The Post Office does not receive any tax money, but it still answers to Congress. USPS can close offices and fire employees on its own, but it has to get approval from the Postal Regulatory Commission to increase rates, and approval from Congress for something as drastic as ending Saturday delivery. The cost of a first-class stamp will go up to 45 cents in 2012, which many have complained is an unreasonably high cost indicative of how inefficient and wasteful the Post Office is.
Actually, 44 cents is not at all unreasonable. When I was a kid in 1965, a stamp was a nickel. Now it's 44 cents. Back then gas cost 31 cents a gallon. Now it's $3.20, and has been as high as $4.00. The price of a stamp has gone up 8.8 times, while the price of gas has gone up 10.3 to 13 times. Considering that a large part of the cost of a stamp is transportation, first class mail delivery is a totally amazing deal.
For the sake of comparison, I went to the UPS website to see how much UPS charges to deliver a "letter" from Minneapolis to a residence in the 12008 zip code in New York. The cost ranged from $21 to $71, depending on time. FedEx wanted between $42 and $151 if they picked the envelope up from a residence. Sending a similar 9x10 envelope via first class mail costs $1.08 (the 44 cents is for a regular number 10 envelope). But the mailman will pick it up from my house at no extra charge.
To be fair, it must be noted that the Post Office will also charge between $5 to $21 for other delivery modes, such as next day express delivery. And the Post Office, which was set up to deliver light-weight first-class mail, won't deliver packages that weigh more than a certain maximum. So obviously UPS and FedEx have their place.
But the first-class mail service that the Post Office currently delivers is, well, first class. And ridiculously cheap. When I subscribed to NetFlix the Post Office delivered the discs between the NetFlix processing center and me in one day. Every time. Direct to my door. For $8 a month I could easily watch 6 to 8 DVDs a month. I can't send even one disc via UPS or FedEx for $8 with one-day delivery.
A lot of newspapers and magazines depend on the Post Office to deliver their periodicals in a timely manner. Without a reliable, cost-effective postal service, those publications are in even greater danger of extinction. Many direct-mail businesses and catalog outlets depend on the Post Office for their very existence. And even FedEx and UPS hand off packages to the Post Office for many rural destinations.
The Post Office has several intrinsic problems that hamstring them:
- The Post Office can't make the simplest business decisions without the approval of the Postal Regulatory Commission. The Commission is heavily lobbied by companies who use the mails. In essence, those companies make their profits off the Post Office's losses. UPS and FedEx can simply raise rates when they need to.
- The Post Office is required to deliver first class mail to everyone in the country for one low price, even people who live in Hawaii, Alaska or rural Montana. UPS and FedEx aren't required to deliver to anyone, and can charge any price they like.
- The Post Office has a large workforce that makes a decent living wage, between $38K to $60K. Its labor and pension costs are a big part of its financial problems. But they need congressional approval to make necessary changes for the way they do business, including the way they pre-fund pensions to make sure they don't go bust (like the pensions that many airlines defaulted on in the past several years).
Some people are calling for the abolishment of the Post Office, and selling it off to UPS or FedEx or Walmart. Sure, these companies could make more money delivering the mail. First, they'd raise the price of a first class letter to several dollars, and charge variable rates based on destination. Then they'd stop delivering mail to places like rural Alaska and Montana. And then they'd hire a bunch of part-time "contractors" to deliver the mail at minimum wage, making them use their own cars (which the Post Office has sometimes already done in rural areas).
Heck, the best candidate for buying the Post Office's business is Domino's Pizza -- they already have the delivery network in place. Pizza, a large Coke and your mail for only $9.99.
And this is no idle speculation. FedEx and UPS already franchise their delivery routes, and people bid competitively for ground routes. Since these subcontractors are stuck with FedEx, they have little negotiating room. They pretty much have to accept whatever FedEx decides to pay them when their contract is renewed. If the subcontractors can't cut their costs, they lose the routes. Then FedEx gets some other suckers to bid for it.
Another thing to consider is the monopoly positions of the delivery companies. There used to be three: UPS, FedEx and DHL. DHL stopped express deliveries in the US in 2008. Giving the Post Office's business to UPS or FedEx would make one of them an effective monopoly, which would make them an expensive and grossly inefficient bureaucracy that answered to no one.
But the worst thing about ending the Post Office would be the transfer of wealth from the employees to the corporate bottom line. The Post Office employs half a million workers, who make a living wage. The first thing a private company would do would pull a Walmart and hire only part-time non-union workers, cutting wages and eliminating health care and pensions. Instead of paying 500,000 full-time workers $50,000 a year plus benefits, a private company would hire a million half-time workers and pay them $10,000 or $15,000 a year with no benefits. The company would brag about hiring half a million new workers! It would also save billions in wages alone. But the economy as a whole would fare much more poorly, as local businesses saw a drastic decline in spending by postal employees. And what would the company do with the extra profits, after giving themselves hefty bonuses? Like many American businesses, it would use the extra billions they save on wages to expand into growing markets like China and Latin America. Sending our money to a foreign country. And the profits they make there go into off-shore accounts, and are exempt from US taxes.
The Post Office is in a lot of trouble, but getting rid of it would make the majority of the country much poorer, and a very few rich people a whole lot richer.
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