- The Washington Times - Wednesday, October 24, 2001

Hit hard by falling demand in the wake of the Sept. 11 terrorist attack, U.S. airlines cut fares and hotels dropped prices. Hit hard by competition from such technological substitutes as e-mail and on-line bill-paying, the U.S. Postal Service is raising rates. Such is the privilege of being a government monopoly.

USPS is now blaming its problems on the anthrax scare. But in 2000 the Postal Service lost $199 million. Even before the terrorist attacks this year's red ink was expected to hit a staggering $1.65 billion. The agency's inspector general estimates uncorrected waste of $1.4 billion.

Based on these achievements, the post office has paid nearly $1 billion in bonuses to managers and executives over the last five years. The Postal Service will also spend $25 million over the next four years to underwrite the professional bicycle team featuring Lance Armstrong.

Similar private-sector sponsorships are typically justified as a form of advertising, but the post office doesn't have to advertise. It is a monopoly.

Even so, USPS has never really made money. Uncle Sam pays retiree benefits and allows cut-rate borrowing. The post office is exempt from traffic fines, zoning rules and taxes. The latter alone saves some $4 billion annually.

Alas, as Jerry Terry of the National Taxpayers Union, points out, Postal Service productivity has risen just 11 percent over the last three decades. Had the rest of the economy behaved similarly, the U.S. would be an international midget.

Given such grotesque inefficiency, rate increases are no answer. After all, its increase earlier this year has brought in an extra $3 billion, and still the Postal Service is losing money.

Nevertheless, USPS plans a 9 percent across-the-board jump (first class mail will go from 34 to 37 cents), the third increase in 18 months. The postal authorities, who buried their announcement in the aftermath of the terrorist attack, expect to raise an extra $5.3 billion.

But on what will the money be spent? More unearned bonuses, unnecessary sports sponsorships and higher pay for the best-paid semi-skilled workers in the country.

Although the post office doggedly defends its monopoly, it pushes ever more work off on private individuals and firms. Many rural carriers, for instance, are independent contractors. The Postal Service has hired private operators to answer telephone questions.

The USPS offers discounts when mailers presort their mail. In January, it signed a contract to send 3.5 million pounds of Priority and Express mail daily via Federal Express.

Moreover, by next year United Parcel Service (UPS) plans to pick up mail as well as UPS-bound parcels from companies in 30 major metropolitan areas. Another firm will sort the letters and deliver then to the post office.

The only reason to preserve the Postal Service is to maintain a multibillion-dollar pork barrel for its executives and employees. The post office is primarily a political service.

Out of desperation, USPS is using its privileged position to enter other markets. It sells phone cards and clothes and is planning an on-line bill-paying service. It created a packing business, but could not match the private competition. It has talked of becoming an Internet Service Provider, as if there was a dearth of private alternatives.

While the Postal Service attempts to hang on to its privileges, many countries are abandoning their public monopolies. Germany, the Netherlands, New Zealand and Sweden, for instance, have moved toward competition and privatization.

Australia, Britain, and even the European Union are looking at similar strategies.

Indeed, former Postmaster General William Henderson acknowledges that "monopolies are fading" around the world. He thinks privatization "will eventually come" in America too.

What conceivable argument is there to maintain a government postal monopoly? The USPS warns that private vendors would "skim the cream" and charge more for more distant addresses.

In fact, companies often benefit by offering uniform service and price hence FedEx's standard overnight charges. But why would it be a problem if private firms charged some consumers more, just as UPS charges more for parcels based upon distance?

Living costs are lower and life is less frenetic in rural areas. If New Yorkers don't have a right to low-cost housing, why do Alaskans have a right to cheap mail delivery? Anyway, private competition is likely to lower everyone's rate.

Change is never easy: International competition and rapid technological change have transformed the U.S. economy. But Americans remain subject to the whims of an antiquated, unproductive government postal monopoly.

Before USPS raises rates again, Congress should end the postal monopoly. Let the post office compete for business. Then mail delivery, like the rest of the economy, will have entered the 21st century.

Doug Bandow is a senior fellow at the Cato Institute and a nationally syndicated columnist.

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