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To Save the USPS, We Must Privatize It

May 8, 2019 in Economics

By Chris Edwards

Chris Edwards

The U.S. Postal Service has been losing money for more than a
decade. Its financial outlook is bleak, with $110 billion in unfunded retirement costs and
more liabilities accruing every year. Congress is in denial about
the crisis, and there is a growing chance that taxpayers will be
put on the hook for a bailout.

The USPS is a huge enterprise with more than 600,000 employees
and $71 billion in annual revenues. Revenues are supposed to cover
its costs, but it has lost $69 billion since 2007. There are a
couple of culprits. The volume of first-class mail — the
USPS’s most profitable product — has plunged 45 percent since 2001. And while
the company has expanded into package delivery, it faces heavy
competition from UPS and FedEx, and will likely be challenged by
Amazon and other upstarts down the road.

The Postal Service is in
dire financial straits. It needs a makeover for the digital age,
and Europe’s privatization efforts have shown it the way
forward.

A Trump-administration task force last year found that the
USPS’s business model “is unsustainable and must be
fundamentally changed if the USPS is to avoid a financial collapse
and a taxpayer-funded bailout.”

There are lots of cost-cutting measures that could temporarily
stave off such a collapse. But in the long run, the USPS needs to
diversify its business to survive and grow, and that is a trickier
problem than it seems.

As a government entity that pays no taxes, the USPS would enjoy
an unfair advantage over potential private competitors in the
markets outside its legal monopoly on mail delivery — the
markets into which it needs to expand to survive. FedEx pays $2 billion a year in federal, state, and
local taxes, while the USPS pays none.

How can we let the USPS diversify and grow without creating
unfair competition? The answer is privatization, and the opening up
of the postal market that would come with it.

Europe has already demonstrated how, practically speaking,
privatization could be a success. Since the European Union mandated
that member nations open their postal markets to competition,
numerous countries have privatized their mail carriers, including
Germany, the United Kingdom, and the Netherlands. A 2018 report for the European Commission found
that the continent’s postal firms were diversifying revenues,
reducing labor costs, adopting new technologies, cutting delivery
frequency, using cluster boxes for delivery, and closing post
offices — all the steps the USPS needs to take.

Privatization would give the USPS the flexibility to save
itself, allowing access to debt and equity markets …read more

Source: OP-EDS

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