The Postal Service’s eminently absurd powers

Much criticism of the Supreme Court’s recent ruling on eminent domain has focused on the narrow circumstances of the case: The court has allowed the City of New London, Connecticut, to seize homes from families and hand them over to a private company.

But the case also raises a far broader concern: Under what circumstances does the government have the incredible power of eminent domain, where it can seize private property for a public need? And does this power always serve a legitimate purpose?

For an answer, look no further than the U.S. Postal Service — perhaps the most glaring example of a government agency that clearly should not have the ability to turn your home into a retail store for Elvis stamps, calling cards, America Online CDs and teddy bears.

In his dissenting opinion in the New London case, Justice Clarence Thomas reminded us of some of the “necessary and proper” purposes for which the federal government can seize property. He cited an 1876 decision, which noted that proper public purpose included taking land for forts, armories, arsenals, navy yards, lighthouses, customhouses, courthouses and post offices.

Including post offices in this list may have made sense in 1876 when mail was the glue that bound the nation together. But the Postal Service delivers mostly business correspondence and junk mail these days. Today, we’re a digital country, linked together by email and telephones.

Nevertheless, the Postal Service’s right to seize private property remains. It is upheld in federal code stating that USPS shall have the right “to exercise, in the name of the United States, the right of eminent domain for the furtherance of its official purposes.”

The idea that the Postal Service should be on par with the military, treated as a public good with the power to seize private property, ought to be reconsidered.

For one thing, unlike the military, USPS is not what economists would call a “public good.”

A public good is a good that everyone needs and wants, but that no one would produce privately because it wouldn’t turn a profit. One of the few true public goods is national defense, and it makes sense for government to provide it.

The fact that USPS both competes in non-postal markets and needs a federally enforced monopoly to ensure its very survival should dispel any myth that USPS is a public good. Moreover, unlike the Department of Defense, the Postal Service competes directly against private-sector companies, even as it enjoys extraordinary government privileges.

In addition to eminent domain, those privileges include monopolies on letter delivery and the use of your mailbox, exemption from most taxes (including real estate), and the right to borrow from the Treasury at discount rates. Also, USPS does not adhere to SEC-transparency requirements for publicly traded companies. In fact, USPS is secretive to the point of paranoia about its books.

These advantages were granted to help carry out the single core mandate of nationwide letter delivery, but USPS has abused its privileges over and over.

The Postal Service now claims it has a right to enter any market it chooses, even ones not related to letter delivery at all. In recent years it has offered everything from prepaid telephone cards to merchandise, like bags and mugs.

Many of these non-postal products have lost money hand over fist. The now discontinued Online Payment Services lost $10.4 million in Fiscal Year 2001. Mailing Online lost $30 million from FY 2001 to 2003. The Electronic Postmark has lost over $2 million since 2002.

Most troublingly, Aunt Minnie ends up footing the tab for these misguided ventures.

Using First-Class monopoly profits to expand into non-postal markets is predatory behavior. But as a government agency, the Postal Service is immune from antitrust prosecution – even when it acts in ways that would be illegal for a private enterprise.

Now, as Justice Sandra Day O’Connor wrote in her dissenting opinion in the New London case, “nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”

Given the Postal Service’s power of eminent domain, and its disturbing expansion into non-postal activities, a new dimension should be added to O’Connor’s warning. Nothing is to prevent USPS from replacing an eBay Drop-Off Store with a USPS teddy-bear shop. The Postal Service’s power of eminent domain ought to be reconsidered.

Sam Ryan is a senior fellow at the Lexington Institute in Arlington, VA.