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Economist Proposes Privatization For Postal Service


The U.S. Postal Service has fallen victim to higher costs and lower revenues that threaten to put it out of business if it doesn’t act soon, says Rick Geddes, Ph.D., a Fordham University economics professor. “The Postal Service is headed for a train wreck,” Geddes says. “People are not sending as many personal letters and technology is helping them pay bills without the help of the Postal Service.” Geddes’ solution is privatization. He outlines the history of the Postal Service and introduces this idea in his book titled “The Postal Reorganization Act of 1970,” which will be published in spring 2002 by the American Enterprise Institute. The Postal Service, unlike most government agencies, does not receive huge amounts of funding from the federal government. Instead, its operation depends upon the $60 billion in revenue it receives each year.

It also has a board of directors, performs a commercial service and has other characteristics that make privatization a viable option, Geddes says. The Postal Service has another distinction – a mail service monopoly. A universal service obligation makes the Postal Service the only mail delivery organization required to make deliveries everywhere and anywhere six days a week. Other mail delivery businesses, such as Fed Ex, have to get permission from the government to operate. However, the Postal Service is mired in bureaucracy, which inhibits cost-cutting policy changes. If the Postal Service were private, its leaders could make decisions that benefit the business rather than having to wade through a mass of red tape.

For instance, a private Postal Service could raise the price of stamps in the winter when mail traffic is heavy and lower them in the summer when business is slow. Right now, a price change requires the approval of the Postal Rate Commission, which takes about a year. Privatization would also give the service an opportunity to trade its stock on the exchange. The money earned from stock offerings could pay for sorting machines, computers and other equipment that would make the operation run more efficiently.

But that does not mean that postal workers would embrace this change. Unionized workers, whose strength has won them higher wages, may fear a loss of benefits when business is bad or the threat of competition if the Postal Service loses its monopoly. “Workers will not allow reform without a fight,” Geddes says. “You have to make reform in their best interest.” Geddes suggests offering postal workers stock ownership. That way, they would have a vested interest and can make a profit by selling their shares. Geddes also suggests that the government continue to regulate the postal service and maintain its monopoly throughout the privatization process. “This is not impossible or crazy,” Geddes says.


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