Privatizing the U.S. Postal Service

March 15, 2011

Although the U.S. Postal Service (USPS) is often mistaken for a government-owned corporation such as Amtrak, it is an independent branch of the federal government.  It is controlled by a board of governors and a postmaster general, and it is regulated by the Postal Regulatory Commission.  The USPS is currently at a tipping point due to the combined effects of a large recent decline in volume and revenue that is projected to extend into the future, as well as increases in operating costs, according to Robert Carbaugh, a professor of economics, and Thomas Tenerelli, an assistant professor of economics, at Central Washington University.

Although the USPS has enacted an array of revenue-generating and cost-cutting activities, these measures likely are not sufficient to eliminate the gap between revenue and costs.  Given the state of technology, privatization probably is the only long-term solution for the USPS.  Simply put, the governance structure of the USPS is flawed, and its ability to realize commercial success is very limited.

Looking forward, there are several keys to successful liberalization of the USPS.

  • First, it must be given the flexibility to adjust and adapt to market forces in the most cost-efficient and profitability-enhancing ways possible, including privatization.
  • The second goal is to have effective antitrust regulation of the newly private post.
  • The third goal is that any remaining postal monopoly must be clearly delineated.
  • Lastly, the postal monopoly must be removed eventually.

Source: Robert Carbaugh and Thomas Tenerelli, "Restructuring the U.S. Postal Service," Cato Journal, Winter 2011.

For text:

http://www.cato.org/pubs/journal/cj31n1/cj31n1-9.pdf

 

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