Privatization of US Postal Service could be costly
When a government agency veers towards obsolescence or its function becomes redundant with those of private industries, it is the duty of the overseeing bureaucracy to eliminate the wasteful entity while ensuring the continuation of any essential services. Given the state of the nation’s economy, it is expected for members of Congress to step up their efforts to identify and remove poorly performing agencies.
However reluctant the federal government is to cull members of its own herd, politicians have seized onto this popular sentiment by blacklisting any and all agencies that have the appearance of being inefficient.
Unsurprisingly, the US Postal Service (USPS) has fallen under congressional crosshairs. Labeled obsolete, redundant and fiscally irresponsible, the postal service seems to be a poster child for failed agencies. Some members of Congress have called for its immediate privatization in the belief that the open market can offer the same services more efficiently and at a much lower cost to the consumer. They point to the fact that last year the USPS lost more than $8 billion dollars and is now fast approaching the statutory limits on its ability to borrow money.
What is not disclosed is that most of the USPS deficit is actually the result of Congress imposing a ridiculous mandate.
The USPS is required to fully fund its retiree benefits for the next 75 years, and it must do so by the year 2016. This costs the agency nearly $6 billion dollars a year. In effect, this is a fiscal death spiral; they must take out a loan to pay for a future that becomes less likely to happen the more money they borrow. The argument can be made that even after removing this mandate the USPS would still run a deficit of close to $2 billion a year. While this is still an enormous cost, the burden is not placed directly on taxpayers. As an independent government agency, the USPS is expected to be fully self-financing and receives essentially no tax dollars. Recognizing the need to address their financial losses themselves, the USPS has put forth a plan that would cut nearly 120,000 employees, close 3,700 locations and end Saturday delivery. Such drastic measures demonstrate the agency’s ability for internal reform, and suggest that privatization is unnecessary to restore its financial balance.
However, proponents for privatization claim that the cost to consumers would be reduced by removing the mail service from government control. But market prices suggest otherwise. Currently, a 44 cent stamp will get a letter from Houston to New York in two to three days. According to the FedEx website, two-day delivery of a similar letter to the same destination will cost between $20-30 dollars.
As a private company FedEx is expected to make a profit, and its rates reflect this fact. As a government agency, the USPS is intentionally designed with no requirement to make a profit in order to provide a universally accessible service to the country. And while it is not a private corporation per se, the USPS has a substantially positive influence on the free market by keeping shipping prices in check. The loss of the USPS as a low cost competitor would grant existing private shipping companies greater ability to increase their own costs, secure in the knowledge that the consumer has little alternative when sending mail.
The profit motive of a privatized postal system would have a significant impact on UH as well. A study out of the State University of New York – Buffalo found that a university the size of UH spends between $1-2 million a year on mailing costs. If mailing rates were to double, a conservative estimate by some, the additional financial costs placed on the University would invariably be passed on to the students through an increase in fees. In addition, many of the textbooks that students order using online retailers are shipped via the USPS at a considerable cost savings when compared to other delivery options. A privatized postal system would erode the purchasing power of already cash-strapped students.
The issue is not whether the USPS can be made to perform better; one would be hard-pressed to find any government organization that could indisputably be called efficient, and the current state of the USPS leaves much to be improved.
The issue is whether the USPS can be reformed while retaining its status as a government agency. There are certain functions that the government is ideally suited for, and privatizing the USPS would destroy its ability to offer low-cost mailing options to all parts of the country.
Congress should first remove the onerous funding requirements it has leveed on the USPS so that the agency can focus on its current state of affairs. Then Congress should implement a truly hands-off approach to governance and allow the USPS autonomy in implementing its own proposed changes.
While the postal service’s financial problems will require painful decisions, they will ultimately prove to be a storm that mail can weather on its own.
Marc Anderson is a 3rd-year cell biology Ph.D. student and may be reached at [email protected]