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OPINION: Save the Postal Service by selling it

Kevin Hassett, who writes for Bloomberg News, is director of economic-policy studies at the American Enterprise Institute.

To understand where the advocates of big government will take this country, look at the U.S. Postal Service.

Start with the fact the Postal Service is a great jobs machine, employing 712,000 people at an average annual compensation, including wages and benefits, of $83,000. And those hefty paychecks are a great source of political contributions for Democrats. In 2010, almost 90 percent of the approximately $4 million contributed to campaigns by postal unions went to Democrats. Take a guess where much of the opposition to reform comes from.

But high-priced labor, which accounts each year for about 80 percent of costs, leads to high-priced mail services - and even higher costs for taxpayers. Over the past 10 years, the price of a stamp has risen from 33 cents to 44 cents, exceeding the inflation rate at a time when computerization should have been leading to big cost savings.

Even so, the Postal Service lost about $6 billion this year and by its own projections it will drop a cool $238 billion over the next decade. By 2020, the last year in the projections, the Postal Service will be losing $33 billion annually.

In April, the Government Accountability Office released a report concluding that "USPS's business model is not viable due to USPS's inability to reduce costs sufficiently." A 2007 GAO study looked at the Postal Service's use of facilities, and concluded that, "A 2005 contractor assessment of 651 randomly selected postal facilities revealed that two-thirds of these facilities were in less than 'acceptable' condition, including 22 percent that were rated 'poor.' "

The decaying buildings provide a handy visual clue to the quality of service. Unfortunately, we don't know how bad the service is, because the Postal Service collects data on its own service quality but refuses to make the data public.

The Postal Service's ability to lose mail is, of course, legendary. Last week, the American Postal Workers Union had to postpone its national election of officers because so many of the ballots were lost in the mail.

The Postal Service is able to survive because U.S. law protects it with not one but two monopolies. First, it's the only entity allowed to deliver many types of mail. There are a few exceptions that have allowed FedEx, United Parcel Service and bicycle carriers to flourish, but low-cost, high-volume letters are walled off from competition from other providers.

Second, the Postal Service actually has a legal monopoly over your privately owned mailbox. You bought it, but if other companies start to use it as a receptacle for letters, they are violating federal law.

As with the stimulus, the American left finds itself far to the left of even the statist Europeans. Countless nations have recognized the possible large benefits from privatizing the postal business. Countries that have introduced major reforms include Germany and Sweden.

The possibility for real gain in the United States is enormous. The Postal Service owns or operates 33,000 facilities nationwide, and owns 219,000 vehicles. If we were to auction it off to private investors, the bids would likely be enormous. FedEx and UPS, for example, have a combined market capitalization of almost $100 billion. Given that, how much might a private bidder offer for the right to start a business with the Postal Service's footprint? The $100-billion mark might be a good first guess.

Which means we have two paths to choose between. On one, we continue to operate the Postal Service, and watch it lose hundreds of billions of dollars. On the other, we sell it to a private contractor, avoid those losses and cash a nice big check.

If the tea party activists want to fix the country, they should start by privatizing the Postal Service. If we can't fix that, then it is hard to imagine how we will ever fix anything.


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