Mistrust of government can go too far. In California, we deregulated energy without sufficient care and oversight, and got rolling blackouts for our trouble. As the New York Times reported earlier this month, private prisons aren't necessarily cheaper to operate. Matt Yglesias suggests this general lesson:

The genius of the real private economy is that firms that are really poorly run go out of business. It's not that some magic private sector fairy dust makes the firms all be runs soundly. Lots of bad businesses are out there. But they tend to lose money and close. Meanwhile, well-run firms tend to earn profits and expand. The public sector doesn't have this feature. Just because a public agency is inept is no guarantee that it will go out of business. Resources are allocating according to political clout rather than any criteria of merit. It's a problem. But it's not a problem that "privatizing" public services actually solves. There's no magic private sector fairy dust.



There is a sensible point in there. What I want to tell you, however, is that there is magic private sector fairy dust. It's called the profit motive. It doesn't shimmer like glitter. It isn't a cure all, or even an unalloyed good: during wars, for example, private contractors with an eye on profit margins are incentivized to cut ethical corners even as they're entrusted to wield power over life and death.

But a desire to maximize profits and an aversion to losing money leads to certain efficiencies that ought to be exploited in less fraught enterprises. At UPS and FedEx, management has a powerful incentive to hold down overall labor costs, and to preserve the flexibility and adaptability of the respective companies. When USPS negotiates with the any of the four unions that represent its employees, the dynamic is completely different: management has fewer incentives to hold down costs, even as labor exercises substantially more clout due to is political influence.

The results are ludicrous. Here is an organization where the volume of work fluctuates significantly with the economy. Its own forecasts suggest that a decade from now 21 billion fewer pieces of mail per year will go through the system. But it is contractually prohibited from laying off most workers - and is in fact giving many of them a pay raise even as it is $15 billion in the red! 80 percent of the USPS budget goes to labor costs. There's no way to get into the black without cutting them.

In fact, Postmaster General Patrick Donahoe wants to cut the workforce by 20 percent over five years. Given the constraints he faces, however, attrition is his only hope. In other words, rather than laying off its worst workers on a sensible schedule, USPS is planning to leave the timing of workforce reduction and the specific personnel involved to fate. Donahoe also wants to shift some USPS services "into convenience stores and supermarkets, where nonunion workers can staff them." Perhaps new locations are a good idea regardless, but should union rules be a determining factor?