Sell the Postal Service

There have been commercials lately that hype the US Postal Service.  One says that many small businesses count on the Postal Service to stay competitive.  Another declares that many people rely on the Postal Service to deliver prescription drugs.  And then there is talk of how many jobs would be lost if USPS is downsized.

The USPS has the great misfortune of being semi-private. It operates on the money it raises through stamps and postage but is subject to oversight by Congress. The Senate is strongly opposed to closing Post Offices to resolve the daily $25 million shortfall. Thus, it can't raise rates to cover the gap nor can it cut costs. This is what happens when government tries to run a business.

The market is speaking.  The US Postal Service is outdated.  If not for the fact that it is illegal to compete with the USPS, it would have gone bust years ago.  FedEx, UPS, and others would be glad to deliver the mail but federal law prevents them.  Though the Constitution does allow for the federal government to maintain a postal service, it doesn't require it to be a monopoly.  Competition will either make the USPS more efficient or drive it out of business, either of which will be good for the consumer.

Every private company seeks to get consumers to buy its goods but must compete for market share.  Hewlett Packard and Dell don't raise prices and lower quality to convince consumers to buy their computers.  No, they constantly seek ways to lower prices while improving quality.  Whichever one better achieves that goal will win more market share.  That's competition.  When there isn't competition, prices rise and quality suffers because the consumer has no other option.  Monopoly is bad and USPS is a monopoly.  Of course, so it public education but that's a blog for another day.

I would suggest that the government sell the USPS.  It would bring in some revenue that could go toward the ballooning debt.  Whomever takes over won't be getting the tax subsidies that currently exist, so tax receipts may rise.  Yes, privatization is the solution.

Monopoly

Everyone agrees that monopoly is bad. When there is a monopoly, the buyer has no choice but to purchase that good from that only supplier. Consider the possibility of Mega Tire Company buying all the tire manufacturers. Bridgestone, Michelin, Firestone, Dunlop, and all the rest rolled into one giant tire company. Of course, under current law, the government would step in to prevent a monopoly. But what if they didn't? Ford, Chrysler, GM, and other domestic manufactures of cars would only be able to get tires from Mega Tire Co. What would Mega Tire do? Would Mega Tire keep their prices as low as possible? Probably not. Would Mega Tire be interested in the highest possible quality? Again, probably not. Why not? Well, the car companies have no other alternative. If Mega Tire produces shoddy tires at a high price, what are the car companies going to do? That is the problem with monopolies. Without competition, quality goes down and price goes up.

Now tires are only a fraction of the inputs that the car companies require to produce their product. There are several factors of production: Labor, Land, Capital, Entrepreneurship. Do any of these suffer from a monopoly? Land is plentiful and there are lots of landowners who would be glad of the rent. Capital is more scarce these days but there is no one bank that has cornered the market. Entrepreneurship is paid in profit, and there are lots of people eager for some profit. What about labor? Hey, look at that. There's the United Auto Workers. And there is no competing union. It looks like the UAW has a monopoly on labor.

It is interesting to note that the government approves of labor monopolies. In most states, membership in the monopoly... er, union is required to work in the industry; there shall be no competition. This monopoly has, over the years, demanded more benefits for less work. It is no wonder that GM and Chrysler went bust. However, since government favors this particular monopoly, it arranged for a reorganization/bankruptcy that benefited labor and penalized investors.

Monopoly is bad unless it is a labor monopoly, in which case it is great. It is so great that we have heard much talk on the Freedom of Choice Act, which would make it easier to monopolize... er, unionize labor.