5.12.2008

Privatize the USPS

United States postal rates have gone up again, from $0.41 to $0.42. One common justification for the rise is that gas prices and a slumping economy are causing the US Postal Service to operate at a huge loss and they need increased revenue. A net loss of $707m was reported by USPS for the fiscal second quarter. It's not the least bit surprising to see a government-run "business" fail miserably and require propping up by taxpayer money.

But so what? Why does this one cent increase really matter in the grand scheme? What's so special about yet another inefficient government program? My answer is that the increase itself is meaningless and just highlights a broader issue.

Look to the flourishing of private shippers like UPS and FedEx, and you'll see it. There is no reason for the government to be in the mail business. It is painfully obvious that private companies could be delivering mail better, faster and cheaper.

Most readers of this blog will recognize that the fundamental argument against the USPS is the same argument that exists against virtually all government programs. Namely, that "the only proper functions of a government are: the police, to protect you from criminals; the army, to protect you from foreign invaders; and the courts, to protect your property and contracts from breach or fraud by others, to settle disputes by rational rules, according to objective law." (Galt’s Speech, For the New Intellectual, 183 - via Ayn Rand Lexicon.)

Rather than focus on that most fundamental of issues, I'm instead interested in why people try so hard to evade their way around it. Playing to the pragmatic view of the world held by so many, why do people continue to justify the existence of government monopolies despite overwhelming evidence that they don't work, and that private enterprise would do it better?

A common argument in support of supposedly indispensable public services like roads and bridges is that some enterprises are too important or too complex to be handled by private entities. If you get into a discussion about privatizing something, or you state what the only proper functions of government are (see above), people often respond with the stock question: "Oh yeah? Well what about roads?"

The difficulty here is that trying to imagine a "what if?" scenario where all roads are private takes a lot of work, and our current system of roads is so complex that privatizing it nearly presupposes the existence of an ideal capitalist system. I've thought about it before and I can't come up with a good and short response, primarily because I have no idea how it would actually work in the day-to-day frame of reference that the questioner would be thinking of (namely, a mixed economy). I'm sure it would work, simply because it would have to, and because in this ideal world, free men would be able to figure it out. That's not a very effective answer when you're trying to persuade someone of not only the morality, but also the practicality of a free market. In my experience, the "what about the roads?" question is the free market analog to the "lifeboat question" in a discussion of rational self-interest.

Mail delivery is a different animal, however. It takes very little imagination to extend the model of private shippers to the delivery of "regular mail," even in today's mixed economy. In fact, the entire concept of "regular mail" would no longer exist because we'd be paying FedEx $0.25 per item of "1st class" or letter-sized mail (note the price decrease!). Or we'd be on a monthly plan, with a certain number of letters allowed, and a "per item premium" charged if we go over the limit (think cellphone plans). We'd have regular pickups scheduled based on usage, with the ability to request an emergency pickup if needed. In order to handle pickups from so many locations (rather than only drop-boxes and businesses) companies like UPS and FedEx would innovate and come up with procedures and products we can't even dream of right now. It would be awesome. I get excited just thinking about entrepreneurs being let loose, free to exploit this new market.

And think of the side benefits. Cheap overnight delivery of letters, tracking numbers, online tracking, emailed delivery notification... who knows what will be created? My guess is that the amount of junk mail we receive would go down, either because the lack of government-subsidies would make it too expensive for junk mailers, or because individual customers could purchase "junk mail blockers" and pay the mail service providers to filter out the unwanted dross before it ever gets to our doors. [Side note: what if we could have SPAM blockers on our phone lines? Rather than some silly government "Do Not Call List", truly private telecom companies could actually innovate and come up with ways to filter out unwanted calls based on customer-defined settings.... ]

Therefore, I say "Privatize the USPS!" I think this is one government debacle that could be shut down in a few months, even in our badly mixed economy. I welcome any comments about the practical aspects of doing this, simply because I can't think of any possible reason why it wouldn't work, and work easily. I suspect I might be forgetting something that would at least throw a spanner into the works and require that privatization would need a year or two to work. Still, this seems like low-hanging fruit in the battle to strip the federal government on one of the many things it shouldn't be doing.




UPDATE: Special thanks to a commenter, Jeff, who pointed out a rather glaring gap in my knowledge. Namely, Article I, Section 8 of the Constitution of the United States, which states:

"The Congress shall have Power... To establish Post Offices and post Roads."

This obviously explodes my idea of privatization being easy. As Jeff notes, it would likely take an amendment to abolish the Postal Service. (or, via some Internet research on law school websites, it would take a creative definition of "establish" and a creative Supreme Court) However, this doesn't change the fact that the evidence in front of us clearly shows that it should be destroyed, and but for the protection of a flawed clause, it could be.

But what this brings to mind is this; if the predominant culture in America still understood and respected the ideas of the Founders, not just as a wispy sense of life but as valid, defensible ideas, then we could actually propose a Constitutional amendment, support it with facts, and pass it. There were 15 amendments within the first 100 years, when the first generation of revolutionaries and their immediate successors chewed over the new ideas of a government of laws and not of men, and for the most part, made them better. What does it say now that trying for an amendment about gay marriage seems more feasible than one to get rid of the Postal Service?

UPDATE #2 (05/13/08): Commenter Cal has further explained that it really wouldn't take an amendment, but instead just a majority vote in Congress. I'll take this as a valuable lesson that trying to dash off a quick post without more thorough research can backfire. Still, apart from that, this is an interesting topic, so I'll just take my lumps and enjoy the discussion.

While doing belated research, I found some other good articles about privatizing the USPS, here, here, here, and here.

11 comments:

Jeff said...

Even though this is one that appears to be easy to be rid of, the USPS is written into the constitution. It would require a constitutional amendment. I would be glad to be rid of it. I would also gladly accept it in perpetuity (inefficiencies and all) to rid ourselves of the alphabet soup organizations that now rule, and ruin, our lives.

Thanks for the blog. I enjoy it every day.

C. August said...

Thanks for the comment, Jeff. So it seems that the "one small thing" nagging at the back of my mind while I wrote the post was, in fact, no small thing. Ugh.

I suppose this is an example of one of the inconsistencies of the Framer's thought, such as the exclusion of property from "life, liberty, and the pursuit of happiness."

Now that you bring this to light, perhaps this explains why this function, despite being so obviously unneccessary, has persisted to this day. The existence of the USPS is so ridiculous that only the Constitution could protect it.

Mark Wickens said...

I was thinking the same thing recently. It is very silly in this day and age and I was wondering why it is still a state-run monopoly in every country in the world. Jeff’s point about the constitution does explain the US, but I'd have thought a few other countries would have experimented with private systems by now.

(Pause to do a Wikipedia search.)

Ah ha! It seems there has been some movement to free up postal services:

From http://en.wikipedia.org/wiki/Postal_system#Deregulation:

“Several countries, including Sweden (1 January 1993),[16][17] New Zealand (1998 and 2003), Germany (2005 and 2007)[18] and Argentina have opened up the postal services market to new entrants. In the case of New Zealand Post Limited, this included (from 2003) its right to be the sole New Zealand postal administration member of the Universal Postal Union, thus the ending of its monopoly on stamps bearing the name New Zealand.”

and from http://en.wikipedia.org/wiki/Royal_mail:

"From January 1, 2006, [the UK’s] Royal Mail lost its 350-year monopoly and the UK postal market became fully open to competition."

So, there is some good news, and perhaps some cause for the rest of us to hope!

Clay said...

I would point out that it wouldn't require an amendment based on what you wrote.

Having the power to do the thing does not necessitate that they actually do the thing.

C

C. August said...

Clay, perhaps you would expand on your comment?

I agree that, by the original language, simply saying that the legislative branch can establish Post Offices and post Roads doesn't mean that they have to.

My knowledge of Constitutional law is quite limited, but I expect that a simple reasoned argument isn't enough. Would it be the case that, if the government just decided it didn't need to establish a Postal Service, this decision would be sufficient? Or would a million little mites come out of the woodwork claiming special needs, and a true amendment would be required to settle the debate?

In other words, if this idea became more than a thought experiment, what might the path be to implementing it in today's America?

If, as Mark mentioned, other more socialistic governments have started a move towards free markets in mail, perhaps there is hope. I'm not even going to try to imagine which of our perpetually conflicted, clueless and corrupt politicians might propose this measure, however.

Clay said...

I agree that it is incredibly unlikely that the power-hungry bunch of thugs in Washington would willingly give up power without a Constitutional amendment.

I was merely observing that it wouldn't violate the Constitution for Congress to vote a public post office out of existence as there is no Constitutional requirement that the government provide one.

Incidentally, my understanding is that the USPS was set up completely arbitrarily and replaced a well-functioning system that was already in place that consisted of many smaller postal services.

I think if you go to the USPS website that they actually provide a fairly accurate history of this.

Also, while I am very fuzzy on the details, I believe that Lysander Spooner fought the government tooth and nail to try to setup his own private postal service during the late 19th century. I cannot recall the result, though I don't think it was favorable.

Cal said...

Clay is right, the constitution does not say that the government must run the postal system, only that it may. So, changing it is easier -- one needs a majority of voters to support it, rather than needing the overwhelming number of voters that is required by an amendment.

The post office has actually seen many changes for the better. I'm not a student of its history, but this might be another of the structural changes that was begun around the time of the "Reagan revolution". USPS and Fedex were allowed to compete in some areas that were previously exclusive to the post-office.

Also, the post-office was made to cut costs and be far more responsible. The 50% increase in rates for first-class mail over the last 11 years or so (it used to be 29 cents) is about a 5% increase per annum. Not great news, but it could be far worse -- see health-care and education.

I think the post-office had been started in the direction of evolution; but, public attitude has shifted away from wanting to privatize things. The pendulum seems to be swinging in the other direction right now. First, it must swing back.

Anonymous said...

Having the "power" to establish is not the same as being "required" to establish. At the time of the Founding, the post was the primary communications network then available, the "Internet" of the 18th century. Clearly, a democratic society could not function without the ability to guarantee the free flow of information, therefore the post became a government function, a matter of national interest and security. I would not be surprised if the Founders would have also explicitly included more contemporary forms of communication, had they been available to them at the time. Indeed, most countries fund a "public option" for advanced media such as radio and TV (think the BBC or the CBC, for example), without stifling the ability of private companies to run their own networks.

C. August said...

Anon, I'm sure you're right about the motivation of the Founders in including the post in the Constitution. But that doesn't make it right.

When a government does anything like this "in the national/collective interest" apart from the legitimate functions of courts, police, and defense, their actions necessarily entail the violation of individual rights.

You said "Indeed, most countries fund a "public option" for advanced media such as radio and TV... without stifling the ability of private companies to run their own networks." Except that by regulating any frequencies to enforce space for the government's communications (as one example), they are forcibly barring private enterprise from exploiting that natural resource. And govt's actions inevitably expand and expand to violate property rights more and more.

In addition, the entire concept of the government's role of "protecting a national resource" like roads or the electric grid or the phone lines is corrupt. There is no such thing as a "national resource." Any attempt by the government to act on such a concept ends in the violation of someone's rights, and thus the violation of the only justification of having a government -- protecting individual rights.

Anonymous said...

@C.August: I think we might just have to agree to disagree! One person's idea of a "legitimate function" is always going to be someone else's idea of a "violation of individual rights". The Constitution is meant to be a framework within which the normal give-and-take of the political process will arrive at the correct balance, ideally, at any moment in history. Historically, any time you go too far in either direction of total libertarianism or total statism, the system tends to break down: ultimately, the best strike point is going to be somewhere in that uncomfortable grey area in the middle. It's just part of what makes life interesting! ;)

C. August said...

Anon, you really don't get it at all. There is no room for compromise when talking about individual rights.

And I do not "agree to disagree" with stupidity. You're flat wrong, both in your idiotic desire to find a middle ground between food and poison, and in your pseudo-historical "argument."