Cato Witness Made a Good Point

May 8, 2019

The witness from the Cato Institute, Chris Edwards, was an outlier at the House hearing on April 30.  He was the only witness not steeped in postal policy issues.  And he made a very unpopular assertion: “To Save the USPS, We Must Privatize It,” later published as an article in The National Review.  Everyone in the room agreed they oppose this solution.

There is one point made by Edwards that makes sense: saving the Postal Service by diversifying into new businesses is not going to work.  In our free market capitalist system, there is a strong ethos that the government should not do what the private sector is doing.  There also are very strong ties between the private sector and members of Congress who have and will prevent any significant diversification by USPS.  (Performing ancillary services for federal, state, local, and tribal governments is not likely to be a significant money-maker.)

As Edwards put it, “As a government entity that pays no taxes, the USPS would enjoy an unfair advantage over potential private competitors in the markets outside its legal monopoly on mail delivery — the markets into which it needs to expand to survive.  FedEx pays $2 billion a year in federal, state, and local taxes, while the USPS pays none.”  Even though FedEx helps fund Cato, the point Edwards made is strongly held throughout our economy and politics.

PMG Brennan has stated repeatedly that the current USPS “business model” is broken.  But no one has proposed a new business model.  If the Postal Service, its unions, and Congress continue to insist on retaining its legal monopoly, both privatization and diversification are off the table.

What is left are cost-cutting initiatives opposed by unions and politicians, above-inflation price increases that would ignite a death spiral, and a return to federal appropriations that carried the post office for the vast majority of its existence.  But federal appropriations (that fund every other government agency) have been weaponized as “taxpayer bailouts” in the case of the Postal Service.

And so it goes.