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Jewish World Review Oct. 30, 2001 / 13 Mar-Cheshvan, 5762

Doug Bandow

Doug Bandow
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Consumer Reports

The coming postal raid -- HIT hard by falling demand in the wake of the Sept. 11 terrorist attack, U.S. airlines cut fares and hotels dropped prices. Hit hard by competition from such technological substitutes as e-mail and on-line bill-paying, the U.S. Postal Service is raising rates. Such is the privilege of being a government monopoly.

USPS is now blaming its problems on the anthrax scare. But in 2000, the Postal Service lost $199 million. Even before the terrorist attacks, this year's red ink was expected to hit a staggering $1.65 billion. The agency's inspector general estimates uncorrected waste of $1.4 billion.

Based on these achievements, the post office has paid nearly $1 billion in bonuses to managers and executives over the last five years. The Postal Service will also spend $25 million over the next four years to underwrite the professional bicycle team featuring Lance Armstrong.

Similar private sector sponsorships are typically justified as a form of advertising, but the post office doesn't have to advertise. It is a monopoly.

Even so, USPS has never really made money. Uncle Sam pays retiree benefits and allows cut-rate borrowing. The post office is exempt from traffic fines, zoning rules and taxes. The latter alone saves some $4 billion annually.

Alas, as Jerry Terry of the National Taxpayers Union, points out, Postal Service productivity has risen just 11 percent over the last three decades. Had the rest of the economy behaved similarly, the United States would be an international midget.

Given such grotesque inefficiency, rate increases are no answer. After all, its hike earlier this year has brought in an extra $3 billion, and still the Postal Service is losing money.

Nevertheless, USPS plans a 9 percent across-the-board jump (first-class mail will go from 34 cents to 37 cents), the third increase in 18 months. The postal authorities, who buried their announcement in the aftermath of the terrorist attack, expect to raise an extra $5.3 billion.

But on what will the money be spent? More unearned bonuses, unnecessary sports sponsorships, and higher pay for the best paid semi-skilled workers in the country.

Although the post office doggedly defends its monopoly, it pushes ever more work off on private individuals and firms. Many rural carriers, for instance, are independent contractors. The Postal Service has hired private operators to answer telephone questions.

The USPS offers discounts when mailers pre-sort their mail. In January, it signed a contract to send 3.5 million pounds of Priority and Express mail daily via Federal Express.

Moreover, by next year United Parcel Service (UPS) plans to pick up mail, as well as UPS-bound parcels, from companies in 30 major metropolitan areas. Another firm will sort the letters and deliver them to the post office. T

he only reason to preserve the Postal Service is to maintain a multibillion dollar pork barrel for its executives and employees. The post office is primarily a political service.

Out of desperation, USPS is using its privileged position to enter other markets. It sells phone cards and clothes and is planning an on-line bill-paying service. It created a packing business, but could not match the private competition. It has talked of becoming an Internet Service Provider, as if there was a dearth of private alternatives.

While the Postal Service attempts to hang onto its privileges, many countries are abandoning their public monopolies. Germany, the Netherlands, New Zealand, and Sweden, for instance, have moved toward competition and privatization.

Australia, Britain, and even the European Union are looking at similar strategies. Indeed, former Postmaster General William Henderson acknowledges that "monopolies are fading" around the world. He thinks that privatization "will eventually come" in America, too.

What conceivable argument is there to maintain a government postal monopoly? The USPS warns that private vendors would "skim the cream" and charge more for more distant addresses.

In fact, companies often benefit by offering uniform service and price -- hence FedEx's standard overnight charges. But why would it be a problem if private firms charged some consumers more, just as UPS charges more for parcels based upon distance?

Living costs are lower and life is less frenetic in rural areas. If New Yorkers don't have a right to low-cost housing, why do Alaskans have a right to cheap mail delivery? Anyway, private competition is likely to lower everyone's rate.

Change is never easy: International competition and rapid technological change have transformed the U.S. economy. But Americans remain subject to the whims of an antiquated, unproductive government postal monopoly.

Before USPS raises rates again, Congress should end the postal monopoly. Let the post office compete for business.

Then mail delivery, like the rest of the economy, will have entered the 21st century.

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


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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
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11/21/00: A Bush presidential mandate?
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10/17/00: America's brightening prospects in Ukraine
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09/13/00: AlGore's risky budget policies
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08/15/00: European garrison for Kosovo?
08/08/00: Journalistic cleansing at the Boston Globe
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06/22/00: Eternal vigilance is the price of liberty
06/15/00: The end of U.N. peacekeeping
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06/01/00: Administration stupidity, congressional cowardice
05/25/00: The silence of the international community
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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

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