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How to reinvent the U.S. Postal Service

Postmaster General Patrick Donahoe has delivered an urgent message to Congress: The U.S. Postal Service is running out of cash. Without a massive financial fix, mail delivery could come to a halt by this time next year. “Failure to act could be catastrophic,” he told the Senate Homeland Security and Governmental Affairs committee.|McClatchy-Tribune News Service

The following editorial appeared in the Chicago Tribune on Wednesday, Sept. 14:
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Postmaster General Patrick Donahoe has delivered an urgent message to Congress: The U.S. Postal Service is running out of cash. Without a massive financial fix, mail delivery could come to a halt by this time next year. “Failure to act could be catastrophic,” he told the Senate Homeland Security and Governmental Affairs committee.

Think this looming crisis will concentrate minds in Congress? We hope so. And we doubt it.
We all know why the Postal Service is hemorrhaging cash. Check your mailbox today for all those letters that your friends and family sent to you. Ditto all the bank statements, bills, and everything else that once depended on paper but now has gone pixel. And that package from Aunt Mae? Well, maybe it was delivered by the Postal Service … or maybe by one of its private-sector competitors.

Result: The Postal Service, a quasi-governmental agency, is piling up billions of dollars in losses. Absent congressional action and radical change, it could lose more than $238 billion over the next decade. You’ve read that Donahoe wants to eliminate Saturday mail delivery, close thousands of underused post offices, lay off 120,000 workers, and secede from the federal retirement and health plans.

We’ve backed overhauling the Postal Service for years. Hasn’t happened. The upshot:
óThe USPS makes money on first-class mail but loses money on many other things. What’s more, the Postal Service can’t raise rates on money-losing mail categories fast enough or high enough because of price caps and other regulations imposed by Congress.

óThe Postal Service has streamlined itself over the past decade, but it hasn’t moved fast enough to get ahead of the switch from ink to electronic mail.

Solution: More competition. Congress needs to end the monopoly the Postal Service holds on delivering everything that arrives in your mailbox. Invite more private competition, as some European countries have. Let the USPS set its rates so it isn’t forced to lose money. Free the agency knowing that if those rates go too high, the private competitors will offer a better deal.

There’s plenty of precedent for how a liberated postal industry could work. Think about what happened when the government deregulated the airline industry and upstarts like Southwest started flying: lower fares, better service, new route structures. Enough said.

We expect that private competitors not burdened with the Postal Service’s legacy costs, including expensive union labor contracts, could improve delivery and pricing. For instance: Might a private company charge more to deliver a letter that travels 2,000 miles than it charges to deliver one that travels 20? Sure.

For that matter, instead of cutting Saturday delivery, as Donahoe recommends, why not offer Americans the option of Saturday and Sunday delivery for an extra charge? Or Wednesday-only delivery for a discounted price? Let the USPS compete ó and let consumers choose.

Postal officials argue that private companies will try to skim the most lucrative markets, and stick the USPS with the highest cost and most unprofitable routes. But Congress can set rules to make sure that doesn’t happen ó much as state governments make sure that private but regulated utility companies serve every household.

In 2001, former Postmaster General William J. Henderson recommended another radical solution: Take the Postal Service private. “We need to free ourselves from the usual discussion about controlling costs or keeping rates stable or mailing more, all of which is simply a form of denial about the real issue,” he wrote in a Washington Post op-ed. “The model itself is not going to work for the long haul: It must be changed.”

Ten years later, Henderson’s wisdom is even more apparent. It’s time to unleash the USPS eagle to compete in the 21st century.
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