to imagine a world without those, at the moment, but they make no more sense than the postal monopoly, and the costs associated with them are much heavier. Ronald Reagan once observed that nothing so closely approaches immortality as a government program, but in truth nothing lasts forever. No think-tank scholar or white paper laid out an end to the USPS; it is just happening, the way things just happen. And we’ll replace the entitlements with something that makes Social Security look like onionskin airmail in the age of the text message.

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