Privatize the Postal Service by Cary Ichter, Partner

 In Uncategorized

Roughly ten years ago I wrote a column for a national magazine advocating the sale of U.S. Postal Service (USPS).  I made the point that the USPS is one of the largest property owners, one of the largest vehicle owners, and one of the largest airplane owners in the world.  And what is the return on this investment that US taxpayers receive for this investment?  A loss of $2.7 billion per year.  Additionally, USPS already has over $100 billion in unfunded liabilities, a capital investment backlog, has posted losses for over a decade, and has no clear path to profitability without reform.

USPS has high fixed costs due to relatively generous employee benefits combined with a universal service obligation that is understood to require mail carriers to visit over 150 million addresses six days per week. Historically, that level of service was financially subsidized by a high volume of mail. The USPS simply cannot support the enormous infrastructure and personnel requirements of continuing the service it currently supplies. A new model is needed.

One of the very good ideas the Trump administration has introduced recently is the idea of privatizing the USPS.  The plan is to restructure the USPS in a manner that would cut costs and give the agency greater flexibility to adjust to the digital age.

The USPS’s delivery networks were developed decades ago and have not adjusted well to the realities of the digital age.  Communications that were once transmitted by USPS are now largely transmitted by email. Revenues have been falling year by year as a consequence.  Meanwhile, USPS is picking up a portion of the tab for package delivery, which is more costly that first class mail delivery; neither the seller nor the buyer typically cover the full cost of delivery.

If the USPS is privatized, the agency will have the ability to adjust prices that requires users to cover the costs of delivery.  Imagine that—users paying for what they get rather than government subsidizing.  What a concept.

According to a Wall Street Journal Report, “A privatized Post Service could be structured like an investor-owned utility and continue to be regulated by the Postal Regulation Commission or other governmental body, ‘consistent with the existing models of privatization in Europe.’”

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