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Jewish World Review April 30, 2002 / 18 Iyar, 5762

Doug Bandow

Doug Bandow
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Consumer Reports

The price of postal monopoly | Like any other company bedeviled by low productivity, archaic work rules and falling demand, the U.S. Postal Service is in trouble. But unlike other distressed companies, it enjoys a government-enforced monopoly. Failure tends to discipline errant businesses. When consumers stay home, companies cut prices. When marketing strategies fail, firms revamp operations.

But not the post office. Coming soon is the third rate increase in 18 months.

For years postmasters general have waxed eloquent about making the Postal Service into a dynamic, forward-oriented operation. But that will never happen so long as Uncle Sam prohibits anyone else from delivering first-class mail. Nor will the post office feel sufficient pressure to become efficient as long as Uncle Sam pays postal workers' pensions. The post office also is exempt from customs duties and business taxes. And the Postal Service operates unhindered by local traffic and zoning laws.

The result is persistently sclerotic performance. For instance, productivity is up just 11 percent over three decades, compared to 53 percent in the private sector. And that's after nearly doubling total capital investment.

The Postal Service's Office of the Consumer Advocate recently pointed to problems with which any consumer is familiar, including long lines. The highly touted Priority Mail, which is going up to $3.85 in June, often takes longer to deliver than normal first class-mail.

By politicizing mail delivery, Uncle Sam has made it hard for even the most committed managers to improve operations. As Jerry Terry at the National Taxpayers Union puts it: "political pressure from powerful labor unions ensures that Congress will not allow free-market competition." Postal workers are thought to be the highest paid semi-skilled employees in the world, collecting nearly a third more than warranted by their output.

So managers focus on making themselves look good. For instance, complains Rick Merritt, executive director of PostalWatch, the post office has improved its official on-time delivery record simply by reducing requirements adjudged too hard to meet.

Moreover, the availability of guaranteed monopoly revenues has encouraged the post office to expand into other markets. Notes Terry: the agency "also provides extra services which just a few years ago were only found in the realm of private enterprise -- overnight and parcel delivery, prepaid telephone calling cards, packing materials, message services, electronic bill payments, and even sponsoring a bicycle racing team." Yet the Postal Service wants to do even more. Postmaster General John E. Botter observed: "What other entity in the world would have 38,000 retail outlets and limit themselves to selling stamps?" But what other entity has a monopoly and still doesn't do its basic job well?

Although the post office resolutely fights to protect its monopoly, it keeps doing less of the work. For instance, it hires independent contractors to deliver rural mail and answer telephone queries. The Postal Service cuts its price when mailers pre-sort their mail. It ships 3.5 million pounds of mail on Federal Express, with which it competes to deliver packages.

But even shifting its work onto private operators hasn't stemmed massive losses, $1.7 billion last year -- despite an earlier rate hike that pulled in an extra $3 billion. This year red ink will run $2 billion.

The Postal Service's preferred alternative is rate hikes coupled with diminished service, such as fewer post offices and less frequent delivery. For developing such a strategy the Postal Service shells out bonuses to six of every 10 employees, $124.5 million worth last year.

The post office knows it is in trouble and is pushing to allow "managers (to) operate under more businesslike conditions." The only effective way to do that is to turn the postal service into a real business. Congress should drop the Private Express statutes and let anyone deliver the mail. At the same time, legislators should drop the requirement that the Postal Service deliver to everyone everywhere at the same price -- let the post office compete like anyone else.

The result would be better service at less cost. That's the experience of competition throughout the economy. And that's why foreign nations, such as Britain, Germany, the Netherlands, New Zealand, and Sweden, have all moved toward privatization. The main argument offered against turning postal delivery over to the marketplace is that some people in distant locations might have to pay more. So what?

Housing costs typically are lower in rural areas. Should urban dwellers be subsidized to ensure uniform home prices? It's obvious that the Postal Service is good about protecting itself: the coming rate increase will cost consumers an extra $500 million a month. It's time Congress started protecting those supposedly being served by the post office.

JWR contributor Doug Bandow is a senior fellow at the Cato Institute. Comment by clicking here.


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04/16/02: The forgotten human right
03/27/02: Cuba's struggle to be free
03/20/02: How to defeat Cuban communism
03/12/02: Junk science, redux
03/06/02: Axis of hubris
02/27/02: Washington-style campaign reform: incumbent protection
02/20/02: The grand Enron morality play
02/12/02: Rebuilding what?
02/05/02: Succumbing to the terrorist temptation
01/29/02: Democrats for what?
01/22/02: The Iraqi question
01/14/02: Profiling frequent flyers
01/08/02: Trade, not aid
01/02/02: Treason by any other name
12/26/01: Preserving freedom in an unfree world
12/17/01: Dealing with terrorism's aftermath
12/10/01: Emerging friendships?
12/04/01: Uncle Sam: Insurer of last resort
11/28/01: Expanding the circle of trade
11/20/01: Free to be stupid
11/13/01: The meaning of compassion
11/07/01: Patriotic scoundrels
10/30/01: The coming postal raid
10/16/01: First, do no harm
10/12/01: Good news from a suffering land
10/04/01: Defending whom?
09/25/01: The wrong solution to the wrong problem
09/21/01: The price of terrorism
08/28/01: Uncle Sam's retirement scam
08/21/01: Canberra's quaint naivete
08/14/01: Uncle Sam's false fuel economy
08/08/01: The Clinton administration in drag
07/31/01: The high cost of government
07/24/01: Kill the campaign reform illusion
07/17/01: Do as I say, not as I do
07/11/01: Lawyers at play
07/05/01: Western blundering, Macedonian disaster
06/26/01: How best to honor Bill Clinton?
06/19/01: A maturing Europe?
06/15/01: Tell Beijing to mind its own business
06/06/01: Ukraine's boiling cauldron
05/31/01: Protecting privacy from Uncle Sam
05/22/01: America's Balkan quagmire
05/09/01: The Taiwanese flash point
05/01/01: Globalization serves the world's poor
04/24/01: Who's cheating whom?
04/10/01: The NCAA scam
04/03/01: Balkan stupidities
03/27/01: McCain doesn't want a 'risk for our country'
03/20/01: Dubious Korean alliances
03/06/01: Coercive patriotism
02/27/01: Bombing without end
02/20/01: A dose of misplaced outrage
02/13/01: Psst: Tax cuts for taxpayers. Pass-it-on
02/06/01: Bridging the unbridgeable gap
01/23/01: Left-wing demagoguery
01/16/01: The drug war problem
01/10/01: Politics and trade
01/03/01: Hope for liberty?
12/27/00: The debris of war
12/19/00: What's the rule of law for?
12/15/00: Ending silicone breast implant saga
12/05/00: Election may yield victor, but there are no winners
11/21/00: A Bush presidential mandate?
11/07/00: Exprienced Gore? Yeah, right
11/01/00: Interventionist follies
10/17/00: America's brightening prospects in Ukraine
10/11/00: GOP budget scandals
10/03/00: How a pharmaceutical 'crisis' was created
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09/13/00: AlGore's risky budget policies
09/05/00: Military readiness and Korean commitments
08/29/00: Let sleeping hypocrites lie
08/21/00: Targeting a journalistic pariah
08/15/00: European garrison for Kosovo?
08/08/00: Journalistic cleansing at the Boston Globe
08/04/00: Junk science on trial
06/22/00: Eternal vigilance is the price of liberty
06/15/00: The end of U.N. peacekeeping
06/07/00: The Clinton regulatory miasma
06/01/00: Administration stupidity, congressional cowardice
05/25/00: The silence of the international community
05/18/00: Protecting the next generation

05/11/00: Freer trade with China will advance human rights

05/04/00: How not to save the Constitution

04/28/00: American tripwire in Korea long ago disappeared: Why are we still involved?

04/18/00: Clinton administration believes the IRS is too gentle, wants more auditors

© 2002, Copley News Service