Wednesday, September 7, 2011

Time for a post office bailout?

The US Postal Service is scheduled to run out of money sometime early next year.  We all know this will not actually happen, because Congress will intervene before then.  But what can be done?  Thanks to the internet, the volume of mail has decreased by 22 percent over the last five years.  UPS and FedEx have taken away most of the USPS market share on parcels.  Labor contracts and political pressure make downsizing difficult.  So far USPS has adjusted by raising rates every year or two; it's a good bet that another rate increase is not too far away.  

Megan McArdle raises the fundamental issue here:
Congress has given the Post Office two incompatible mandates.  It is to make money like a business . . . but it is not to have any of the freedom that businesses have to, say, close branch offices, cut its delivery area, or change delivery schedules.

This is, to put it mildly, lunatic.
Congress will make it difficult to close post offices or reduce service.  Unions (and some Congresspersons) will make it difficult to lower costs to become competitive. 

Should there continue to be a government monopoly on first class mail?  I don't know about your first class mail, but most of mine consists of catalogs and solicitations.  FedEx, UPS and other services could step in and figure out a way to make a profit.  Why not give them the opportunity?

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