Conservatives should insist on real postal reform, not the appearance of reform
I read with interest the article entitled “Fiscal Conservatives Should Support Postal Reform” (published on Jan. 25, 2022) and written by Thomas A. Schatz.
I think 9 out of 10 times, I agree with Schatz. And I certainly agree with the headline that postal reform is needed and that conservatives should play an active role in helping to shape that reform. But the devil is in the details. Calling it reform doesn’t necessarily mean it will make things better or improve the situation.
Schatz’s article correctly points out that the United States Postal Service (USPS) has had 15 consecutive years of net losses which dates back to when George W. Bush was president. Those losses total over $91 billion.
The problem is that the USPS has a variety of products that can be broken down into two broad categories. One category are non-competitive monopolist products like First Class mail. The law gives the USPS monopoly powers on First Class mail. Not surprisingly, the USPS is highly profitable on this category of products. It’s really hard to not make a profit when all competition has been outlawed.
But the other category of products are ones where the USPS has competitors — delivering packages for example. This is where they are losing the vast majority of the billions that they’ve been bleeding for a long time. But because the USPS accounting system is substandard, they cannot tell you precisely how much each category of package shipping is losing. And to make matters worse, they use the profits from First Class mail to subsidize their losses elsewhere. This makes it hard for the USPS to invest and upgrade its First Class equipment and processes. So year after year, the USPS is mismanaged and the taxpayer is asked periodically to bail them out.
The USPS was granted a monopoly on First Class from its beginning. But it focused on First Class mail so the problem was limited. But as the USPS has decided to expand its operations and compete with other businesses in the delivery of packages, the problems have begun to compound. And the losses have begun to mount. And as First Class profits were siphoned off to fund other priories, quality of service problems began to surface.
It doesn’t make a lot of sense to approve of a government granted monopoly using those monopoly profits to expand their business and compete with private competitive businesses that don’t have access to monopoly profits to aid their business.
Years ago, I think Schatz had it right when he said, “The Postal Service’s substandard accounting, billion-dollar losses, and declining service quality highlights the need for the agency to focus solely on its letter mail products. Straying from its original mission will only compound the USPS’s problems and bring us even closer to the possibility of a taxpayer bailout.” (From a CAGW press release dated May 8, 2015)
The issue isn’t necessarily about forcing the USPS to have two sets of trucks and two sets of carriers — one for first class mail and one for their growing package business. The truth is making sure that the USPS is charging prices for its package shipping business that support its full costs is all that is needed. The USPS shouldn’t be allowed to divert monopoly profits from the USPS’s primary business first class mail. But this would require a modern accounting system and an honest and trustworthy division of the costs attributable to each line of business — something to date the USPS has been unwilling to do.
Would anyone want to compete with a business that had a government granted monopoly and was allowed to use those monopoly profits to compete with them and drive them out of the business? And that business model isn’t actually working for the USPS either. If it were, we wouldn’t be facing the perpetual losses and cries for help. So while I agree with Schatz’s call for needed reform, I do not understand how one can conclude that using monopoly profits to subsidize other business lines serves anyone’s interests except those who may have sweetheart deals to deliver their packages at well below market rates. That allows certain parties to divert monopoly profits to subsidize their shipping costs. That isn’t reform and it isn’t conservative.
George Landrith is the president of Frontiers of Freedom, a public policy think tank with a mission to promote peace through strength and free enterprise.
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