When I first started these commentaries back in 2005 I noted that one of the major points of disagreement within the economics profession had to do with how much government intervention into “the market economy” was necessary. Of course, there are anarchists who believe that there should be no government what so ever. (In my opinion, the most detailed explication of how such a society would exist in reality is the fictionalized presentation by the anthropologist turned fantasy writer Ursula K. LeGuin in The Dispossessed. It still makes a fabulous read almost 50 years after publication!) In addition, supporters of the planned economy introduced into the Soviet Union in 1928 and copied by various communist governments between World War II and the 1990s (with North Korea still claiming to be centrally planned) believed that the government should make little or no provision for anything resembling a “free market.”
But even back in the 1970s when I started teaching economics, the range of “debate” within the profession in the United States and other advanced countries in the world was not about whether there should be no government or almost 100% government control. Instead, the issue was how much and in what way should government use its power to alter what would be done in a totally free market.
In explaining the role of government in the United States, I can do no better than reproduce what I wrote in Surrender over 20 years ago:
“The role of government in a market economy such as the United States is usually divided into six major areas of activity …1) Provide a legal framework appropriate for the successful operation of the market system, 2) Maintain competition, 3) Provide social goods and services, 4) Adjust the compostion of output to take account or social costs and benefits, 5) Supplement or curb private aggregate demand so as to permit only minimal unemployment while at the same time maintaining price stability, [and] 6) Redistribute income.” (Page 36).
Consider points 1 and 2. Virtually every economist who isn’t an anarchist, even the most libertarian, believes that there needs to be a government to enforce contracts and protect private property from theft. Even in today’s United States, economists pay lip service to a role for government in protecting the market from monopolization --- one firm taking over everything. That is why there was recently a major hearing before Congress where CEO’s of four tech giants defended their companies claiming they faced “lots” of competition.
With point 3, we come to the focus of this commentary --- the provision of essential goods and services. Adam Smith who is considered the founder of modern free market economics asserted that government had a role of “providing for the common defense” and “essential public works.” Among those essential public works, was a Post Office. When the framers met in Philadelphia to write the Constitution in 1787, Smith’s major work was eleven years old and most if not all of the delegates were familiar with it. Therefore, it is not surprising that the Constitution gave Congress the role of creating both post offices and postal roads.
What makes a post office one of the “essential public works” of which Smith approves despite his general disdain for government interference with what he called the “natural system of liberty?” In a monarchy or centralized dictatorship, the King can be in touch with all his underlings via direct messenger. That was of course how empires of the past, whether they be the Roman Empire or the various Chinese Empires, maintained (or at least attempted to maintain) centralized control. Ordinary people did not need direct people to people contact over distance. But the United States was going to be a Republic. And a Republican form of government requires interaction among the citizenry. A postal service that knits the country together, no matter how many days or weeks it might take for communication to get from point A to point B, is an essential feature of any Republican government.
Pursuant to the power granted by the Constitution, Congress created the Post Office Department as part of the federal government in 1792. (Benjamin Franklin was the first Postmaster General.) The Post Office was promoted to cabinet level in 1872.
The fact that the Post Office was a part of the government almost from the very moment our nation was founded makes a very important point. Unlike private businesses, where the goal is to earn sufficient profits for its owners so the organization can continue to exist --- or even to grow --- an entity like the Post Office has a singular goal --- to provide a crucial service.
The Post Office has always had the responsibility of delivering mail and packages to every address in the United States six days a week except for holidays. Unlike a private business that makes deliveries, such as FedEx or UPS, it is not in business to earn profits. That is why it is willing to lose lots of money delivering mail to isolated rural addresses paying for the time of the letter carrier trekking miles into the backwoods of Maine, the mountains of Eastern Oregon, or the bayous of Louisiana. It also builds post offices in very isolated places as well, staffing them six days a week. A private business would never construct such out of the way distribution centers nor make deliveries that frequently go to such isolated places. If a private entity were to make deliveries to such places, it would charge different fees depending on the density of the population served. (In a city, it might charge much less than the current rate for a first class letter but on an island off Maine or away from the big islands of the State of Hawaii it would charge much more than it costs currently.)
There are certainly those who argue that the universal rules of the Postal Service (six days a week delivery, post offices in isolated rural locations --- all for the same price of a first class stamp whether the letter is going around the block or to an isolated settlement in Alaska above the Arctic Circle) is --- well --- inefficient! For these folks, having a government run Postal Service is a relic of a bygone era. This attitude is a point of view that has gained strength over the decades. Thus, when Congress in 1970 passed a law that led to the creation of an “independent” postal service and charged it with attaining “self-sufficiency,” many feared this was a first step towards privatizing the Post Office. In 2006, Congress went further and required that being “self-sufficient” meant that the service’s pension fund and health care expenditures be pre-funded. Thus, the annual budget of the postal service had to include massive amounts of funds set aside so that in the future, when the current group of employees retire or require medical services, there will be enough funds saved up to pay their pensions and health costs.
This is unlike the legal requirements to any other business in the United States --- though many companies do try to at least partially prefund their retirement pensions. Most state and local pensions operate on a pay-as-you go basis --- the current workers pay in, the retired workers get pensions. Social security works that way as well. The principle is one of social insurance and dates back all the way to the 1890s in Bismarck’s Germany. It represents social solidarity. Everyone pays in and everyone who needs help (for disability, if a parent dies, or one is too old to work) can get the help. The 2006 law contradicts the basic social insurance approach. In my personal opinion, it was nothing less than an attempt to bankrupt the Postal Service so that it would be ripe picking for the privatizers.
After 2006, there was a most predictable result. The Postal Service began to lose money. This created evidence supporting the desire by the privatizers to get rid of another government entity --- Demonstrating that the postal service constantly loses money becomes evidence that it is “inefficient” and would be better if run by a private company.
(Of course, the minute the Postal Service is sold to a private company, the requirement to pre-fund pension promises will disappear and just like magic the new private company will be profitable! – Don’t you just LOVE economics??) (Oh, I think I forgot to mention that it was the lame duck Congress dominated by Republicans in 2006 --- the year the Republicans lost control of both houses of Congress --- that saddled the Postal Service with these onerous expenses.)
In February of this year, the House (under Democratic control) attempted to liberate the Postal Service and passed the USPS Fairness Act. That law eliminates the pre-funding requirement going forward and forgives all payments which the Postal Service has been unable to make since 2006.
But of course, that bill was not considered by the Senate, which under the direction of Mitch McConnell sees itself solely as a conveyor belt for confirming right-wing Judges before Trump loses the election. So, House Democrats decided that the next best thing was to make sure the Postal Service didn’t run out of money just when its service is most necessary --- in the run up to the November elections. In the HEROES Act, the House appropriated $25 billion in subsidies for the Postal Service including money to provide a “hazardous pay” increase to postal workers salaries retroactive to January 27. So far, the Senate has refused to include any help for the postal service in the various proposals they have proposed in response to the HEROES Act.
[For details on the HEROES Act, see https://www.congress.gov/bill/116th-congress/house-bill/6800]
Because of the Coronavirus, many people would prefer to vote by mail in this election. Therefore, it is essential that the postal service have sufficient personnel and be able to deliver the mail on time. Absentee ballot applications need to arrive at election headquarters in a timely manner. The ballots need to get to voters on time as well, and the vote-by-mail has to be postmarked at least by election day.
Trump has two responses. The first is to bad-mouth voting by mail --- making an absurd distinction between requesting absentee ballots and “voting by mail” claiming the latter will be subject to tremendous fraud possibilities while the former works just fine. In addition, Louis DeJoy the man appointed Postmaster General just this past May is making a strenuous effort to reduce (destroy?) the Postal Service’s ability to meet its obligations to deliver the mail in a timely fashion. Claiming to be instituting austerity measures to save money, he has reduced overtime and created a situation where mail delivery has been slowed dramatically. This combined with Trump’s rhetoric is an attempt to reduce the public’s faith in the Post Office’s ability to process ballots for the November election. It will also, despite the rhetoric of saving money, actually reduce the revenues of the Post Office, making the deficits even larger. Some people are warning that the Post Office is in danger of having to cease operations before the November election, though officials of the Postal Service itself dispute those claims.
Reducing the ability of the Postal Service to facilitate widespread voting by mail is, of course, an important element of Trump’s plan. IF the Post Office is unable to delivers millions of votes by mail, fewer people will be able to vote. The fewer people who vote, the better chance Trump has to win. That is why the appropriation in the Heroes Act is essential. We the people have to scream and yell as loud as possible to get the Senate to accept the Post Office subsidy that is contained in the Heroes Act. As I write this, Friday, August 7, negotiations between representatives of the White House and Congressional Democrats are ongoing. So far it appears the Democrats are sticking to their guns. They have to. Our democracy literally depends on keeping the post office functioning delivering the mail from all to all and on time. That’s what the word “service” means in the title of the organization – the United States Postal Service.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author with Howard and Paul Sherman of the recently published second edition of Principles of Macroeconomics: Activist vs. Austerity Policies
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