Safely conveying the Nation's junk mail

Congress has the power "to establish Post Offices and Post Roads," but that doesn't mean it should.

A recent Q&A with U.S. Postmaster Patrick Donahoe explains that the Post Office's financial woes are due to a decline in first-class mail, owing to the advent of electronic communication. He also mentions a gigantic $5.5 billion payment due to the government in September for the funding of retiree health benefits. He won't be able to make that payment. The American Postal Workers Union, AFL-CIO, isn't happy about that and faults, in part, the requirement that the Post Office pre-fund future retiree's healthcare benefits.

Donahoe speculated that beyond cutting Saturday delivery (which has been on the table), mail delivery might eventually in 15 years need to be reduced to only three delivery days a week. At that point he envisions the Post Office's business will principally consist in doing two things: delivering packages and "hard-copy advertising," a/k/a junk mail.

FedEx, UPS, and DHL already compete with the Post Office in the package delivery markets. That means the U.S. Post Office's principal unique line of business would be...you got it, delivering junk mail. As Donahoe puts it, "there's always going to be a market for direct mail, because people like to get something in front of a customer's eyes."

Of course, if ForestEthics and other environmental activists prevail (and I hope they do), there may one day be a "do not mail list" to permit individuals to opt out from all the direct marketing.

But if all that unwanted junk mail stops, does this signal the end of the Post Office as we presently know it? The first-class postage model depends on cross-subsidization. Universal service at uniform rates isn't cheap. Urban mailers pay more than they should to mail the same letter than rural mailers. The fight over the Post Office will be an interesting but probably uneven political fight. Labor unions, rural state constituents and their filibustering senators, direct marketers, the stamp dealers lobby, and foreign postal offices will be pitted against management, urban constituents, and environmentalists. 

The way this scenario plays out will be a study in public choice theory. First, the Post Office hikes the price for the same services to unorganized individual users while cutting services visible to the same in symbolic ways (e.g. Saturday service) that direct end user anger at official Washington. Second, the Post Office makes the case to Congress (with union concurrence) that it can no longer pre-fund the retirement benefits and should no longer have to. The well-organized groups prevail on Congress and are successful with this strategy that buckpasses to a future generation of taxpayers and to a future Congress. The Congress obliges but in compromise requires significant reduction of retirement benefits for future hires, who are, of course, unrepresented in any of these negotiations. Finally, in some future Congress, as the Post Office continues to run in the red and the unfunded retirement benefits come due, the Post Office eventually argues to Congress that it needs to subsidize the post office directly, like the military, so that it can operate at a loss. That subsidization, in turn, may require an offsetting tax on unorganized individuals' email (let's call it a stamp tax) to support the federal agency now in charge of safely conveying the Nation's junk mail...

Comments

[Marloes]

Nice i like it!