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Archive for Tuesday, May 7, 2002

Subsidies warranted for Postal Service

May 7, 2002

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The postman no longer rings twice. Snow, sleet and gloom of night will keep the carrier from his appointed rounds. And there are no V letters in the war on terrorism. But the U.S. Postal Service is still delivering the mail, as it has since the 18th century.

Of course, the USPS is not the old Post Office, which was a Cabinet department invariably headed by deserving politicians. In 1970, Congress reconstituted the Post Office into the Postal Service, a quasi-independent agency (like Amtrak) with a board of governors and mandate to earn a profit. The two agencies are not dissimilar, in that respect: Service and efficiency have had their ups and downs over the years, and neither has settled on a profitable formula. But while Amtrak may limit itself to certain surviving passenger lines you cannot, for example, take a train from Nashville to Washington the Postal Service delivers the mail, six days a week, to every corner of the republic.

Of course, more Americans drive and fly than ride the rails, but everyone sends and gets mail, and has an opinion about it. Since the USPS announced last month that it was raising the cost of a first-class stamp yet another three pennies, to 37 cents the third rate increase in 18 months opinions have been harsh.

There are two ways of looking at the Postal Service. On the one hand, it is a kind of daily miracle: You drop a letter through a slot on a street corner in, say, southern Illinois, and two days and 34 cents later, it arrives on a residential cul-de-sac in a subdivision in northern Florida. It is not just remarkable that this happens in such a short interval, but that it happens at all, given the millions of pieces handled every day and the millions of individual destinations around the country. Service is not always what it should be, and it sometimes takes longer for a piece of mail to cross town than to cross the country. But like homely phone conversations beamed to and from satellites, it is a technological marvel we take for granted.

Then there is another way to look at the Postal Service. In the 32 years since Congress "reformed" the agency it has steadily lost money and market share to private competitors (e.g., Federal Express, United Parcel Service) and, lately, e-mail. The two postal unions wield such enormous political power that it is very difficult to cut the work force, consolidate operations or impose certain labor-saving devices. The USPS carries a steadily expanding debt of $11 billion, and pension liabilities of $32 billion. It is protected from competition by a legal monopoly on first-class mail. And in the folklore of national life, most middle-aged Americans can remember when the price of a first-class stamp was just 3 cents.

Clearly, there are problems, but are there solutions? One obvious remedy, for many, is to privatize the Postal Service: Eliminate the monopoly, and let it compete in the marketplace. A businesslike Postal Service would face its unions on a level playing field, raise capital and lure customers by reducing prices or expanding service. But there is a problem here as well. A private business must earn a profit, and if it cannot do so, it will trim costs and cut services where necessary. That works in the world of commerce, but Americans have grown accustomed to certain privileges of citizenship. A post office that delivers mail three days a week, or eliminates service in less profitable parts of the country, would make sense as far as Jack Welch is concerned, but would not be what people consider a public service.

That leaves us with a conundrum. Is it possible to improve to reform, privatize, streamline the Postal Service while retaining its level of service at reasonable prices? I am not so sure. Balancing the services we demand with the profits Congress requires may be, at long last, an impossible trick. The present system, which combines the federal first-class monopoly with private competition for parcel service and guaranteed overnight delivery, can be unwieldy and may be redundant. But it seems to leave the tens of millions of daily postal customers relatively satisfied which is no small achievement.

And that begs a final question: Is it absolutely, positively essential for the Postal Service to be profitable? We don't require the Marine Corps to pay for itself; why should mail delivery earn more than it costs? Obviously, any monopoly breeds complacence, and a board of governors should ensure that the service remains competitive. But there are some things that government must do because the market would offer a lesser version, not an acceptable substitute. There are plenty of ways in which the Postal Service can be modernized, and control costs for commerce dependent on the mail. But it probably requires permanent subsidies as well as profit incentives, and that's a fair trade for what we've grown to expect.




Philip Terzian is the associate editor of the Providence Journal.

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