NCPA - National Center for Policy Analysis

Postal Service Needs Reform

April 12, 2004

The United States Postal Service is an inefficient, bloated monopoly that may require taxpayer dollars for a bailout, says the President's Commission on the Postal Service.

According to the report:

  • In 2002, first class mail volume, which is the main source of Postal Service revenue, declined the most in 30 years; meanwhile, single-piece mailings (individuals mailing single letters) is also declining rapidly.
  • The Postal Service's liabilities are increasing, while its debt stands at about $90 billion; in fact, the General Accounting Office (GAO) has now placed the Postal Service on its "high risk" list for a potential bailout.

The commission recommends the following changes:

  • Set up a Board of Directors with accountability to "shareholders," while still maintaining government ownership.
  • Subject the Postal Service to Securities and Exchange Commission (SEC) disclosure requirements while allowing the Postal Authority to cap rates for monopolized products, similar to what regulators have done with private companies.
  • Since 76 percent of the Postal Service costs are from labor, reduce labor costs by not hiring replacements for the 47 percent of employees who become eligible for retirement in 2010.
  • Shut down or relocate underutilized mail distribution facilities in costly urban areas; eliminate some of the Postal Services 38,000 retail outlets and replace them with smaller, in-store facilities.

Rick Geddes of the Hoover Institution points out that the only way that the Postal Service can be truly accountable is through privatization, but admits that the issue of ownership should not get in the way of these needed reforms.

Source: Rick Geddes, "A Timely Proposal for Postal Reform," Hoover Digest, No.1, Winter Issue, 2004, Hoover Institute; based upon Report of the President's Commission on the United States Postal Service, July 31, 2003.


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