Small Business Reading Room

Monday, March 14, 2005

Postal Tail Wagging the Federal Dog

The US Post Office Board of Governors is trying to get another rate increase. This time they expect to go for about 5-6% for 2006 and the same again for 2007.

The world is moving ahead and the Postal Service is becoming more and more of a dinosaur. As Raymond Keating points out in his latest Cybercolumn, this is becoming less laughingstock and more of a danger to small businesses.

As the Postal Service slides further behind the rest of the world they must continually raise rates faster than inflation. Massive economies of scale and improved productivity in the rest of the economy have not stopped the Post Office from raising rates 517% since 1970. Inflation was 293% over the same period.

Now they want to expand into more of the private economy. That is a bad idea. The least we can do is let the Postal Service wither as smaller percentages of our communications go by mail. The best we could do would be to completely privatize the whole system. Privatization would give each citizen one share in the new private post office. We could each hold it or trade it for cash at the market price.

So long as the Postal bureaucracy and labor unions are wagging the Federal dog, small business will have to pay the price.


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