The Postal Bailout

These are dark times for the U.S. Postal Service. After years of rising postal rates and declining service, customers found a way to avoid using it entirely: a strange new technology that allows mail to be composed and sent instantly, for free, anywhere in the world. The legally mandated monopoly of the USPS on delivering this kind of mail was a key factor in its “business model,” since it already had plenty of competition for parcel delivery through UPS, Federal Express, and their many competitors.

Defenders of the Postal Service would often point to the relatively reasonable cost of a stamp, which was still a pretty good deal by any objective standard. The problem is that the government was spending a lot of money in subsidies to keep stamps that cheap, and with the widespread acceptance of email, even forty cents was suddenly a high price to pay for sending a letter. Postal revenues declined as the USPS entered a buggy-whip death spiral… and crashed upon the rocks of fabulously expensive employee benefits and restrictive employment rules, achieved through the wonder of collective bargaining by public employees.