In today's Wall Street Journal, Kathy Chen reports, "Post Office Looks to Scale Back." Faced with a shocking fall in mail volumes (according to Ms Chen it is down 32 billion pieces in two years), the Postal Service finds one congressional road block after another in the way of reducing costs or increasing revenues.
He who calls the tune (Congress) does not pay the piper. The Service runs on its own revenues as a business, but Congress still restricts what they can do even though it does not pay for the Postal Service.
Arguably the Postal Service is a natural monopoly in a declining cost industry. Milton Friedman used to argue there are three solutions to the problem of monopoly: government ownership, regulation, or doing nothing. He always favored the last. The Postal Service has the worst of both worlds: it is both government owned and regulated. They are regulated even though it is not a private company.
Congress made matters worse when it changed the Postal Service's controlling legislation. It restricted its entering new businesses, restricted its price increases to inflation or less, and required it to prepay its retiree health benefits without tying the payments to changing actuarial costs. If Ford lays off workers, it reduces its future retiree health benefits. If the Postal Service cuts its workforce, Congress does not reflect the cuts in its annual bill.
Free the Postal Service up so it can compete. UPS's virtual monopoly in ground parcels (particularly BTB) and its price discrimination are not healthy for the U.S. economy. The customers of UPS and FedEx would benefit from more competition.
Congress's micromanaging of the Postal Service foreshadows what is in store for bailed out firms. Citi, GM and Chrysler will find government control and Congressional tinkering far more onerous than governmental ownership itself. As a shareholder in Ford and JPMorgan, I am happy to see both free of the TARP ball and chain.
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