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Geddes delivers Postal Service fix: Set it free

Richard Geddes testifies before Congress
Richard Geddes, associate professor in the Department of Policy Analysis and Management, testifies Feb. 13 before the U.S. Senate Committee on Homeland Security and Government Affairs.

The U.S. Postal Service is in the midst of a major fiscal crisis, losing $17,361 every minute, or about $25 million every day.

Testifying before Congress, Cornell economist Richard Geddes offered a way to stanch the financial bleeding: take the Postal Service public.

“Postal liberalization in other countries demonstrates clearly that, with proper policy reform, the postal and delivery sector can emerge ... as a sustainable, vigorous and profitable component of a developed economy. For that desirable outcome to be realized in the United States, however, we must remove existing legal impediments to the Postal Service evolving into a more innovative and entrepreneurial company,” said Geddes, associate professor in the Department of Policy Analysis and Management, who testified Feb. 13 before the U.S. Senate Committee on Homeland Security and Government Affairs.

The volume of first-class mail delivered by the post office – its most valuable service – peaked in 2001. But by 2012 volume had plummeted by one-third. “Declines of this magnitude in letter mail have not been seen since the Great Depression,” said Geddes, who is director of the Cornell Program in Infrastructure Policy.

The dramatic decrease is due mostly to the influx of cheap and instantaneous electronic substitutes such as phone calls, emails and texts. “Increased use of electronic banking and electronic payment of bills, such as utility bills, have had a particularly large impact on mail volumes,” Geddes said.

But two key reforms could offer a turnaround.

First, Congress should break the post office’s monopoly on delivering letters and the use of a household’s mailbox, and allow it to become “entrepreneurial.” “Postal laws should be reformed to allow the Postal Service to use its most valuable asset – the network that gives it the ability to deliver mail to every address on a regular basis – in new and innovative ways to meet existing demand and to offer new delivery products,” Geddes said. For example, commercialization would allow the post office to become more competitive, especially where it is making money: Package and shipping services increased 4 percent in the first quarter of 2013.

Second, Congress should “corporatize” the post office, requiring it to comply with the same laws that corporations do, from establishing a professional board of directors to compensating executives based on whether they meet clear performance standards.

This revamped legal framework would make the government the sole owner of the post office. But eventually the government would take the post office public by selling shares to private investors. Making the post office a publicly traded company would inject it with much-needed capital. And private investors – not taxpayers – would bear the risk.

Other countries have implemented these reforms with great success, Geddes said. “The United States now lags behind almost every other developed country in postal liberalization,” he said. For example, all 27 members of the European Union have eliminated their postal monopolies. Germany’s Deutsche Post DHL has become a major player in global delivery and logistics. It operates in 220 countries and is the world’s largest courier company. And New Zealand Post has become a successful, innovative global company focusing on parcel delivery, logistics and other businesses.

“The U.S. Postal Service has an enormously valuable asset in its universal delivery network that has been constructed over decades. That asset deserves to be managed as effectively as possible. These reforms ... will ensure that the Postal Service remains a sustainable, vigorous institution for decades to come,” Geddes said.

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