Saturday, February 24, 2007

USPS

I have a question. I am hoping someone can answer me. I would appreciate comments/conversation on this topic if anyone is willing.

My question is this: Should the United States Postal Service be privatized?

I was reading a really interesting article put out by the Cato Institute. In it, a number of people were asked this very question. One of whom is the Postmaster General, Marvin Runyon. His comments were about what you would expect them to be: don't privatize the USPS, let us privatize ourselves. I would say that is pretty much the same thing. The USPS can't privatize themselves though...they have to ask permission to do pretty much everything.

In other articles I have read there seems to be a question of what, if anything, privatization would do. Most economists say it would force the USPS to play by the same rules that regular companies do. For example, The USPS has turned a profit a number of times. When it does make a profit it does not have to pay any taxes that a regular profitable company has to pay. When it doesn't turn a profit, it evens the books by using federal tax money...your money.

If the USPS were privatized I think it would force it to immediately improve efficiency (yes, I realize this is not a particularly original though..but it is true). Obviously it is not currently running efficiently because it rarely turns a profit. Privatization would eventually rectify that problem.

Of course, a major problem with getting this done is to get it past the USPS federal employee union. All USPS employees are guaranteed their jobs, they certainly wouldn't want that to be in jeopardy.

It will be interesting to see what, if anything, happens with the USPS. I think it needs to be done...to save my tax money and to be more efficient. Higher efficiency would free up more people to be more productive elsewhere. This is one of the early lessons of economics...scarcity. The scarce product here is labor.

Another impact of privatization would be the new competition for first class mail. Currently the USPS has a legal (read: governmental) monopoly on first class mail. If the market would open up then the other carriers (UPS, FedEx, etc...) would want to get in there, driving prices down. These parcel carriers would also now have someplace to diffuse their costs and this would also drive down the prices for package shipment. None of this would happen right away probably, but the growing pains (read: higher prices) would be worth it in the long run.

I doubt much will happen with this though...probably at best there will be some sort of semi-privatization, a la Fannie May. That would be better than nothing, but still would not be the ideal position that we as taxpayers deserve.

I am interested in your thoughts on this.

Labels: Economics, Privatization, USPS

Posted by Adam Wilson :: 11:00 PM :: 0 comments

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