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The Postal Service's Dilemma

The U.S. Postal Service has been a fixture of American life since the founding of our Nation.  The old U.S. Post Office was reorganized in 1970 as a government-sponsored enterprise (GSE), meant to be run like a business, free of political patronage and micromanaging.  Yet, the enterprise faced significant restraints imposed by the 1970 law and further impediments to economical operation by legislation enacted in 2006. These limits on the Postal Service’s ability to perform were easily overcome for awhile, but no more.  For over two centuries, the business model of the Postal Service was to make substantial profits on letter mail, over which it has had a federally-sanctioned monopoly, and to use those profits to offset losses on other classes of service and to maintain the organization’s “infrastructure.”  The problem is that in the past decade, electronic communications (e-mail, bill-paying, etc.) have so undermined demand that monopoly mail has fallen precipitously, along with the profits meant to undergird the rest of the Postal Service’s activities.

If it were an ordinary enterprise, the Postal Service would be in Chapter 11 (or even Chapter 9).  Actions by Congress and the Administration have enabled the Postal Service to avoid a shut-down of delivery services by delay of certain payments due the federal government.  But these are short-term relief actions and do not solve the underlying problem.  The reforms presently under consideration by Congress and the Administration are reasonably ambitious, but may fall short of giving the organization a reasonable lease on life.

Harold Furchtgott-Roth, Moderator

Hudson Senior Fellow and Director of the Center for Economics of the Internet

Jim Miller, Featured Speaker

United States Postal Service Board of Govenors

Hudson Experts

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