http://money.cnn.com/2012/02/17/news/economy/stamp_price_hike/index.htm?iid=SF_E_River
The US Postal Service is currently in financial troubles and presented their 5-year business plan to Congress last week. One part of the plan was to raise first-class stamp prices to 50 cents (currently it is at 45 cents). The Postal Service said if nothing is done they could lose up to $18 billion in the next five years if nothing is done.
The rise in stamp price could "yield $1 billion a year in new revenue." Also in the plan, they have suggested closing down some mail processing plants and cut the delivery of first class mail from six days to five days. The Postal Service would also cut jobs and force employees who are eligible to retire to retire. The plan has received opposition from employee unions and Congress. The unions wants Congress to act. The plan of the cuts were introduced in December of last year but were delayed until May 15th, if Congress does not act by then the Postal Service will go through with these cuts.
I thought this article was interesting because we were talking about the government's role in providing certain goods if there are market failures. Do you think the government should run the Postal Service or should a private firm do it?
9 comments:
Private firms are more efficient at running companies than the government, as they can arguably understand the market conditions better than the government due to the fact they are 'specialists'. However, if the private firm runs it, we must be wary of the lack of competition (another market failure that could have the government intervene) as that private firm would probably be a monopoly. But, if the postal service was to be privatized and other firms were allowed to enter the market as a form of delivering mail (hint: parcel services such as UPS, DHL, FedEx), it would promote competition and lower prices for consumers. In the end, the government should consider privatizing USPS as it would be a burden off their backs, and just monitor it in a paternalistic manner rather than be thoroughly involved.
Although private firms are more efficient at running these services, there is an argument to be made to keep the USPS operating at a loss. In the end, the government needs to evaluate whether the ability to send mail at a limited price is a public good. A private firm looking to make a profit would, in this case, raise prices. However, if the government thinks it would be do the public a disservice to have to pay more heavily for mail, then they could accept the net loss of the USPS as a cost to deliver to the 'public good' of cheap mail. While there would still be a cost to consumers, the government would subsidize a bit of the actual cost to deliver the service. I personally feel as though they should privatize USPS, but I would understand this argument against doing so.
Greg is correct in his analysis that the post office should be ran as a private firm that competes in the open market for the delivery of mail and packages. Its important when making this transfer to a private market to recognize there is a need for government subsidy for the last mile of transportation in much rural America that receives service today. This goes to Emma's point that there could be a definite need for government involvement with USPS to insure all American's can have delivery service of mail and packages. In the coming years it will be very interesting to see the changes that USPS will make to cut costs and remain efficient.
I agree with the above comments. Additionally, however, the government will have to consider not only the impacts of privately-sent mail (pen pals and the like) but also company and government sent mail. I wonder if the development of a privatized mailing system would lead to contracts between the government and large firms in order to continue sending out mail at a cheaper price.
In my opinion, a raise of 5 cents is reasonable, as the US postal services projected a loss up to $18 billion in the next five year if nothing is done. As for the issue whether the US postal services should be privatized or not, I incline to keep the US postal services as a ‘public good’; that is, to keep the US postal services as a non-profit organization. Once it privatized, as the profit will become the first thing to achieve, I believe the fee would be raised to a much higher level that mailing to a friend will be expensive. Furthermore, as the e-communication tools are very easy to access now, I don’t see an huge profitability of mailing business. Once the fee raised to a (unreasonable) high level, no matter for private or public use, people might/will change to e-communication tools.
Privatizing the US mail system may be more efficient, however I feel that increasing the price to .50 might be too much. The shift of communication has already been toward more electronic versions. I think this price might be too high and people will pursue other options. The revenue can only be made up to the extent that the government believes if demand remains the same and I'm not sure it would at that price. Fifty cents seems too high in my opinion and from a personal standpoint I might be less likely to send letters.
Privatizing USPS will not simply make the mail system more efficient. I also find out that the staff in private mail system are more efficient and more friendly than staff in the USPS. The cost of consumers in using USPS service, is not only the cheaper price of sending a mail, but also a much longer wait time in the row and less friendly service due to less competition as government owned.
There are several people I know totally turn from USPS to UPS because of this stamp increasing. People have been feeling the service and efficiency of USPS has more advantages than UPS. Maybe privatizing USPS is a good thing, but insisting some basic disciplines is still necessary, such as flat fee.
I believe that the Post Office clearly needs to be allowed to make the changes it suggests. To continue to force it to operate in such an unprofitable manner is not what it needs, the suggestions that it puts forward need to be fulfilled and then once we can see the results, it can be determined what to do. Currently, it almost seems that some want to force the post office to fail just so that their "points" will be proven.
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