Why Does Congress Not Run the Post Office Like a Business -- i.e., With Lax and Forgiving Rules?

by Neil H. Buchanan
Who could have imagined that the United States Postal Service would become a flashpoint in a national election, especially in the midst of a global health crisis?  Yet here we are, with movement conservatism's longstanding loathing of the Post Office having joined in an unholy alliance with Donald Trump's efforts to convince the world of the complete lie that mail-in voting is rife with fraud.

Here, I want to focus on the non-Trumpian side of that alliance, that is, on the decades of efforts by anti-government extremists to disparage the very idea of a national postal system run as a public service by the national government.  The reasons for that bone-deep hatred of the USPS are perversely fascinating on their own (de)merits, but there is a deeper hypocrisy involved as well.

Last week, I wrote a column here on Dorf on Law which was, I readily concede, based on my own touching naivete.  That is, even though I write frequently (both in public intellectual forums like this one and in my formal academic work) about how the standard conservative model of economics is a sham, I simply cannot shake the habits of mind formed in my youth that tell me that we can and should expect people and businesses to exhibit broadly rational economic behavior.

In particular, I wrote last week that it makes no sense for landlords and mortgage holders to have begun the process this summer of evicting millions of people from their homes.  Yes, plenty of people will reluctantly but inevitably violate their leases and mortgage contracts by not paying rent and monthly mortgages in full and on time.  As a legal matter, that gives the non-breaching party the right to pursue remedies that generally include eviction.

But just because someone has a right to do something does not mean that they should go ahead and do it.  What happens after the evictions?  The owners of the properties will be left with "non-performing assets," that is, with properties from which they are collecting zero in income and which will be much more costly to maintain on an immediate and ongoing basis.

That usually is not a problem, because the whole point of evicting nonpaying occupants is to replace them with paying occupants.  The transaction and other costs of the evictions themselves, including lost rent until the unit is re-let or re-sold, are presumably less than the extra money that the owner expects to collect by finding paying customers -- but new paying customers are few and far between these days.  (None of the evictees, after all, will pass a credit check when they look for new places to live.)

The point here, which I acknowledged in that column, is that I continue to believe in a baseline presumption that people will act rationally, which in this case means that they will stop and say, "Hey, maybe the financially maximizing thing is not to evict people, given the alternatives."  I am not saying, of course, that I think that people only think about financial maximization.  I am, however, saying that if we believe (as conservative economists do) that people are rational maximizers, then we ought to see things that we are not seeing.  And that is puzzling.

Similarly, I was surprised last year to find myself thinking that supply and demand work in the real world in the way that the textbooks say they should work.  Specifically, as I considered moving from DC to Gainesville, I wondered what faculty members in that relatively large university town do about their houses when they are gone for the summer or are on sabbatical.  My first thought was: "Well, obviously there must be profit seekers who have made a business out of maintaining and monitoring empty houses; so I'll just find one of those companies."
When I asked my future colleagues about this, however, I was surprised that not one of them used such a service (or even had heard that such services exist).  How did they handle their housing issues during prolonged absences?  Word of mouth recommendations of individual people who might or might not be able to do what is needed.  Fortunately for me, the person to whom I was referred has turned out to be great.

But this is not what the textbooks predict.  Moreover, a large part of modern economics involves figuring out ways to explain away deviations from the textbook model.  Nearly all such explanations, however, return in one way or another to the circular statement that standard economic theory is not wrong and cannot possibly be wrong, because if something is not happening it must be because it is not rational for it to happen.
Somehow, thousands upon thousands of people in college towns groping around in the dark to find competent property management is presumptively rational, simply because it is happening -- just as it must be rational for landlords and mortgage holders to evict renters and homeowners, because it is happening.

Volumes have been written about how this circular reasoning works, with the catchall category of transaction costs (to which I referred briefly above) doing an awful lot of the work.  And this ties into the notion that markets are "efficient" in the economic sense, because people supposedly react rationally to economic incentives in a way that cannot be improved upon by "central planning" -- which is the conservatives' scary label for "decisions made by elected and appointed officials to guide economic activity."

All of which, strangely enough, brings us back to the post office.  Because the USPS is a government agency, it is automatically presumed -- even by non-conservatives -- to be inefficient.  Why?  Because it is not subject to the rigors of competition, of course.  Gatherings of conservatives typically include stale laugh lines about the Post Office and the Department of Motor Vehicles, unfunny jokes that play on the idea that unresponsive bureaucrats must always provide inferior service compared to nimble entrepreneurs.
None of that is remotely true, of course.  When we have bad public bureaucracies, it is because we have chosen to have bad public bureaucracies, not because they are inevitable.  One of the forgotten aspects of the Clinton Administration (of which I was never much of a fan) was Vice President Al Gore's "reinventing government" initiative, which involved an effort to update public services to eliminate long lines and so on.  And it was a real success, especially at the Post Office.
Gore was hardly writing on a blank slate.  The late, great progressive economist John Kenneth Galbraith had written extensively in the second half of the Twentieth Century about the deliberate impoverishment of the public sector.  People have come to associate government offices with discomfort, dinginess, and wasted time because that is what they experienced, even though what they were getting was a political choice.
I have moved around the country many times over the years, and if it were true that public-serving offices simply have to be terrible, then there would be no examples of good DMV's.  Yet my experiences in Wisconsin, Maryland, D.C., and Florida were positively pleasant, even as I have horror stories that I could tell about Ohio, New York, New Jersey, and Massachusetts.  There is no political coherence (red states, blue states, swing states) to this.  It is simply a matter of whether the relevant government decides that it is worth its while to end the immiseration of its citizens (and the office workers who are stuck in horrible systems).

There is a key difference, however, between these two targets of conservative hatred.  Although the most extreme anti-government types surely disagree, most conservatives will concede that DMV's need to be public agencies, and they simply use the horror stories to support their overall theory that everything that can be privatized should be.  But the postal system is precisely one of those things that conservatives have long been certain should not be run by government at all.

It is not only conservatives, however, who can fall for this anti-Post Office argument.  A very good friend of mine who is quite liberal surprised me one day a few years ago by saying that she did not think that the government should run a postal service.  Her arguments were classic neoliberalism, with appeals to the supposed efficiency of private actors mixing with the idea that there is no public goods aspect to postal delivery.

Indeed, when I asked her about people living in remote areas -- areas that, one might add, FedEx and UPS refuse to cover, using the Post Office to deliver their packages via the "last mile" system -- her response was that, well, those people chose to live out there, so why should the rest of us subsidize their self-indulgence?  If they want to live in the hinterlands, let them pay the full freight of that decision.

There is quite a lot of appeal to that logic, precisely because it draws from the same set of attitudes that I described above: people make choices rationally, businesses will spring up to serve paying customers, and so on.  It certainly treats everyone as atomized agents, not as part of a nation or a society.  "You happen to prefer chardonnay over Bud?  Your choice, your cost.  You live in the countryside?  Your choice, your cost."
Even setting aside the question of how much choice people have in where they live -- and, ahem, the transaction costs of relocating -- that we now know how much the post office is involved in providing medicines to elders and veterans at the very least raises the stakes on the question of whether we should suddenly impose much higher expenses on certain customers.  Indeed, why should we even treat postal delivery as a commodity?  Just because it costs money?  Well, so do police forces, but conservatives are freaking out about the idea that police funding is excessive and misdirected.

Finally, then, we have reached the biggest problem with the neoliberal faith in markets and rationality as the only and only route to maximizing social welfare.  Even if we accept the neoliberal idea that postal services are merely another market, the companies that supposedly would be able to replace the Post Office can exist only because of the legal system, which sets up the rules of commerce, labor, customer rights, and on and on.  What can we say about those rules?
The emergence of the Trump-vs.-USPS war has had at least one salutary effect, which is to cause us all to learn that Congress -- far from encouraging the Post Office to be profitable -- in 2006 decided to force the agency to pre-fund its anticipated pension obligations for the next 75 years.  Without that requirement, which is imposed on no other entity (public or private) in the country, the USPS would run a consistent surplus.
In the private sector, the laws that we set up determines whether a market exists at all, and seemingly arcane rules can change everything.  Indeed, private companies that still offer traditional pensions are allowed to under-fund those pensions in a big way.  Even when that does not happen, the laws regarding company funding of 401(k) plans, IRA's, and so forth, provide various ways in which companies can play the system (for example, delaying vesting of employers' matching contributions and sometimes clawing them back).

In other words, there is an endless list of ways in which changes in legal requirements could make the USPS "more competitive."  Allowing it to treat its employees as badly as private companies are allowed to treat theirs is a bad idea, of course, because it moves in exactly the wrong direction.  Even so, if the goal is to get federal agencies to act more like businesses, it is important to remember just how lax and forgiving the laws are that enable those businesses to make money for their owners.