Why Has the US Postal Service Not Been Privatized Despite its Persistent Losses?

The United States Postal Service (USPS) has been in the spotlight for its fiscal struggles, with a reported loss of approximately $50 billion over the past decade. Yet, despite these financial woes, the idea of privatizing USPS remains contentious. This article explores the reasons behind this resistance and discusses how other countries, such as New Zealand, have successfully privatized their postal services.

Historical Context and Constitutional Issues

Divestiture of USPS from government ownership is not as straightforward as one might imagine. The primary hurdle lies in the Constitution of the United States, which mandates that USPS be provided as a government service. Under Article I, Section 8, only Congress has the authority to 'establish Post Offices and post Roads,' indicating that USPS functions as a public service rather than a private enterprise.

Why Corporate America Isn’t Interested in Buying USPS

Contrary to popular belief, major American corporations would not be particularly interested in purchasing and privatizing USPS. This is because USPS has an extensive infrastructure, including billions of dollars worth of assets and a vast customer base. Corporations would likely look to maximize profits from these assets, which can be challenging given the postal service's rural delivery obligations that do not always generate revenue. Moreover, the political and bureaucratic challenges of changing USPS's status would pose significant barriers.

Case Study: New Zealand’s Postal Service Transition

In stark contrast to the US, New Zealand experienced a similar situation in the 1980s with its postal service, NZ Post. Back then, NZ Post was struggling with financial deficits, surplus employees, and a poor reputation. The government at the time had to take drastic actions to bring the service under the business model.

Reform Measures and Success

A new board was appointed based on merit, rather than political patronage. The mandate was to make a profit, and the government reserved the right to intervene if it wished to direct NZ Post to do otherwise, but such actions would require financial compensation. Key reforms included:

Existing employees retained pension benefits. New employees did not receive pension benefits. A subsidy was granted to maintain lagging post offices.

Within one year, NZ Post achieved profitability. This success was partly due to the government's decision to close underperforming post offices and allocate the savings towards early childhood education programs.

The Role of Market Demand and Government Support

USPS also faces unique challenges. The ability to mail to anyone in the United States is a significant selling point. There are also several key customers, such as the Internal Revenue Service (IRS), who must be able to deliver letters to anyone in the country. These factors contribute to USPS's continued importance.

Also, similar to Amtrak, USPS could potentially turn a profit if given the opportunity. Under the leadership of a new boss, Amtrak successfully reduced its losses, proving that with the right leadership and changes, government-operated entities can achieve financial stability.

Conclusion

Despite the financial challenges, the USPS remains a core public service in the United States. Other countries, like New Zealand, have demonstrated that privatization is possible with the right reforms and political will. However, the path to privatization in the US is complex and fraught with constitutional and political barriers.

Keywords

US Postal Service, Privatization, Government Service