The U.S. Postal Service, which has been losing customers for almost a decade, is still struggling to right itself.
Everyone understands its basic problem. The electronic age has pushed first-class mail into an unstoppable decline. To stay afloat, the post office needs to get its costs under control, by closing post offices, eliminating Saturday delivery, downsizing its workforce. To boost revenue, it could offer banking services and sell lots of stuff besides stamps.
But with three Congresses in a row failing to pass legislation to help stabilize its finances, some lawmakers and policy experts have reached the consensus that it’s time for the government to sell the post office.
This group was limited for a few years to conservatives and Republicans in Congress. But now a Democrat at the centrist Brookings Institution, Washington’s premier academic think tank, is joining the privatization side, arguing in a new paper that Congress’s inaction requires that something be done. Elaine Kamarck says that letting politicians continue to protect the Postal Service from competition is no longer viable.
“If the USPS were a purely private entity, the changing shape of the marketplace wouldn’t necessarily pose an existential threat,” Kamarck wrote in an essay made public last week, “Delaying the inevitable: Political stalemate and the U.S. Postal Service.”
“They could shrink the infrastructure created to deliver first-class mail and increase their capacity to deliver parcels,” she writes, “a logical adaptation to the changes that have come about as Americans have moved from paper to the Internet.”
The idea of selling off any part of the government agency for which Benjamin Franklin first served as postmaster general has drawn fierce opposition from Democrats in Congress and the still-powerful postal unions. Others say it would be politically untenable.
But Kamarck and others who favor privatization argue that the post office’s existence in a “never-never land” that is “not fully public and not fully private,” stifled by laws and saddled with a “governance structure that impedes innovation,” now requires that the country’s second-largest civilian employer after Wal-Mart be broken in two.
Many of the problems getting in the way for the post office stem from Congress. The Postal Service has been self-financed for decades, but Congress controls most of what it does.
Congress, riven by an ideological and demographic divide between lawmakers representing rural and urban districts, cannot agree on a fix to its finances, made shakier by massive liabilities for future retirees. Proposals on Capitol Hill would let postal officials compete with other retailers and make cuts to service. But interests including postal unions and greeting card companies have stepped in to pressure lawmakers not to act. And the losses continue — $5 billion last year, the eighth annual net loss in a row.
It’s unclear who, if anyone, would buy such a money-losing operation, but Kamarck joins conservatives in concluding that government-run mail no longer makes sense in the Internet era. Britain and other European countries are privatizing. The telecommunications industry deregulated, the thinking goes. So should the Postal Service.
The government entity would continue delivering the mail. The rest of the agency would spin off into something private, competing with the likes of banks, retailers, FedEx and UPS to deliver packages and sell anything else it wanted to. The change would open the door to a sale to the highest bidder.
“What really should happen is that Congress needs to fix the Postal Service,” Kamarck, founding director for the Center for Effective Public Management at Brookings, said in an interview. “But they don’t want to deal with it. They’re allergic to it.”
Postal officials rejected the proposal. In a statement, Toni DeLancey, the Postal Service’s senior manager for public relations, said, “The idea of separating and privatizing the package delivery business, which has been growing by double digits for the past several years, is poorly conceived at best.
“At worst, and aside from being politically and economically unrealistic, the proposal aims to shift an enormous financial burden onto taxpayers, which is unnecessary and unwanted in any policy context.”
Kamarck, creator and manager of the Clinton administration’s reinventing government initiative in the 1990s, does not go as far as conservatives in advocating a total sell-off of the Postal Service. She writes that the agency’s mandate to provide universal service is essential, and “has been baked into the American value-system.”
Universal service means, simply, that the mailman must deliver to every home, even if it is hard to reach, even if the Postal Service loses money on remote, rural routes. If UPS or FedEx owned the system, they would not be obligated to serve every corner of the country.
Here’s the thinking behind much of the opposition to a spin-off. Selling off the post office’s most profitable arm, its package business, would leave behind its unprofitable arm, delivery of the regular mail, to fend for itself. The best options for survival could be service cuts and rate hikes. Lawmakers, particularly those representing rural areas, are particularly sensitive for the former. Mailers are sensitive to the latter.
Although the Postal Service has a legal monopoly on mail delivery (no one else can put letters or packages in its mailboxes, for example), it enjoys the equivalent of generous subsidies that private companies don’t get. It can borrow from the Treasury at low interest rates. Its buildings are exempt from state and local property taxes. It pays federal corporate income taxes on some earnings, but they are circulated back to the agency, according to a study earlier this year by Robert Shapiro, who was an economist in the Clinton administration.
Adjusting these subsidies would have to be part of any transformation to a private entity, Kamarck said.
She does not offer specifics on how such a massive change would take place at the agency. But with Congress unwilling to allow the Postal Service to operate like a business, calls to farm out government delivery of mail are likely to grow.