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Update the Post Office for the 21st Century

Seal of the former United States Department of the Post Office, predecessor of the modern US Postal Service, via Wikimedia Commons.

(Analysis) The US Post Office is facing financial insolvency from its traditional “snail mail” service. Designed as a means to allow affordable home mail delivery for every US citizen – the private sector would price delivery for many recipients out of reach under a true market solution – technology and deregulation are eroding the ability to fund this public service.

Technology is making traditional written and printed correspondence increasingly obsolete. Growth of e-mail and the Internet since the 1990s is reducing reliance on the US Postal Service (USPS), with mailings of correspondence consequently declining. One example of this decline is first-class mail peaking already in 2001. Declining use of postal services eats into revenues that sustain the required infrastructure necessary to continue home delivery at reasonable universal rates.

The other source of revenue erosion is deregulation. Deregulation has allowed private, for-profit carriers to skim the most profitable areas of delivery from the USPS. Left with only less profitable or unprofitable services, the USPS finds itself under financial pressure to cut costs.

Recent suggestions that the postal service offer financial services, as they did through the 1960s, or that a requirement to fund pensions for 75 years into the future be removed, are effectively only stop-gap solutions to the core problem confronted by the USPS: its traditional service is no longer viable over the long term. Any long-term solution to the USPS’s financial problems requires addressing this core problem.

One potential solution would directly confront its long-term problem of dwindling demand for traditional home delivery of written/printed correspondence. By granting the USPS a monopoly over Internet service provision – rather than allowing virtual local/regional monopolies by private companies – the long-term financial health of the USPS could be restored. This would also benefit consumers, who are price takers in monopoly-controlled markets for Internet service.

As we continue to face both unemployment/underemployment of labor and an economy that would benefit from temporary fiscal stimulus, this solution to the financial problem of the USPS could additionally serve to employ factors of production lying “fallow”, and provide the kind of investment – currently lacking from the private sector – that should enhance our long-term productivity.



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