Example of Why USPS Should be Privatized

January 3, 2011

The Washington Post is reporting that the U.S. Postal Service is delaying the scheduled closure of some of its postal outlets. The USPS, which lost $8.5 billion last year, originally sought the elimination of 3,200 of its 36,000 outlets. However, following an outcry from members of Congress whose districts would be affected by the closures, the number under consideration was reduced to a paltry 162.

A new Cato essay on privatizing the U.S. Postal Service notes that this “is no way to run a business.” The USPS is structured like a business in that revenues from the sale of postal products generally cover costs. However, Congress often prevents it from actually operating like a private company, such as taking actions to reduce costs, improve efficiency, or innovate in other ways:

Full post offices are more costly to operate than other means of serving customers. The average post office transaction cost 23 cents per dollar of revenue in 2009 while the average transaction at a contract postal unit cost just 13 cents. Post offices used to generate almost all postal retail revenue, but 29 percent is now generated online through usps.com and other alternative channels.
In 2009 post offices recorded 117 million fewer transactions than in 2008. Four out of five post offices are operating at a loss. However, the postal network’s overcapacity has drawn little corrective action from Congress. In fact, legislation introduced in the House with 102 cosponsors would apply the burdensome procedures for closing post offices to other postal outlets as well. Congress is actively working against the modernization of the U.S. postal system.




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