Should the U.S. Seize the Postal Service?

The mess that the U.S. Postal Service has become may be beyond solution, if the only rescue rests on borrowing from the Treasury and sharp cutbacks in staff and retiree health care contributions. The federal government could simply nationalize the Postal Service, which would allow it to continue to fulfill its mandate that has been an essential public asset for decades.

The most recent crisis the USPS battles involves its $15.9 billion loss for the fiscal year, which ended September 30. Mail volume dropped to 159.9 billion pieces from 163.3 billion in the prior year. If the mail volume attached to national and local elections disappears this year, as it will, the situation will worsen quickly.

The use of the Postal Service as a preferred method for communication and shipping has gone through a permanent erosion caused by a list of competitors, which runs from e-mail to private overnight services led by FedEx Corp. (NYSE: FDX) and United Parcel Service Inc. (NYSE: UPS). The obvious solutions - cut jobs, cut pension payments, close locations, stop daily delivery - will put tens of thousands of people out of work as the economy balances perilously against another recession. Older, retired workers with lower benefits could turn elsewhere - to the federal and local government - for aid. The simple math may be that the cost to shrink the Postal Service matches roughly the cost to maintain it near current levels of service.

Patrick R. Donahoe, the postmaster general, told Congress, "It's critical that Congress do its part and pass comprehensive legislation before they adjourn this year to move the Postal Service further down the path toward financial health." One solution, and perhaps the most elegant one, means that the government would take the Postal System under its wings. That way, the Postal System would become like the CIA, FBI or NASA - an service essential to the public interest.

Budget hawks who constantly search for ways to chop federal expenses may object to a nationalization of the Post Service. Against their interests, basic mail service for all Americans should carry more weight. Many citizens cannot avail themselves of private overnight mail service or afford to have delivery cut to three or four days a week.

So the argument becomes one of whether the Postal Service can be considered to provide critical public functions. If so, the government should take it over and be done with it.

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Politics Tagged: FDX, featured, UPS