Privatizers Go Postal

The longest-running American experiment in the partial privatization of government services has just entered its fourth decade, and the outcome has not been good. I'm speaking of the United States Postal Service, which continues to struggle despite "reform" and recently announced yet another rate hike, its third in three years, pushing first-class stamps from 34 to 37 cents. The Postal Service remains $13 billion in debt, this after having laid off 30,000 employees (or 4% of its work force) since 1999 and having labored mightily to turn itself into an approximation of a standard commercial enterprise, replete with state-of-the-art advertising, expanded consumer choices, and clever promotions.

The ongoing travails of the formerly named Post Office Department have elicited a predictable response from advocates of further so-called postal reform, such as President Clinton's postmaster general from 1998 to 2001, William J. Henderson. They want to go the whole hog -- full privatization. This would result in a postal service not only organized (as presently) along corporate lines, with a board of directors, self-generating revenues from customers, and regular profit-and-loss statements, but one freed of its universal-service obligation (regularly scheduled and uniformly priced deliveries everywhere) and divested of its monopoly over letter carrying. The Postal Service would, in short, go from a semi-independent public entity to a totally private company able to set market rates and answerable only to its shareholders; it would become, in effect, a new FedEx or UPS.

This is a far cry from the original concept of what a postal service should be and how it should be organized, a concept developed by Benjamin Franklin, America's first postmaster general under the Continental Congress. From the very beginning, mail delivery was considered by the Founders a proper function of the central government, and upon adoption of the Constitution of 1789, it was placed within the purview of the Office of the Postmaster General, which shortly became a cabinet-level department. There matters stood for over a century, during which time the Post Office evolved into a trusted and dependable arm of the federal government, famous for faithfully delivering the mail despite the most trying circumstances.

Enter President Richard Nixon. To Nixon and his administration, the Post Office Department's colorful history of Pony Express riders and seat-of-the-pants airmail pilots was less compelling than their own desire to cut government spending and streamline the agency to make it more businesslike. The result was the Postal Reorganization Act of 1970, which removed the postmaster general from the cabinet and created the present US Postal Service, a federally owned but theoretically self-supporting corporation.

In 1971, the new era of semi-privatization got under way. Operational authority was vested in an 11-member, presidentially appointed Board of Governors, rather than in Congress as formerly. Rate-setting powers were conferred on an independent, five-member Postal Rate Commission likewise appointed by the president. And public postal employees were converted into quasi-private workers whose wages and working conditions would be thenceforth determined by collective-bargaining agreements between postal-union representatives and management. Most significantly, a phaseout of taxpayer support began, and by 1983, virtually all federal subsidies to the Postal Service had ended.

Somehow, none of the changes have brought about Nirvana -- and for good reason. Certain public functions -- mail delivery is one -- simply cannot be carried out in a business framework; they are by their very nature nonprofit governmental activities. The mistake of the privatizers (and partial privatizers) is to think that everything can operate on a money-making basis. In truth, the postal system can't do so and retain its intrinsic character, and neither can other critically needed public enterprises, such as rail transportation.

Readers may have noticed the uncanny similarity (not coincidental) between the contemporary difficulties of the revamped US Postal Service and those of Amtrak, the national passenger railroad created the same year. Both represent attempts to marry essential public services to the marketplace by creating profit-driven public corporations intended to operate on a self-sufficient basis without recourse to direct federal funding. Both have been relative failures from a budgetary standpoint due to their schizophrenic natures. They are neither wholly commercial nor wholly governmental and are unable to generate sufficient profits to cover the costs of fulfilling broad public-service mandates.

Both corporations are charged with obligations of universality. That is, they have to provide certain minimal services private corporations wouldn't have to provide: the delivery of personal and commercial (or junk) mail nationwide for uniform low rates in the case of the Postal Service; the maintenance of widely dispersed, low-volume passenger routes outside heavily travelled metropolitan corridors in the case of Amtrak. The consequence is that both of these public corporations have been chronically in debt from the start. Now, however, the conservatives who control things in Washington are demanding a strict accounting -- as opposed to the loose accountancy standard they have applied to private corporations like Enron and WorldCom. The quasi-govern mental entities that deliver mail and rail passengers should, they say, balance their books and get out of debt, or they should be fully privatized and thrown into the competitive market.

The current situation was preordained from the outset, of course. The US Postal Service and Amtrak are quintessential products of "lemon socialism" -- the perverse idea that profitable activities are best left to private industry, while desirable but unprofitable ones are shunted to the public sector. In railroading, freight transportation makes money, so in 1970, it was left to private railroads; passenger service is historically a money loser, so it was given to Amtrak. In mail handling, package delivery is profitable, so FedEx and UPS were allowed to compete for it; delivery of cards and letters, periodicals, and junk mail is unprofitable, so Uncle Sam kept the franchise. It is patently unfair, given those circumstances, to expect the hamstrung public enterprises responsible for mail and rail to meet their universal mandates and to simultaneously break even, much less realize a profit.

At the same time, universal mandates calling for minimal, broad-based standards of service and access in such areas as communications and transportation are critical to a healthy, properly functioning democracy. It's time for the privatizers among us to realize that certain basic social services need to be provided even if they earn no money for the providers. Faith-based initiatives and other charities won't deliver the mail or run the railroads. Private industry will do it (up to a point), but at a price too many can't afford. Like it or not, government has to do the job -- at cost, when possible, but at a loss, if necessary. Amtrak and the US Postal Service don't need privatizing. If anything, they need the exact reverse: full public operation under the aegis of government departments with adequate, tax-supported budgets.

Wayne O'Leary is a writer in Orono, Maine.

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