11:30 pm on the Post Office doomsday clock

Will it be illegal to send first-class mail in five or ten years? Economic laws just don’t go away: the United States Post Office is hemorrhaging money and will be cutting services in 2012.

After five years in the red, the post office faces imminent default this month on a $5.5 billion annual payment to the U.S. Treasury for retiree health benefits; it is projected to have a record loss of $14.1 billion next year amid steady declines in first-class mail volume. Donahoe has said the agency must make cuts of $20 billion by 2015 to be profitable.

“We have a business model that is failing. You can’t continue to run red ink and not make changes,” Donahoe said. “We know our business, and we listen to our customers. Customers are looking for affordable and consistent mail service, and they do not want us to take tax money.”

Since the USPS has a legal monopoly on first-class mail delivery, if (or when) it went belly-up and Congress didn’t bail it out it there would be no legal first-class mail delivery at all.

Why is it that this monopoly exists in the first place? The US Constitution grants the federal government the power to set up “Post Offices” but does not say that everybody else is barred from doing so. Lysander Spooner competed with the USPS from 1844 to 1851—before he was forced out—but generally they’ve had exclusive privilege. The reason? In a competition, the USPS could not win.

But even legally protected against competition they aren’t making money. They blame the internet, and that’s certainly a large part of it. But there’s another part, a part that’s always been fundamentally wrong with them: they are shielded from market signals and hence are unable to allocate resources efficiently. What is the minimum feasible cost (not the price) of mailing a letter from Arlington, TX to Arlington, VA? I don’t know, and neither do they. There’s no way they can know. As the Postmaster General said in the quotation above, “We have a business model that is failing.” But absent market signals, attempts to improve it are just shooting in the dark. What they actually did was simply cut back services. Guess which direction the price will go anyway.

At least we have the consolation of knowing that when the USPS is finally bankrupt and even Congress can’t find a subsidy for it they’ll have to reverse their nonsensical laws and let a free market in postal services happen.

Advertisements

One thought on “11:30 pm on the Post Office doomsday clock

  1. David Elliot

    Wait for the Left to make this about poor people and entitlements. UPS charges almost $10 to deliver a letter cross country, half that if you set it up yourself. Obviously that’s a lot more than 43 cents. Someone in a poorer district will argue that the USPS provides a channel for commerce and communication for those folks unable to use computers or pay premium prices for other carriers. We owe it to the least amongst us to keep that conduit – of freedom, really – open.

    Easiest way to sell things that don’t make sense is to do them in “support” of the “other”. We don’t want this, but it isn’t for us, its for them, so we gotta do it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s