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Publick Occurrences 2.0

December 5, 2011

The Post Office as State-Business Hybrid

Filed under: Business History,Congress,Government,Joe Adelman's Posts,Media — Joseph M. Adelman @ 1:09 pm

News about the post office is circulating rapidly (which is ironic, given that the news is about cuts that will slow service). Over the weekend, the New York Times ran an analysis of the finances of the U.S. Postal Service, concluding that it could not survive without junk mail. And then this morning, the USPS itself announced anticipated service cuts that will close more than half of the 500 processing centers around the country, slowing mail delivery and eliminating (for practical purposes) next-day delivery of first-class mail.

As I’ve argued in other spaces, and as J.L. Bell commented on my post last Friday, Congress has asked the Postal Service to do the impossible: act as a monopoly universal provider and make a profit. It’s taken a while, but postal officials are finally starting to put things in those terms:

“We are in a deep financial crisis today because we have a business model that is tied to the past,” Postmaster General Patrick R. Donahoe said during a speech last month. “We are expected to operate like a business, but we do not have the flexibility to do so. Our business model is fundamentally inflexible. It prevents the Postal Service from solving problems and being effective in the way a business would.”

This is an unsustainable model for the long term. I would also stipulate that a major problem for the postal service is the massive obligations it is under for its pension system, though the problem runs far deeper (and therefore I won’t discuss it). Most importantly, I think the Postmaster General is underselling the issue. The key question is whether, as I noted on Friday, the government has a vested interest (i.e., a reason to fund) in providing a means to communicate by paper and packages throughout the country. The problem is and has been that Congress hasn’t asked that question. People want to privatize it or “rescue” it, but with little examination of the underlying question of whether society’s interest in the circulation of information in this manner is worth an expenditure.

The question is deeply vexed and has a long history. The 1710 Post Office Act of Parliament established the Post Office in North America (with headquarters in New York) for the purpose of facilitating communication but also with the explicit assumption that it would produce revenue that could accrue to the Treasury. (The revenue was initially to go for the support of the royal family.) It didn’t make money until the 1760s, when Benjamin Franklin as Deputy Postmaster General for North America instituted a series of reforms that streamlined and improved service. As I noted previously, the post office was important enough that it was one of the first actions of the Second Continental Congress, and it is also one of the few government agencies that Congress is explicitly authorized to regulate in the enumerated powers clause of the Constitution. Questions of revenue generation continued into the nineteenth century, when the Post Office made an enormous profit. And of course the Postal Reorganization Act of 1970, which converted the Post Office Department into an independent government agency as the U.S. Postal Service, focused on ways to make the Post Office profitable again.

It’s also important to consider that the communication that flows through the postal system has changed dramatically. At its inception, the Post Office was a means to circulate political information (through newspapers and other publications), official mail, and commercial information, and rates were set accordingly. Alexis de Tocqueville, on his tour of the United States in 1831, noted with wonder how thorough information circulated in the nation:

I travelled along a portion of the frontier of the United States in a sort of cart, which was termed the mail. We passed, day and night, with great rapidity, along the roads, which were scarcely marked out through immense forests. When the gloom of the woods became impenetrable, the driver lighted branches of pine, and we journeyed along the light they cast. From time to time, we came to a hut in the midst of the forest; this was a post-office. The mail dropped an enormous bundle of letters at the door of this isolated dwelling, and we pursued our way at full gallop, leaving the inhabitants of the neighboring log-houses to send for their share of the treasure.

The post office was, as Richard John has demonstrated, the branch of the federal government most present in the lives of Americans, and served as an outlet for encouraging informed political debate (or at least that was the ideal). Not until the 1840s and 1850s did Congress lower the price of sending a letter to a level that encouraged mass use of the genre, which led to the development of new forms of mail, including the valentine and advertising circulars. Now, as the New York Times piece cites, junk mail–that is, unsolicited advertising–constitutes a major component of the Post Office’s revenue stream. We no longer get our newspapers, as Tocqueville once noted, through the post office. We no longer send personal letters.

At some point, therefore, the ideal of government-sponsored communications channels fell by the wayside. What I hope Congress and the media will pick up on is the question of whether society and government have an interest in guaranteeing this sort of service, and if so, how. Whether that leads to the demise of the Post Office is up to Congress.

UPDATE (12/6, 9:31am): Just found that Richard R. John did a study for the Postal Regulatory Commission in 2008 entitled, History of Universal Service and the Postal Monopoly. Provides a good background with quite a bit more detail than I’ve provided here.

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10 Comments »

  1. @edatpost I’ve posted my thoughts on #USPS service cuts in historical context of state/business conundrum here: http://t.co/LFYXhSr0

    Comment by Joseph Adelman (@jmadelman) — December 5, 2011 @ 1:24 pm

  2. Letter-writing with stamps and paper is probably not coming back as the default form of mass communication. However, cheap mail would still seem to provide a crucial level playing field for a lot of small businesses and institutions, not to mention rural America. But I wonder if minds in those quarters are not too fogged by conservative economic dogma to realize that and speak up? Someone in addition to historians needs to get out and ideologize for the concept of providing public services. Unfortunately, the post office management itself clearly does not get this, what with the genius new plan of providing an intentionally crappier public service.

    Comment by Jeff Pasley — December 5, 2011 @ 3:01 pm

  3. From what I understand, the biggest problem the Royal Mail has in the UK is that it is forced to serve unprofitable routes while bigger competitors are able to undercut their service both by placing some burden of delivery on the Royal Mail (yes, seriously!) and offering lower prices and faster delivery on profitable routes. In the US, this burden must be even greater, especially as I imagine it’s in rural areas that the USPS is most essential. The USPS, then, must be allowed to run at a loss. But if you can’t monopolize the profitable routes, those losses would quickly spiral out of control.

    Jeff – not coming back right up until the point mass cyber-warfare breaks out!

    Comment by Ken — December 5, 2011 @ 4:03 pm

  4. Ken, you’re right. In the US, of course, companies like FedEx and UPS eat up a large proportion of the competitive shipping business, especially in the most competitive urban centers (i.e., New York, Chicago, Los Angeles, etc.). Meanwhile the USPS has to deliver to the far reaches of Alaska and Hawaii, and get service to hard-to-reach rural areas of the Mountain West, etc. In fact, one of the cliched talking points about the post office is that UPS and FedEx contract with USPS to deliver packages in those rural areas precisely because it’s so expensive and unprofitable. So yes, it’s absolutely essential to mail delivery in rural areas, and you can’t make any money that way.

    But as I’m trying to say, that question isn’t being asked where it needs to be.

    Comment by Joseph M. Adelman — December 5, 2011 @ 5:40 pm

  5. [...] The Post Office as State-Business Hybrid Congress has asked the Postal Service to do the impossible: act as a monopoly universal provider and make a profit. It’s taken a while, but postal officials are finally starting to put things in those terms: [...]

    Pingback by Sunday Reading « zunguzungu — December 11, 2011 @ 9:25 am

  6. The biggest problem right now is the 5.5 billion dollars a year that congress is forcing the USPS to pay.

    Comment by K — December 27, 2011 @ 4:40 am

  7. For profit companies like UPS and fed ex are using the USPS to deliver mail that these companies cannot profit on. For example they are droping mail off residential to post offices on a daily basis making the USPS deliver the mail to residents. These companies are profiting from the packages and leaving it up to the USPS to deliver those same packages to residents that they (USPS & fedex).

    This makes me wonder if UPS and fedex are driving the USPS further in debt? A win for big companies and a loss for the USPS. Why?

    Comment by frannk — December 27, 2011 @ 6:06 am

  8. Below is an interesting story I read on the USPS………………

    Is Another Of Americas Founding Institutions Fading Away Into History Forever?

    Three weeks after the battles of Lexington and Concord, the Second Continental Congress met in Philadelphia in May 1775. A committee, chaired by Benjamin Franklin and including Samuel Adams, Richard Henry Lee, Philip Livingston, Thomas Lynch, and Thomas Willing, was named to consider the creation of a postal system.

    Now, in 2012, we may soon see this American Institution known as the United States Postal Service; vanish into history as the USPS desperately struggles to keep its head above water. And its possible, that the only ones able to toss them a life preserver, helped to financially drown them in the first place…

    To read the entire story, go to:

    http://westvirginianews.blogspot.com/2012/02/has-congress-made-it-impossible-for.html

    Comment by Sam Webber — February 24, 2012 @ 2:11 pm

  9. for summer reading free on the post office go to search , find the title: The Post Offcie, its past record, it’s present condition and it potential relation to the new world era, Daniel Calhoun Roper, chairperson united states tarriff commision and first assistant post master general, 1913-1917. In 2000, 2001 background; from 1970 until 1980 it is said tht Postal Federal Employees took cuts in pay , health benifits and retirement benifits worth about 200 billion dollars, in 2000, 2001, they were made to pay under the 1997 budget reconcillation act in to the fers, federal employee retirement system and csrs, civil service retirement system, both the President and both sides of congress thanked them for their ‘ sacrifice’ to add to the budget deficit reduction. Postal Federal employee recieved no additional benifits for paying 15 percent more in to their retirement accounts. The increase was removed from the President’s budget in 2002, further legislation ensued. Congress was informed of overpayments to the csrs and fers account, 55 billion plus 85 overcharge to usps on csrs, and 15 billion at least on fers, totally out to at least 104 billion paid in to retirement , there fore congress decided that a 3rd retirement system should go in to place ( by being lobbied see links below) taking 5 billion a year out of profits of the USPS from 2006 until 2016 called the postal accountibility and enhacement act , which really mean non accountibility and subtraction act from profits. With the paea , bonus’s were givent to the top 13 in upper managment of the usps, including former pmg potter, who got a 72 thousand dollar a year raise, and top salary , then retirement benifits of 5. 5 million in 2010. Meanwhile craft employee who had too much money in retirement got told non replacement of staff for attrition or retirement since congress was considering them so much for their retirements and thought to put away 75 years worth of retirement that no other federal agency has to do or private company at 100 percent, this was for workers not born or working yet for the usps from 2006 until 2016 at a rate of 5 billion a year. The effect on postal workers were immediate, as you can read in http://www.postalmag.com/joygoldberguspsstress.pdf, or go to AWPU first area tricounty local , pa 3800 and read stress in the workplace artical, how the ongoing violation of the guiding principals of the usps is creating a toxic work environment, then go to search and find http://www.billburras.org-misc, usually you have to type in the words to find for goggle will tell you they can find so type in bill burras jouranal and then look for misc and scroll down the elevator page and read phoney excuses for diverting usps revenue. Then go to ALEC/Koch The Privitazation of USPS for Ups and FedEx, by bob sloan vltp , posted april sometime 2012, then go to examiner.com and search for artical by Tim McCown, The privitization of the USPS , behind all the schemes and lies of the privitization of the USPS, the go to http://www.savethepostoffice.com. thank you.

    Comment by valerie Nostdahl — August 12, 2012 @ 3:24 am

  10. George mason universtiy is also contributed heavily by the koch industries brothers.

    Comment by valerie Nostdahl — August 12, 2012 @ 3:27 am

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