Friday, August 3, 2012

Privatize the US Post Office

Yesterday the US Postal Service defaulted on their congressionally mandated pre-payment of health insurance and pensions for its future retirees. This is an overly burdening regulation that no other industry faces, which has an end effect of killing the postal service.

That wasn't the intent of the regulation when it passed in 2006 - Congress just wanted to not have to worry about it therefore they made the postal service put the money away ahead of time. The only problem is that Congress could not comprehend the structural changes caused by the internet on the horizon, which completely killed the necessity of the postal service. People can now communicate much faster through email then they can through the mail - especially when everyone has a smartphone in their pocket.

Only problem is that internet is not equally ubiquitous. It is found every where in cities and next to no where in the rural country side. The cities tend to be filled with a younger crowd who more quickly adopted the newer technology than their elders back on the farm. The USPS, with its universal coverage mandate, had a business model where the high-profit metropolitan areas would in effect subsidize the money-losing rural districts. You can see where this is going. As younger urbanites discovered the internet, the older, rural areas are asked to pay for themselves or shut down their branches, which sparked absolute outrage. As long as the post office is controlled by politicians, that was a no-go.

Here is my problem: I am having a really hard time figuring out why the Postal Service should still exist. Or at bare minimum - be a subsidized public entity.

You will here this conservative argument a lot: the reason the government should not subsidize an industry is because it ends up picking winners and losers instead of letting them openly compete on the free market. Subsidies kill motivation for innovation, which lowers our potential quality of life.

Matthew Ygelsias and the Cato Institute is all for privatizing it. Let it succeed or fail like any other company. If it was a private company, it can make some common sense reforms - such as changing delivery/pickup schedule, automating processes, and moving to a normal health insurance payment plan - without congressional approval. There are literally hundreds of changes that the Postmaster General wants to make, but does not have the power to do so.

Here is the biggest single change that a private postal service would do: The US Postal Service can raise a lot of money by selling its real estate portfolio. Almost all of it. The USPS does not need customer-service locations anymore. They already work with private shipping locations (think Kinko's and FedEx stores) to allow them to sell stamps and ship mail. Yet they continue to have their own locations that compete alongside of private businesses who often provide more services. Their own locations are at a competitive disadvantage to their own franchises. The only real estate that they need anymore is centralized processing facilities where they bring all of the mail to.

Spin it off. Only by giving it the ability to fail can it make the changes needed  for it to succeed.

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