A reason for this is that USPS faces very little competition. In fact, it has a federally guaranteed monopoly on the delivery of letters; it’s actually illegal to send a letter that’s not “urgent” via UPS or FedEx. Whereas most companies lose ground in the marketplace if they let their unions run wild (see: GM), the Postal Service has nothing to fear.
And further, as an “independent agency” of the federal government, as opposed to a private company, USPS has no reason whatsoever to turn a profit — in fact, it’s virtually forbidden to. Thus, its negotiators have no reason to play hardball when they sit down with organized labor.
For much of its history, USPS was required to set rates that were revenue-neutral. Thanks to a 2006 law, it has a little more leeway now: For service categories in which it competes with other providers, it can set its own prices. However, non-competitive services — for which USPS must charge the old revenue-neutral rates, plus inflation — account for about 88 percent of USPS’s revenue.
One might think that even in the absence of a profit motive, USPS would have an incentive to preserve its very existence. However, companies with strong ties to the federal government seem to have an implicit bailout guarantee — think Fannie Mae and Freddie Mac. Considering that mail delivery is far more popular than those two government-sponsored enterprises ever were, it seems highly unlikely that the federal government will let the Postal Service go under. Even Republicans seem hesitant to suggest that course of action.
Right now, Congress has only a few options aside from a bailout. One would be to allow USPS to stop pre-funding its retirement benefits — which is basically just borrowing from the agency’s not-so-bright future; it’s true that other agencies don’t have this onerous requirement, but any retirement benefits that aren’t funded while an employee is working will have to be funded while the employee is retired.
Another is to take measures to cut costs — the postmaster general has suggested ending Saturday delivery, closing lots of post offices, and breaking the agency’s contractual obligation not to lay off union workers. These would be a good start, though the prospect of a government that breaks its own agencies’ contracts is frightening, however laughable the contracts in question are. Rep. Darrell Issa (R., Calif.) has suggested requiring older workers to retire instead, a less heavy-handed alternative. He estimates that such a measure could remove 200,000 workers from the payroll.
In the long term, however, the best solution to this problem is to end USPS entirely. Congress should sell USPS to the highest bidder and eliminate its monopoly on letter delivery. Ideally, the buyer would start with a clean slate: Unions would have to win elections if they wanted to continue representing employees, and they would face an opponent that actually had something to lose.
In early America, the mail was the only way to communicate over long distances, and most likely, private companies wouldn’t have served all of the nation’s rural areas. In fact, the Constitution itself authorized (though it did not require) Congress to set up post offices and post roads for the purpose of facilitating mail delivery.
Today, by contrast, affordable Internet access is available to just about everyone — and we can expect Americans who prefer daily letter deliveries to pay for that service themselves, in the free market, through either existing delivery companies or a reconstituted and fully private USPS. As it currently exists, the Postal Service has outlived its usefulness, and taxpayers shouldn’t be on the hook for its steady stream of deficits and poor decisions.