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Best Fix for Postal Service Is to Take It Private

Author: Peter R. Orszag, Adjunct Senior Fellow
July 25, 2012
Bloomberg.com

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Those who believe in the usefulness of government must be vigilant about making sure all its activities are vital ones, since the unnecessary ones undermine public confidence. With this in mind, Congress should now privatize the U.S. Postal Service.

Further evidence for why this should happen came last week, when the Postal Service announced that it would be unable to meet billions of dollars in payments that are coming due in August and September for future retiree health benefits. Privatization is not always the best way to improve efficiency, but the problems facing the Postal Service will be difficult to address if it remains within the government, and there is no longer any sound reason for it not to go private.

The Postal Service faces three problems: First, Congress has not given it the permission it needs to cut costs and raise revenue -- and lawmakers seem unable to approve even modest reforms. Second, its market has been declining for years, as e- mail, electronic payment and other alternatives to traditional mail have grown. Third, the economic slump has caused a further drop-off in mail volumes.

The agency has been struggling to meet these challenges by becoming more productive -- and has been more successful than many people may realize. As the Cato Institute (hardly a bastion of support for government operations) has noted, a decade ago sorting 35,000 letters an hour required 70 employees. Today, it takes only two. Over the past six years, the number of career Postal Service workers has declined by more than 20 percent.

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