The U.S. Postal Service announced today that it intends to end Saturday mail delivery beginning on August 1st. According to the USPS, the move would save the government’s beleaguered mail monopoly $2 billion a year. The USPS has lost over $40 billion since 2006 and it has maxed out its $15 billion line of credit with the U.S. Treasury. With mail volume in permanent decline, the USPS has no choice but to try and cut costs.
Congressional meddling has made it difficult for the USPS to downsize it operations to reflect economic and financial reality. Indeed, the USPS has been asking Congress to allow it to drop Saturday delivery service for the past couple of years, but those pleas have been rebuffed. With the USPS literally on the verge of not being able to pay its bills in full, it will be interesting to see if Congress finally relents.
Even if Congress does allow the USPS to drop Saturday mail delivery, the postal service faces a bleak future. The technological revolution in digital communication has undermined the USPS’s mail monopoly. Compounding matters are excessive labor costs and the aforementioned unwillingness of Congress to grant the USPS sufficient operating flexibility. Without dramatic reforms, taxpayers face the possibility of ultimately being forced to clean up yet another federal mess.
Instead of kicking the can down the road (one thing that Congress is actually good at) policymakers should be considering privatizing mail delivery. In a competitive free market, customers might choose six-day delivery, or five-day delivery, or one-day delivery, etc, etc. Entrepreneurs would have an incentive to tailor services to satisfy customers and to seek new cost-effective delivery methods. Prices would be higher or lower depending on what customers want as is the case with any other service provided by the market.