Marathon Pundit: From the American Enterprise Institute: How to fix the US Postal Service dinosaur

We may be headed to a US Postal Service bailout. Ugh! The American Enterprise group gives a number of suggestions to bring the USPS into the 21st century, including selling post offices located on valuable real estate in such places as Washington DC and Manhattan. The AEI recommends privatizing the dinosaur, which would probably (they didn't mention this item) lead to renogotiating overly-generous union contracts.

The Obama Administration has proposed a timid, ineffective plan. It provides only temporary fixes by returning to the Postal Service some $7 billion in overpayments it made to the Federal Employees Retirement System since 1971, deferring for two years a required annual $5.5 billion payment due to U.S. taxpayers, and allowing postage rates to increase by 2 cents. The plan would do nothing to address the underlying, inexorable problem of adjusting to a new communications marketplace. In short, such changes would only push off--and make more costly--the day of reckoning when real reforms become inevitable.

Congress must answer two questions in light of widespread electronic communications and increasingly commercial mail. First, what level (such as days per week) of government-guaranteed mail delivery is appropriate in such a world? Second-assuming that Congress decides that some routes are worthy of a direct taxpayer subsidy-what is the cheapest and most transparent way to pay that subsidy? Taxpayers have a right to know exactly how much guaranteed mail service is costing them, as well as assurances that they are paying the minimum amount necessary for such service.

Even if Congress decides that direct taxpayer subsidies are warranted--and increasingly commercialized mail suggests that they are not--the Postal Service should nevertheless be put on a course toward de-monopolization and privatization.

This approach would free up the Postal Service to evolve into a typical private corporation, and to bid itself on those routes it refused to serve without subsidies. The Postal Service would also be free to set its rates as it wished.