Is United States Postal Service (USPS) a Monopoly?

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The available facts need to be examined. First, the USPS is a government agency that is authorized by the US Constitution under “Article I, Section 8, Clause 7” (US Constitution). Spooner states:

“By the old articles of Confederation, it was declared “the United States, in Congress assembled, shall have the sole and exclusive right and power of establishing and regulating post-offices from one State to another throughout all the United States.” (Spooner, 1844, p. 15).

When the constitution came to be adopted, this phraseology was altered, and the words “sole and exclusive” were omitted. This alteration… must certainly have been intentional” (p.11).

The legal status as a monopoly, under the Constitution is open to challenge. During the 1970’s, USPS was made into a Corporation that still retained its government agency status. USPS has allowed contractors to move mails between post offices. Today, Federal Express and United Parcel Service deliver high value parcels and will utilize USPS to expedite non-profitable overnight deliveries.

USPS is running significant losses. Why?

According to the US Government Accountability Office (GAO), for the following reasons:

“Since 2006, the U.S. Postal Service (USPS) has closed redundant facilities and consolidated mail processing operations and transportation to reduce excess capacity in its network, resulting in reported cost savings of about $2.4 billion. Excess capacity remains, however, because of continuing and accelerating declines in First-Class Mail volume, automation improvements that sort mail faster and more efficiently, and increasing mail preparation and transportation by business mailers, much of whose mail now bypasses most of USPS’s processing network” (GAO 2012, p.1).

What then, are the conclusions reached by the GAO?

“In February 2012, USPS projected that its net losses would reach $21 billion by 2016” (GAO 2012, p.4). The GAO have in 2009 made the following recommendations: “(1) rightsizing its retail and mail processing networks by consolidating operations and closing unnecessary facilities and (2) reducing the size of its workforce” (GAO 2009, p.2). In 2012, the GAO stand behind their 2009 recommendations:

“GAO is not making new recommendations in this report, as it has previously reported to Congress on the urgent need for a comprehensive package of actions to improve USPS’s financial viability and has provided Congress with strategies and options to consider” (GAO 2012, p.6).

What needs to be done? Economic theory provides the answer. The price system allows economic calculation, which is expressed in accounting terms as profits and losses. Profits accrue when the good or service demanded by consumers is urgent enough to provide a monetary profit after all costs and expenses. If losses accrue, it is clear that the consumer demand is insufficient, and the resources should be reallocated.

Clearly in today’s technological environment there simply isn’t the demand for postal services, as they currently exist. Should a consumer demand remain, and clearly there would remain demand, the private providers already in this business segment can charge a price that reflects the economic realities, which, undoubtedly would be significantly higher. Therefore the rational decision is to close USPS and liquidate the business as a bankrupt.

Politically, this will never happen. As the second largest civilian employer in the US, in the current economic climate of recession, in a Presidential election year, the losses will be allowed to continue to accumulate.

References

Spooner, L. (1844). The Unconstitutionality of the Laws Of Congress, Prohibiting Private Mails. Web.

The United States Constitution: Article I, Section 8, Clause 7 (n.d.) Web.

U.S. Government Accountability Office. (2009) Network Rightsizing Needed to Help Keep U.S.P.S. Financially Viable (GAO-09-674T) Washington D.C., United States: Author. Web.

U.S. Government Accountability Office. (2012) Mail Processing Network Exceeds What is Needed for Declining Mail Volume (GAO-12-470) Washington D.C. United States: Web.

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Is United States Postal Service (USPS) a Monopoly?

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