A Proposal to Reform the U.S. Postal Service
Critics of government inefficiency often point to the U.S. Postal Service as an example of an agency that delivers poor service at high costs. And yet, proposals for reform of the USPS are seldom seen. Today’s Washington Post highlights a study that may offer a serious reform proposal in the future.
The review by the nonprofit National Academy of Public Administration will analyze the benefits of restoring the agency’s financial health by using a “hybrid” model, which would farm out to the private sector postal operations other than the last delivery mile. A letter carrier would still drive or walk that last part, dropping letters and packages in mailboxes.
There is a very simple idea at work here. For those who wish to deregulate an industry that has lacked competition for years, a good place to start is by opening that part of the supply chain where there clearly is no “natural monopoly” of any sort. For example, the delivery of first class mail between Los Angeles and New York has none of the characteristics of a natural monopoly. The delivery of mail to a farmer along a rural route in an isolated part of Iowa has very different characteristics. Those political decisionmakers who genuinely wish to reform mail service in the United States would do well to consider these different scenarios, limiting subsidies and regulations to these least-competitive markets.
Of course, even in markets with little competition, subsidies and regulation can cause harm, but that is a separate discussion. The focus here is on reforms that could generate substantial benefits in a straightforward manner.
For relevant case studies, policymakers could look to the (highly imperfect) deregulation of the electricity and telecommunications industries. Those reforms could have been done better, but they also draw out a key lesson: In parts of the industry where competitive forces could emerge right away, they should be free to do so.
The amount of money at stake — the potential savings to taxpayers and gains to consumers — is substantial. And as expected, there are forces for and against any such reform.
The study is likely to bring more attention to a public-private model as a viable — and controversial— substitute for the Postal Service’s existing structure, which relies on a unionized workforce of more than 650,000 employees to sort, package, transport and deliver the mail. With first-class mail volume plummeting as Americans conduct more business and communications through the Internet, the Postal Service lost $16 billion in fiscal 2012.
The idea of taking postal operations private is popular in conservative circles but will be a non-starter in others. It is staunchly opposed by congressional Democrats and postal unions, which stand to lose tens of thousands of members.
Will this new idea overcome established interests? Will reform happen in U.S. mail service? Time will tell.