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Wednesday, August 26, 2009

FedEx, UPS, and the Post Office

Obama said:

If the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren't subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete. They do it all the time. I mean, if you think about -- if you think about it, UPS and FedEx are doing just fine, right? No, they are. It's the Post Office that's always having problems.
This quote shows an embarrassing level of ignorance by President Obama.

UPS and FedEx provide express delivery service and package delivery service. They do *NOT* provide first class mail service. It is explicitly illegal for a private business to create a first class mail service that competes with the Post Office. The reason that UPS and FedEx don't offer first class delivery of regular letters is not because they don't want to. They don't do it because it's illegal.

There's an amusing story on this point. Lysander Spooner tried to operate his own mail delivery business that competed with the Post Office. He was offering better prices and better service. The State forcibly shut down his business, because the Post Office has a State-backed monopoly. Competing with the Post Office is illegal.

As long as the Federal government exists, the Post Office *CANNOT* go bankrupt. The Post Office's debts and employee pensions are backed by the full taxation power of the Federal government. The Post Office has an explicit State-backed monopoly.

Fortunately, the Post Office is sufficiently inefficient that UPS and FedEx can compete with it in their niche. At this point, UPS and FedEx are able to hire lobbyists to defend their market position. They can prevent the Post Office from using its first class mail monopoly to undermine their business.

A "State option" healthcare plan would have the same problem. It would be guaranteed funding via taxation/theft. Private plans might be able to offer better prices or better service. They would be taxed to subsidize the State plan, forcing them to raise prices.

Government "competition" with private businesses is not true competition. The "State option" would be guaranteed funding via taxation/theft. Either the "State option" would be so lousy that nobody would use it, or it would be so attractive that almost everyone would choose it.

For example, if there were a "State option" healthcare plan, my employer might decide to stop offering their own plan. Instead, they'll enroll everyone in the State plan. Only employers that cater to wealthy workers would have their own private plan.

It is silly to say "government competes with private businesses". There is no true competition in the areas that matter, providing security and defense.


Abbie said...

Actually, for right now, the Post Office is not backed by tax dollars, but by postage and services. Maybe inflation.
When working with the post office, I found that it is likely that the USPS funds itself by overpricing first class, etc.

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