The Postal Service and the business of mail

Few members of Congress want to take away your Saturday mail delivery or close your underused local post office — or at least, not shortly before election day, when such actions might come back to haunt them. That explains a lot about why Congress has cravenly failed to take the necessary action to put the U.S. Postal Service on a path to solvency, instead forcing it to default last week on a required $5.5-billion payment toward the health benefits of future retirees. The irony is that one of the best and boldest routes Congress could take is also the one that largely absolves it of responsibility: It should let the post office solve more of its own problems.

The Postal Service is bleeding money, losing $25 million a day. To a large extent, it has been a victim of the same technological shifts that have affected books and newspapers. The American public not only sends its business correspondence, personal letters, birthday cards and party invitations via computer, it also pays its bills and balances its checkbooks online. The number of items that went through the Postal Service dropped by more than 20% from 2006 to 2011. But post office managers made their own mistakes, agreeing to an employee contract that for a long time prohibited layoffs and instituting a common pay schedule throughout the nation even though some areas of the country are much cheaper to live in than others.

Congress has set up an untenable situation for the Postal Service. It’s a federal institution, but only a quasi-governmental agency. It receives no taxpayer funding, and is expected to pay for its operations through the revenue it generates, yet Congress has refused to allow it to reduce mail delivery by a day per week, raise its prices substantially, introduce new services or close offices that don’t pay their own way. In April, Congress finally gave approval for the Postal Service to reduce its workforce of 550,000 employees by about 100,000, as it closes many of its processing centers.

Still, the Postal Service is not permitted to make many of the decisions that a private business would make to bring in revenue and control costs. Congress also requires the Postal Service to fund its future retiree costs decades beforehand.

It doesn’t take an economics major to see that this equation doesn’t work out.

The federal government must decide whether reliable and timely mail delivery is a necessary public good or a competitive private service. If the former, Congress must assure appropriate funding and management; if the latter, it should stop constraining the Postal Service and allow it to meet the challenges of the Internet era.