Viewpoints : Should We Privatize the Postal Service?

T he specter of another increase in the price of a postage stamp has again raised calls for privatizing the Postal Service.

Leading the campaign for privatization is James C. Miller, former head of the federal Office of Management and Budget in the Reagan Administration. Miller argues that if private companies were allowed to deliver the mail--currently, they may only deliver parcels, extremely urgent mail and some bulk mail--prices would fall and the mail would travel more efficiently.

Furiously defending the Postal Service as a government agency is Postmaster General Anthony M. Frank, who frequently has found himself debating Miller on the subject. Frank says the agency’s proposal to increase the price of a first-class stamp to 30 cents next year barely allows the agency to keep up with inflation.

For a debate on the issues, journalist Sharon Bernstein conducted separate interviews of Frank and Miller, asking them the same questions and allowing each to respond to the other’s views.

Does the Postal Service need to be changed? If so, how?

Miller: The Postal Service needs to be changed in two specific dimensions. The more important is to repeal the private-express statutes that presently grant the Postal Service a monopoly on the delivery of addressed mail. The second reform that needs to be made is to transfer the Postal Service from the public sector to the private sector and give it the types of incentives competitive firms have.

Frank: Jim Miller makes his living off of doing this. It was an avocation for him (when he was with the Reagan Administration), and now it’s become a vocation. His ideas--if you can call them ideas--are not worth dignifying with a discussion.

(As far as changes,) nothing stays the same in our country. In point of fact, the Postal Service is going to go through more changes in the next five years than it has in the history of the country. So of course it’s changing. We’re automating more of our systems, and we’re going to pay discounts to the big bulk mailers for presorting their mail and putting their own bar codes on. That will free our people up to do more customer service.

But its system of ownership will not change.

What is the basic argument in favor of privatizing the Postal Service?

Miller: There really are two different issues: postal privatization and removal of the monopoly.

First, I’d like to talk about the monopoly. Our commercial system is based on competition. Indeed, some believe the antitrust laws are the Magna Carta of our marketplace. Yet the antitrust laws do not apply to the Postal Service. If they did, you would get a more responsive, lower-priced operation.

As for privatization, government firms are notoriously inefficient because they have no bottom line. All over the world, countries are privatizing their government corporations, whether it’s in the industrialized West or in the Eastern Bloc. Yet we in America steadfastly cling to a dinosaur Postal Service.

Frank: First of all, there’s not two issues, there’s one. Jim Miller wants to break up the Postal Service into little pieces and sell off the profitable ones.

The Postal Service has two functions. One is to run as a business and one is to run as a public service. You’d probably end up with a thousand private carriers; some would go bankrupt in competing for what would be the higher concentrations of population--major cities--where deliveries are less expensive. The Post Office would be left with the most difficult and costly deliveries, the ones private firms don’t want. They’d want Manhattan but not the Bronx and rural areas.

How is the Postal Service currently financed?

Frank: Most people don’t know this, but the Postal Service does not take a dime in taxes. We are completely self-contained. And since the Post Office was changed to the Postal Service in 1971, the price of postage has kept pace with inflation and nothing more.

If the Postal Service is sold to a private company, wouldn’t consumers be at the mercy of a profit-oriented company that, like an unregulated phone company, could raise rates at will?

Miller: I don’t think it would be like the telephone company. I would not propose giving any postal company a monopoly on the delivery of mail. I would much rather risk my welfare on competitive firms pursuing the profit motive.

Frank: And prices will go down just like airline travel went down so much since deregulation. Now you get to fly from Los Angeles to San Francisco for $400 bucks when it used to cost you $12.50. I hope the sarcasm is coming across here.

People who have been in the private mail business for a long time talk of literally hiring carriers off the street. What kind of quality control would be used if the Postal Service went private?

Frank: Yes, the old wino mail drop. The Postal Service employs 750,000 people, and most of them are career employees.

Miller: People entrust many times the number of parcels to United Parcel Service as they do to the Postal Service every day. The Postal Service is practically out of the parcel business because they just can’t stand the competition.

And at the high end, people trust their express mail service to private companies far more than to the Postal Service.

How would the jobs and work environment of postal employees be affected by privatization?

Frank: When Jim Miller talks about privatization, he means union busting. The Postal Service pays its people $15 an hour, plus another $5 in benefits. Miller would pay them entry level wages of $4 to $6.

Miller: I don’t think they would be adversely affected significantly, although postal union leadership is adamantly opposed to it. The competitive postal services pay their employees very well, but they work under more flexible work rules that allow their employees to be more productive.

(The Postal Service says its) work rules protect the workers. Well, you can have an operation that protects its workers to the point that they don’t service the consumer.

Do any other countries have a private postal system?

Miller: New Zealand took its postal service private three years ago, and it’s working very well. The government maintains some ownership, but it’s essentially private.

Frank: That country is about 600 miles long with 3 million people. As soon as they went private they closed 70% of their post offices. The cost of a letter went up an immediate 33% for three-day delivery and twice that for next-day service.

How likely is the United States to take its postal system private?

Miller: It’s more likely they’ll reduce the monopoly power of the Postal Service sooner than they will take it private. And I don’t think either is likely any time soon. The reason is the postal unions and the Postal Service itself is very popular on Capitol Hill.

On the other hand, the power of the idea is not something to overlook; it’s a very strong one. And don’t be surprised if 10 years from now it’s accomplished.

Frank: If we do our job, the chances of that happening are nil.

(Miller) says, “Let’s just try it as an experiment.” Well, if it doesn’t work, how do you put Humpty Dumpty back together again? Do you just go out and say, “I want to hire 750,000 people and train them?”