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SUMMERS: Only way to save USPS: Privatization

Congressional meddling and labor costs doom current Postal Service

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The average American home received a personal letter through the mail just once every seven weeks last year. With business dwindling, the U.S. Postal Service lost $8.5 billion in 2010, and losses for fiscal 2011 are expected to be about $9 billion. The USPS doesn't have the $5.5 billion needed for its retiree health care fund payment due this month and is so close to its debt limit that it won't be able to pay its bills later this fiscal year.

The response to this financial crisis: Raise the price of stamps by a penny next year.

In what has become a scene from "Groundhog Day," politicians again are offering reform proposals that nibble at the edges. Yesterday, a Senate panel passed a curious new bipartisan plan from Sen. Susan M. Collins, Maine Republican, Sen. Thomas R. Carper, Delaware Democrat, and Sen. Joe Lieberman, Connecticut independent, that would allow the Postal Service to take $6.9 billion from the Federal Employees Retirement System to pay down debt and offer buyouts to employees near retirement. It also would force the USPS to continue Saturday delivery for at least two years.

Sen. John McCain, Arizona Republican, and Rep. Darrell E. Issa, California Republican, previously drew up a plan to end Saturday delivery, allow for the sale of advertising on vehicles and facilities, and save $3 billion by consolidating post offices and mail-processing centers. The heavy lifting in their proposal would be done by a commission empowered to override union collective-bargaining agreements, potentially paving the way to lay off thousands of postal workers and reduce the salaries and benefits of others. Postal workers receive better benefits than other government workers, and labor costs make up 80 percent of the agency's expenses.

Although some of the reform plans are improvements over the status quo, pilfering money from retirement funds and relying on yet another government commission to do Congress' job aren't sustainable solutions. Mail volume is down more than 20 percent since 2007, and first-class mail is expected to drop another 37 percent by 2020. Email, text messages and online bill paying guarantee that those letters are never coming back.

The Postal Service is largely in denial. It claims its fiscal woes stem from being forced to "overpay" into its retirement system. But the Government Accountability Office recently found that the USPS has not overpaid and that allowing it to withdraw that money would "increase the federal government's current and future unfunded pension liability by an estimated $56 billion to $85 billion."

When the USPS does face the reality of plummeting mail volume and bloated costs, it hits another roadblock: Congress. Federal Times reported that the USPS examined "almost 3,200 stations and branches - which sell stamps and mailing services, but don't have a postmaster - for possible closing. Since then, the list has dwindled to 162. Only two of those facilities have actually closed."

And that's the hitch. The USPS can't cut costs because members of Congress don't want to close post offices in their districts. Also, union contracts prevent it from making the necessary workforce reductions. Political interference and gimmicks have long foiled the agency. It's time to end the postal monopoly and privatize the USPS. The delivery of mail is not an inherently governmental activity, as evidenced by the success of FedEx, UPS and even bicycle messengers. There is no reason the government should be in the mail delivery business.

Since the 1980s, countries including the United Kingdom, Germany, the Netherlands, New Zealand, Sweden, Denmark and Finland have opened their mail services to competition or partially divested government ownership, resulting in lower prices without sacrificing quality. By contrast, the Consumer Postal Council's Index of Postal Freedom ranks the United States among the most restrictive, noncompetitive mail systems, alongside China and Hungary.

Regardless of which of the postal reform plans passes, we'll be right back here next year talking about the USPS losing billions of dollars again. Emerging technologies will continue to make the USPS more archaic, worsening its debt and deficits. The Postal Service is handcuffed by Congress and unable to make the massive changes to its business model needed to turn things around. Privatization is not only the best way to stop the financial bleeding and better serve customers, it is also the Postal Service's best chance at survival.

Adam B. Summers is a policy analyst at the Reason Foundation.

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