• The Post Office IS Subsidized

      The Post Office wasn't happy with my recent post, "Obama's Post Office Mistake." A spokesman sent me a letter claiming that: "The Postal Service is not government subsidized. The last time the Postal Service received taxpayer money for its operation was 1982."

      Well, that’s true but mostly not true. Not paying parking tickets and monopoly powers are certainly a form of subsidy. In addition, The Post Office doesn't have to pay state or local taxes, and it gets to borrow billions from the government at reduced rates ($10.2 billion, by the end of this year, according to the GAO.) Last year, the FTC found that the Post Office received implicit subsidies of $34 to $117 million -- and that's not counting the monopoly, its biggest benefit.

      When we confronted the Post Office spokesman about that, he admitted that they received those subsidies, but added: "the government gives, but it also takes away. On the negative side, because of the responsibilities given to us by the law, we show a net loss [in terms of subsidies.]"

      I don't envy the people who try to manage the Post Office. Venal congressman won't let them close unprofitable offices, and union deals make it nearly impossible to fire workers. The FTC report found that government restrictions cost the Post Office an extra $417 and $986 million per year.

      All these government distortions lead to bad service. The Post Office tells me that it scores highly in customer satisfaction and on-time delivery.  But the real market test is: where do people put their money?  In mail categories where competition is allowed, the US Postal Service has just a 16% market share - behind UPS and FedEX, according to the FTC report linked to above.

      The solution: Get rid of all the subsidies and restrictions. It's been done in the UK, Sweden, Germany, and Finland.

      A report by European and US researchers, including several members of the US Postal Regulatory Commission, looked at Sweden and concluded that:

      The intensely competitive market for bulk mail has forced Posten [the Swedish Government Post Office] to keep its prices low through cost cutting and efficiency measures.

      The researchers found that neighboring Norway, which didn't reform its postal system, had prices rise nearly twice as much.