The Battle Over The USPS

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With mail volume down to a third of its level for the same time last year, USPS is projecting a $13 billion shortfall in revenue. Insolvency could strike the agency as soon as September. Democrats in Congress have pledged billions to help with the bottom line, but a recalcitrant Trump administration has threatened to veto any coronavirus spending package that includes grants for the beleaguered mail system.

The battle over the Postal Service has reached a critical stage. Now, others are stepping forward with suggestions for saving the agency that would utterly transform it, from privatizing the USPS to nationalizing Amazon.

In assessing the health of the Postal Service, its critics and defenders alike see the Covid-19 pandemic as an opportunity for radical treatments. These proposals deserve a look, since the alternative — the collapse of the mail — is unthinkable to many and untenable under Article 1 of the Constitution. The regulations that have hampered the agency deserve some scrutiny, too. Rescuing the Postal Service may not require disruptive thinking as much as an honest assessment of how things got to this point.

On the left, some see the current calamity as an opportunity to take out two birds with one stone. Paris Marx argues for fully absorbing Amazon into the USPS. Marx extolls the benefits that nationalizing Amazon would have for workers in Amazon’s notoriously labor-unfriendly fulfillment centers. The company’s superior supply chain, combined with USPS infrastructure and logistics, could help the public swiftly combat the coronavirus pandemic, he writes. Nationalize Amazon Web Services, too, while we’re at it, Marx says, citing the argument in Nick Srnicek’s Platform Capitalism that the cloud should be placed under public ownership and run like a national utility. Let Amazon-owned Whole Foods run Meals on Wheels, Marx argues — and expand the services offered by the Postal Service to build a foundation for socialism(More details: https://jacobinmag.com/2020/03/nationalize-amazon-coronavirus-delivery-usps).

Mike Davis comes to the same conclusion by a different route. The U.S. should nationalize Amazon to strip it from its founder, Jeff Bezos, whose reach is growing under the global emergency. Davis’s piece is much more focused on preventing Amazon from taking over the world than on saving the local post office, but he also sees a road to solvency through measures aimed at stopping profiteering. “Here’s a revenue stream that could not only save the Postal Service but rebuild it after years of budget cuts and unfair competition with FedEx and UPS,” Davis writes(More details: https://jacobinmag.com/2020/03/nationalize-amazon-coronavirus-delivery-usps).

n response, James Pethokoukis of the conservative American Enterprise Institute writes that nationalizing Amazon “isn’t a real policy idea that might ever happen, but rather absurdist policy theater meant to entertain other socialists.” Privatizing the Postal Service might strike its defenders as a similarly extreme end, but under the current administration it seems like the outcome that’s closer at hand. Two years ago, the White House released a report on restructuring the USPS, part of a larger federal re-org scheme. The plan called for patching up the Postal Service and putting it on the market, either for bidding or through an initial private offering(More details: https://www.aei.org/economics/when-socialists-are-stuck-inside-they-dream-of-nationalizing-amazon-and-pretty-much-every-other-time-too).

For his part, President Donald Trump appears to be laser-focused on using the USPS to punish Bezos, who also owns The Washington Post. The president, who incorrectly maintains that Amazon makes the USPS its “delivery boy,” has demanded that the Postal Service raise its package delivery rates for Amazon. Trump’s personal vendetta aside, the official White House position on the USPS is much closer to conservative orthodoxy on the subject. The 2018 plan explains that privatization would enable the Postal Service to cut wages and eliminate benefits, curtail or end routes, shutter post offices, and operate fewer days out of the week. The report only gives cursory energy to explaining how a private postal agency would continue to serve the rural reaches where Amazon doesn’t deliver (under the agency’s universal service obligation). The White House suggests that access to private capital for vehicle upgrades would save taxpayers money — which is false, since the USPS hasn’t received any taxpayer funding since the 1970s.

Postal carriers aren’t eager to see all this innovation happen at their expense. Megan Brennan, who has occupied Benjamin Franklin’s seat as postmaster general for the last five years, had planned to retire in January but delayed her decision indefinitely; the four unions that represent postal workers anticipate a fight over the Trump administration’s appointment for her eventual successor(more details: https://prospect.org/power/why-everyone-should-care-who-the-new-postmaster-general-is).

Nikole Hannah-Jones has suggested that the conservative beef with the Postal Service is motivated at least in part by racial animus. One in five USPS workers is black, and people of color make up a plurality of the workforce. The Postal Service offers a solid ladder to the black middle class; the White House is all but promising to kick that ladder out from under them. Costs of privatization to the agency’s more than 600,000 workers would fall disproportionately on African Americans — the same carriers and clerks who are operating at great risk of exposure to coronavirus right now. Meanwhile, the spoils of privatization, especially the agency’s unrivaled data, would flow elsewhere(More details: https://twitter.com/nhannahjones/status/1249382181719375878).

“USPS is caught between a mandate to operate like a business but with the expenses and political oversight of a public agency,” one White House report reads. That’s ironic — since the aggressive conservative measures to push the Postal Service toward solvency arguably created the crisis that they say only privatization can solve.

While the modern history of the USPS as an independent executive branch agency dates back to the 1970s, its money troubles can be largely traced to a 2006 law called the Postal Accountability and Enhancement Act. Passed at the height of Bush-era enthusiasm for privatization for Social Security, the bill required the Postal Service to pre-fund its pension and retiree health benefits for current and future workers over 10 years. Critics such as New York Representative Alexandria Ocasio-Cortez point to this law as an albatross around the agency’s neck.

Yet as actuaries explain, pre-funding is the norm for private pensions (and indeed a requirement under the 1974 Employee Retirement Income Security Act). Under the law, all companies with pension funds must contribute the amount of benefits accrued by employees each year. That’s not the same as requiring a company to fully fund pension benefits 75 years in advance, though.

The key difference for the Postal Service is that the agency must pre-pay retiree medical benefits, not just its pension obligations. This is neither the case for other private businesses nor for other federal agencies. Nowadays, old-fashioned retirement health benefit plans are rare: In 2018, only 18 % of large employers offered retiree health coverage. If companies in the private sector were required to pre-fund these benefits, they’d just wiggle out of the obligation. But the USPS can’t change or cancel medical benefits for retirees without an act of Congress.

Further, the 2006 law gave the Postal Service a narrow window to pre-fund its retiree obligations. Elizabeth Bauer, explains that under the 1974 ERISA law, “plans were given 40 years to fully fund plans that had previously been pay-as-you-go, and 30 years to fund plan enhancements.” The Postal Service was required to do a big lift over just 10 years, at a cost of billions each year. Plus, the USPS is required to fund its retiree medical coverage by investing exclusively in U.S. Treasuries, whereas private-sector plans are able to take advantage of better interest rates through corporate bonds.

When the Bush administration signed the reforms into law in 2006, it arguably forced the Postal Service to swallow a poison pill. Then the Great Recession happened. And somewhere in there, email lapped snail mail for all kinds of public and private transmissions: Between 2006 and 2015, total mail volume fell from 213 billion to 154 billion pieces, a 38% decline. By 2015, the USPS had notched its ninth consecutive year of financial losses, having hit its statutory debt ceiling of $15 billion. By 2016, the USPS was out of the 10-year pre-funding sprint that Congress had whistled into action — but the agency had defaulted on some of those payments.

Privatization isn’t inevitable. While the USPS is banned from lobbying Congress on its own behalf, the agency’s defenders include pretty much everybody. The USPS is by far the most popular federal agency, edging out likable contenders such as the National Park Service and NASA with a 90% favorability rating in a poll by the Pew Research Center last year. (The U.S. Centers for Disease Control and Prevention came in fourth.) It would almost certainly take an act of Congress — and maybe even an amendment to the Constitution — to fundamentally rewrite the charter of the Postal Service.

While the agency appears caught between Scylla and Charybdis — between nationalization (a merger with Amazon) or privatization (who knows, maybe also by Amazon) — there are other routes the future could take. Alternatives might include some of the same service cuts that a private owner would be likely to introduce, like the five-day delivery week that the service has long pondered, only without selling out the agency. Or USPS service could expand to include postal banking, public internet, and other social services.

Either way, Congress could recognize that the 10-year window that it imposed on the USPS to pre-fund health retirement benefits was a disaster — possibly rising to the level of sabotage — and bookended by the Great Recession and the coronavirus pandemic, pitfalls that no company in such a pinch could navigate.