Government Can’t Even Run a Monopoly

By
Richard C. Young
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The U.S Postal Service is a monopoly business, with monopolies on both “letter mail” and mailbox access. Despite that, the USPS is running out of money and is headed for, in the words of the Postmaster General, David Steiner, a “severe financial crisis.”

USPS Employee Scanning a Competitive Product. U.S. GAO report: www.gao.gov/products/GAO-18-638

When you hear government officials like Mayor Zohran Mamdani tell constituents that the public sector should be running businesses like grocery stores and the healthcare industry, remember that the public sector can’t even run a monopoly business. The Cato Institute’s Chris Edwards discusses the troubles at the USPS, writing:

The USPS has lost money every year since 2007 as mail volumes have plunged and the company’s productivity has declined. Its future is bleak unless Congress enacts major restructuring. The table shows factors causing the company’s decline.

  • Mail volumes have fallen dramatically.
  • Marketing mail—also called junk mail—has become the largest type of mail by volume.
  • Shipping and package volume have flat-lined as the USPS faces tough competition. Also, Amazon has been reducing its use of the USPS for last-mile delivery.
  • Post office visits are down 54 percent from 2000, even though the US population has increased 21 percent.
  • The USPS has cut the number of post offices by just 8 percent despite the huge drop in visits.
  • The USPS has cut its employees by 31 percent since 2000, but total product volume is down 48 percent.
  • Employee compensation is almost three-quarters of USPS costs, and the labor force is 90 percent unionized.
  • USPS revenues have declined sharply as a share of gross domestic product. The USPS is a shrinking part of the economy.

Postmaster Steiner floated numerous reform options. One option is to close retail locations because “roughly 60 percent of post offices lose money.” We should close small, rural post offices that receive few customers, as well as thousands of urban and suburban post offices that are close to other locations.

Another option is to reduce delivery frequency. Steiner said that reducing service from six days a week to five would save $2.9 billion or more a year. But I think Congress should cut delivery to three days a week to save $9 billion or more a year. Remember that most of today’s USPS volume is junk mail.

Read more here.