Gary Becker

In Trouble Once Again: What to do about the US Post Office?

The United States postal system has a distinguished history since mail delivery is part of the Constitution, and Benjamin Franklin was the first Postmaster General. But during the past half century it has faced one financial crisis after another. Changing communication technologies may be the underlying source of its difficulties, but the postal system has also been hampered by regulations, and by its own inefficiencies. The solution: completely privatize the postal system, and allow other carriers to make daily mail deliveries using business and residential mailboxes. There are now enough actual and potential competitors, including the Internet, to make delivery of mail a highly competitive industry.

After running up billions of dollars in losses subsidized by the federal government from 1942-71, the postal service was made a quasi-independent non-profit enterprise (the United States Postal Service, or USPS) that no longer receives any direct government subsidy. Financially, USPS held its own until 2007, but since then cumulative losses have amounted to about $20 billion, and it is expected to lose another $8 billion this fiscal year. Obviously, this cannot continue much longer without a resumption of government subsidies, so this is an excellent time to consider major changes in the postal service and the economic environment in which it operates.

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(photo credit: angrywayne)

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