The U.S. Postal Service doesn’t want to deliver mail on Saturday anymore. Facing a large budget gap, the USPS is lobbying Congress to allow the agency to deliver mail only five days per week, a cost-cutting measure it has advanced for more than a year.

As I said back in August, the Postal Service’s decline seems to be inevitable. USPS is subsidized not by tax dollars but by regulatory capture: The Private Express Statutes limit private mail carriers from delivering mail to mailboxes and from charging less than $3 to deliver a letter.

Luckily for the USPS, it doesn’t have to compete in a free market, where its work schedule would be drastically insufficient to compete successfully with others. UPS and FedEx don’t have the same regulatory luxury, and consequently have some locations that are open 24 hours a day and on weekends, because that is what customers want. Private delivery companies also price shipments based on distance traveled, which makes more sense than the flat rate that the USPS levies for first-class letters. Mailing a letter to one’s landlord in the next town over has a lower marginal cost for a postal service than mailing a letter to a cousin across the country, but first-class USPS prices don’t reflect that.

Unlike private delivery services, the USPS does not face direct competitive pressure, and so has found it difficult to adjust to changing technology and market conditions. This has left the agency well past its prime, if that prime ever really existed. James Bovard pointed out in a review of USPS history that government-provided postal services were originally conceived as revenue generators, and that regulators had to actively stamp out competitors who were providing more reliable, trustworthy services at lower prices:

The early colonists inherited the tradition of government postal monopoly from Britain. In sixteenth-century England, the Tudor monarch outlawed private post in order to hinder communication between potentially rebellious subjects. Later, the monopoly was justified as a revenue raiser for the Crown. But even 270 years ago, private carriers were breaking the law and providing the public with better service than the government:

In 1709, Charles Povey used bell ringers to collect letters, which he delivered anywhere in London for a halfpenny. The Post Office prosecuted Povey, who was convicted and fined, and then it adopted his system for the government service.[2]

Since 1709, not much has changed in how governments run their postal monopolies.

In 1789 the Constitution granted the federal government the right to set up a post office, but it did not prohibit competition from private services. However, the first postal act, in 1792, did effectively outlaw private competition.

The first postage rates were extremely high, as Congress tried to force easterners to subsidize the more expensive service to outlying settlements on the western frontier. As the Postal Service’s official history notes, “Until 1851, the cost of sending a single sheet letter 40 miles was either 6› or 8›. When the letter traveled over 400 miles, it cost 25›. These prices doubled, tripled, or quadrupled with each additional sheet.”[3] In 1843, “it cost 18 1/2› to send a letter from New York City to Troy, New York, but only 12 1/2› to send a barrel of flour the same distance.”[4] The government charged 25› to deliver a letter from Philadelphia to New York.

Henry Wells (later of Wells-Fargo fame) entered the market, charged 6› a letter, and delivered faster.[5] In the Boston area alone, over a hundred private express companies carried the mail. Private companies delivered letters directly to addressees’ homes, while the government still required people to pick up their mail at the nearest post office.

As private business flourished, government postal revenues declined. The postmaster general admitted in 1843 that many people thought the government’s monopoly was “odious,” but insisted that it had to be preserved for the good of the country.[6] In 1845, Congress tightened the laws prohibiting competition and increased the penalties for violators. In 1851, Congress lowered postal rates and began providing a direct subsidy for postal operations.

An 1844 competitor, the American Letter Mail Company, was founded and operated by notable proto-libertarian Lysander Spooner. This competition was so effective and efficient that “The end result was that in 1851 Congress again had to lower the postal rates to a uniform 3 cents” from previous prices “of 18 3/4 cents or 25 cents.” Lawmakers simultaneously put Spooner out of business for good by strengthening the USPS monopoly laws.

The notion that government postal services may have been necessary to provide a crucial public service in the absence of trustworthy private alternatives doesn’t stand up to the historical record, and is even less justifiable in today’s electronic information age, in which private companies are the primary means by which most people send and receive sensitive communication.

Missourians — and the United States in general — would greatly benefit if the USPS lost its monopoly protection so that costs could be reduced through the efficiency of competitive pressure, rather than through elimination of services.

Charles Jaco just finished taping an interview with Show-Me Institute research assistant John Payne, about the Metro mass transit system in the St. Louis area. At least some portion of it is slated to appear in tonight’s FOX 2 news broadcast at 10:00. Be sure to tune in. [UPDATE: The video is now online.]

For more information about St. Louis transit, read Payne’s recent op-ed about MetroLink, which also ran on the Riverfront Times blog and in the St. Louis Business Journal. His commentary attracted some attention from a Metro board member, who responded on our blog, followed by a short rejoinder by Payne.

The Show-Me Institute ran a trio of pieces in October 2008 about transit funding in St. Louis, considering the problem from different angles. We’ve also been fortunate enough to publish a few pieces analyzing Kansas City light rail plans, by transit scholar Randal O’Toole and policy analyst David Stokes. Although these latter pieces considered the issue specifically as it relates to the Kansas City area, many of the broad observations about light rail costs and efficiency apply just as well to St. Louis.

The Show-Me Institute recently released an op-ed by research assistant John Payne titled, “Adding New MetroLink Lines Too Costly, Inefficient.” The piece appeared on the Riverfront Times blog on Feb. 15, along with comment from the paper, and ran in the St. Louis Business Journal on Feb. 19.

We recently received a thoughtful response from Hugh Scott, III, who has been a member of Metro’s Board of Commissioners for nearly five years, commenting on Payne’s op-ed. In the interest of furthering dialogue about important issues like public transit funding, his entire letter appears unedited below:

As even noted anti-tax advocate Glenn Beck acknowledged on his show yesterday, (2/22/10) some taxes are necessary. In the case of public transit, I would maintain that taxes supporting these systems inure to the economic benefit of metropolitan areas. Public transit enables people to commute to jobs and transit centers provide a critical mass of customers for businesses located near them. Not only does Metro employ 2000 St. Louisans but it assists countless thousands of workers to get to jobs in healthcare, retail, manufacturing and distribution. For many of these commuters, no public transit would mean no job.

Show-Me Research Assistant John Payne misses the mark in his article, “Adding New MetroLink Lines Too Costly, Inefficient.” While he tacitly agrees that public transit is important for our community, he advocates opposition to the proposed referendum for a ½ cent sales tax on the April ballot. The focus of his criticism is on the part of the proposal which suggests some the addition of light rail corridors. Extending light rail is however, not the major thrust of the proposal.

Throughout its history, BiState (Metro) has not had sufficient dedicated taxes to support its operations. It has relied on the beneficence of the City of St. Louis and the adjoining Missouri and Illinois counties, the States of Missouri and Illinois, and the Federal government to provide operating subsidies. Some of these entities have been generous over the years. Others have been quite parsimonious. In all cases, awarding of funds is arbitrary and Metro must beg for money from its stakeholders on an annual basis. If Metro is expected to operate in a business-like manner, it must have a stable reliable source of revenue. This, in fact, is what the April 6 ballot proposal is really all about.

When the last tax measure failed in a very close vote in November of 2008, Metro was forced to cut 40% of its bus and train service and 400 staff members. This resulted in the loss of at least 5000 jobs in our community. While half of these cuts were quickly restored due to the receipt of emergency funds from St. Clair County and the State of Missouri, deeper cuts will be necessary if the proposed tax is not approved by the voters. With the approval of the new tax, pre-2009 service will be restored and the current system will be able to operate on a stable financial footing for the first time in memory.

Other short term (1-5 year) priorities include implementation of a bus rapid transit system similar to the “higher speed bus routes” advocated by Payne, adding amenities such as a “smart card” fare system, and beginning planning for more light rail. These programs will be implemented only after the pre 2009 service is in place and only when funds are available. The five year plan does not call for construction of new light rail corridors.

Putting a light rail extension in service will take a minimum of ten years. It will also require large amounts of federal funds in order to build. Metro does not believe that the community should “foot the bill” for any Metrolink expansions without the majority of the funds being provided by the federal government. Instead Metro is asking for funds to begin the planning process so that when federal funds become available for light rail expansion, St. Louis will be in line. It only makes good sense to spend some money on planning. Otherwise, federal money for light rail will go to other cities and St. Louis will be left out.

Payne tries to make a case for increased bus service as opposed to more light rail. He asserts that buses are a better form of transit because they are cheaper and provide more flexible route opportunities. This was precisely the argument made by former BiState CEO, Col. Rudolph Smyser in the 1960’s when he ordered the shutdown of the last of the street car lines in St. Louis.

While it may be argued that buses are superior to light rail from an economic standpoint, flexibility of routes is precisely the problem with buses. Businesses which might prosper by being near a transit stop do not locate near bus stops because a bus stop might easily move to another street or corner. Many non-transit dependent customers will not ride buses because it is often difficult to know where the bus is going. With streetcars, subways and light rail, one need only look at a map showing landmarks or look down the track to know where the car is headed.

In some ways, Metro has successfully mitigated the confusion caused by changing bus routes by creating a hub and spoke system integrating buses and light rail. Thus a person who boards a bus that says “Clayton Station” can expect to travel to the Clayton Metrolink station. Similarly, a passenger who boards our most heavily traveled bus route, Grand Avenue, can be confident the bus will travel north or south on Grand without deviating. In a sense, our increased market share in buses may be in part attributed to our lack of flexibility with routes not the reverse.

In conclusion, Metro has built a world class transit system which integrates bus and rail service quite successfully. While our population density might be low for light rail travel our market share compared to peer group cities is very high. Light rail continues to gain popularity from non-transit dependent riders and nationally, our market share is in the top three cities in our ten city peer group. The April ballot proposal is about preserving this fine system. Our first priority must be to stabilize the existing system. Future planning is always important but it comes further down the list of priorities.

A recurring concern within our national health care debate has been about insurance, and how to make it work for our friends that don’t want, or cannot afford, to participate. This led some of us to examine how that problem is solved elsewhere. One approach is seen in Switzerland. As many are aware, Switzerland is a country with a history of high-quality health care. It has 7.2 million people living in 26 cantons (states). The 1994 Swiss health insurance law requires everyone staying in that country for 90 days or more to purchase a basic health insurance policy.

Before 1994, health care insurance was not compulsory in Switzerland and premiums were risk-related. That older system was similar to what we have now in the United States. At that time, most people with jobs had some form of private health care insurance supplied by an employer. Members of the military and full-time government employees had health care insurance through a government-owned company. People outside of those categories were able to purchase insurance, and the rates varied over a wide range. A publicly discussed concern at that time was the fact that certain individuals, classed as high-risk because of chronic disease and age, found health insurance unaffordable. In response to the public outcry about that, the Swiss Federal Health Insurance Act was designed to help all the people without insurance and to promote competition between health insurers.

Now there are 91 Swiss health insurance companies that offer these compulsory policies through their “not-for-profit” divisions. Market forces are such that some companies have chosen to limit the cantons where they sell insurance. In each canton, as a result, there are about 50 companies competing in the health care insurance marketplace. The compulsory policy premiums are community-based, so everyone living within the same mail code is charged an identical fee, without regard to any previous medical problems. The competing insurers differentiate themselves and make their profits by selling extra benefits through complementary policies managed by the for-profit divisions of those companies. The extra benefits available through those insurers include things like dental care programs, hotel-quality single bed hospital rooms, “in-your-home” child care when a parent is ill, spa/gym memberships, etc.

The Swiss health plan purchasing process is designed to make consumers aware of their personal ownership of the insurance policies. A nationwide website guides people to the most appropriate plan to match their personal needs. Each policy must be bought by an individual, even though the government may reimburse a purchaser for part of the cost. The policy belongs to the purchaser, and goes with the purchaser when moving to a new job, because it is not a job benefit.

People that are indigent have health care insurance, too. In each canton, a “means test” determines how much the canton will reimburse an indigent resident, but that person gets to pick their own preferred private insurer just like everyone else. Then, the cantonal government issues a voucher that the recipient transfers to the insurance company. In 2001, the cantonal governments paid about 19 percent of the health care policy premiums.

Regulations there require a given insurer to charge the same fee to each purchaser for the basic policy, without regard to any preexisting health conditions. This results in a universalized program that provides for the treatment of illnesses, accidents, and pregnancies, and which includes the costs of all medical treatments, hospitalizations, and medications. However, at every interaction with the health care system, an individual must contribute something out-of-pocket. This is intended to make the purchaser acutely aware of the medical costs. These payments are not just nominal amounts of money, as seen in health insurance co-pays in this country; it is the full price of the interaction. In a typical Swiss policy, an individual pays a deductible, and the initial cost of all treatment and medications are paid out-of-pocket. Then, after the event, the patient is reimbursed by the insurer for almost 90 percent of the amount paid. However, to avoid any sudden economic calamities, the compulsory policies have a pre-set maximum out-of-pocket level, and all expenses beyond that are paid directly by the insurer.

The Swiss compulsory universal health insurance program was developed through a series of referendum elections in each canton. Significant improvement in health care access has been reported, because the system is intended to allow everyone to see a physician whenever necessary. Perhaps as a result, about five years ago Swiss life expectancy at birth was 79 years for men and 84 years for women. In comparison, U.S. life expectancy is just this year beginning to approach 78, and in Missouri, during the most recent year with accurate data, it was only 76.4.

Such care is not inexpensive, but it costs less than what we pay here. Implementation of the Swiss plan resulted in spending on health care representing only 11.5 percent of that country’s GDP, at a time when the health care spending in the United States approached 15.3 percent of our GDP. Although our country is not the same as theirs, maybe there is something we can learn from them.

To learn more about the Swiss and other health care systems, please see “The Grass is Not Always Greener: A Look at National Health Care Systems Around the World,” by Michael Tanner of the Cato Institute.

The St. Louis Post-Dispatch is reporting on the budget troubles in Florissant, the largest city in St. Louis County. Not surprisingly, the police officers there are objecting to a proposed 3-percent pay cut. Now, I don’t ordinarily sympathize much with government employees, but the ones in uniforms generally deserve a little more compensation than some politically hired clerk. Even more importantly, there is a very reasonable solution, at least for the short term, that is being proposed by one of the councilmembers.

He says they should close the municipal golf course. I agree, but first they should try to sell it.

Podleski ran unsuccessfully against Lowery in April 2007 and continues to be the chief critic of the city budget. After the Monday’s meeting, he suggested the city close its golf course. The budget predicts the golf course would lose nearly $164,000 in the next fiscal year, he noted. When the city is cutting pay, “can it afford a golf course?” he asked.

No, it can’t afford a golf course, but privatization is better than closure. Even if the course only fetches a reduced amount in this economy, at least it then goes back onto the tax rolls as private property. This really is a no-brainer for Florissant. Other think tanks have done a lot of work on the issue of government golf privatization, especially Reason. I can’t think of any item that is less necessary for the government to provide than a golf course. A budget crisis might make the issue more immediate, but even if it were flush with cash, Florissant should privatize its golf course.

During the drive home from work yesterday, I listened to a discussion of high-speed rail on NPR’s “Marketplace.” Mitchell Hartman discussed a new report from the Pew Research Center reminding us that high-speed rail depends on federal assistance. Pew calculated that Amtrak receives a $32 subsidy per ticket, on average, from taxpayers. Amtrak, however, estimates that the size of the subsidy is $8. From the show’s transcript:

The difference is Pew includes all the costs of running a railroad, like depreciation — that’s wear-and-tear on tracks and trains — and overhead, like the legal and HR departments. Taxpayers pick up those costs too. Amtrak got $1.3 billion in funding last year.

The program even quoted Randall O’Toole, a Cato Institute senior fellow and self-described “Antiplanner”:

Best thing we can do for mass transportation would be to privatize it, let the private operators respond to the market, and then we’ll have a more efficient system that might be attractive to more people.

O’Toole has written several policy studies for the Show-Me Institute on the subject of high speed rail and its free-market alternatives. His most recent, “Why Missouri Taxpayers Should Not Build High-Speed Rail,” was published late last month.

High-speed rail is relevant to Missouri, particularly as officials consider upgrading the tracks from Saint Louis to Kansas City to accommodate high-speed trains. As David Stokes testified before the Joint Committee on Transportation Oversight earlier this month:

For Missouri to build true high-speed rail — the type that American tourists ride in Europe at 150 mph — would cost Missouri taxpayers billions more, all to serve the small percentage of the population that uses passenger rail.