Washington's antiquated policies, combined with rising internet use, are killing the U.S. Postal Service. Mail volumes are down over 20 percent since their highs in 2006, declines not seen since the Great Depression. First-class mail - by far the Postal Service's most profitable class - is down almost 25 percent since its 2001 peak. The Postal Service expects to lose between $9 and $10 billion this year, and was unable to meet a $5.5 billion payment to the U.S. Treasury due on September 30th, which Congress deferred until November 18th.

Moreover, the composition of the mail has changed dramatically. About 90 percent of all mail is now business-originated commercial material. The Post Office's original public mission of "binding the nation together" is patently obsolete when people around the world can communicate instantly via the internet, and receive only catalogs and advertisements by mail.

The decline in physical mail, and the growth in low-profit advertising content, is likely to continue. "Kicking the can down the road" through incremental reform and accounting gimmicks are no longer sufficient to avoid a massive taxpayer-funded bailout. The time has come for meaningful reform that will protect taxpayers and create a sustainable Postal Service.

The Postal Service needs to be converted into a regular business, facing market competition and disciplined by active, focused shareholders. It must be permitted to reduce its high and rigid costs, and to adjust to the realities of a new communications marketplace. This should be done through de-monopolization, corporatization, and eventual privatization, as has been done in many other countries.

The Obama Administration has proposed a timid, ineffective plan. It provides only temporary fixes by returning to the Postal Service some $7 billion in overpayments it made to the Federal Employees Retirement System since 1971, deferring for two years a required annual $5.5 billion payment due to U.S. taxpayers, and allowing postage rates to increase by 2 cents. The plan would do nothing to address the underlying, inexorable problem of adjusting to a new communications marketplace. In short, such changes would only push off -- and make more costly -- the day of reckoning when real reforms become inevitable.

Congress must answer two questions in light of widespread electronic communications and increasingly commercial mail. First, what level (such as days per week) of government-guaranteed mail delivery is appropriate in such a world? Second - assuming that Congress decides that some routes are worthy of a direct taxpayer subsidy - what is the cheapest and most transparent way to pay that subsidy? Taxpayers have a right to know exactly how much guaranteed mail service is costing them, as well as assurances that they are paying the minimum amount necessary for such service.

Even if Congress decides that direct taxpayer subsidies are warranted -- and increasingly commercialized mail suggests that they are not -- the Postal Service should nevertheless be put on a course toward de-monopolization and privatization.

A government-enforced monopoly is not necessary to subsidize some delivery routes. If some routes lose service in a competitive marketplace, then bids can be solicited from a variety of companies (including the Postal Service) based on which one will provide that service for the lowest possible subsidy. The Postal Service would benefit from the competitive pressures of the marketplace and from better corporate governance, the latter of which is currently very weak.

The federal government already has a body in place that could conduct such bidding: the Postal Regulatory Commission. The Commission is currently the Postal Service's regulator, overseeing rate increases and service standards. The Commission's new task would be to ensure that bidding on routes was fair and transparent.