The following originally appeared on EconomicFreedom.org, a project of the Charles Koch Institute. The Institute republished it here on July 31, 2015.
Free-Market Solutions to the Post Office Problem
Each day Americans’ mailboxes are filled with letters, advertisements, and flyers, all delivered by the United States Postal Service (USPS). To pay for this service, taxpayers contribute millions of dollars each year, though not enough to cover the operating costs. In fact, the USPS currently loses about $25 million per day and, unless steps are taken, its debt could climb to $18.2 billion by 2015.
The Postal Service is besieged by problems, from declining customers to growing government interference. Only by adopting free market principles can it help curb waste and create a service that offers real value to Americans.
Enveloped in Problems
In the last five years, mail volume for the USPS has declined by more than 43 billion pieces—a drop of about 20 percent. This trend will only continue as the public turns more and more to the speed and convenience of email or a quick phone call over traditional “snail mail.”
To survive, the Postal Service must improve and innovate. However, what progress we see in the field is coming from private-sector entrepreneurs, not from the USPS itself. One example is Outbox, a new startup company that plans to digitize the delivery process by picking up your mail, scanning it, and storing it in a digital mailbox. Subscribers to Outbox can then sort through the scanned images from a laptop or iPad and pick the “hard copies” they want Outbox to deliver to them.
The Government Package
So why isn’t the USPS making innovations and meeting customer needs like Outbox? Simple: because consistent financial support from the government eliminates incentives to do so.
The federal government provides the USPS with subsidies worth between $39 and $117 million per year—plus Treasury loans that have totaled $13 billion over the last two years. This money keeps the Postal Service in business despite its tremendous losses. In a free market, the USPS would have to adapt, respond, and improve or else go under.
Furthermore, government involvement in USPS operations perpetuates economic waste.
- The government prevents efficiency. For instance, one rule blocks the USPS from closing down unprofitable branches if doing so would mean job losses. As a consequence, a post office branch in Hope, Minnesota was kept open despite serving an average of eight customers a day who require a combined total of seven minutes of service.
- The government prevents competition. Currently, the USPS is the only company permitted to deliver non-urgent mail to U.S. homes. If competition were allowed, better alternatives would emerge and the Postal Service would have to innovate to meet changing consumer demand. When this happened in package delivery services, competition from United Parcel Service and Federal Express left the USPS with only a 16 percent market share. Because they have an incentive to please their customers, UPS and FedEx provide more reliable services and offer more options.
Let the Free Market Deliver
The free market can provide a twofold solution to post office woes—first, by allowing competition in mail delivery; and second, by reducing government financial support. If implemented, these approaches would increase incentives, encourage innovation, create a less wasteful system, and better meet customer needs.
Now, that’s something worth writing home about.