April 10, 2020

On May 23, 2019, the Washington Nationals major league baseball team had an abysmal record of 19-31.  Virtually everyone was calling for the manager Dave Martinez to be fired and the roster to be overhauled.  But Nats general manager Mike Rizzo stayed with Martinez and most of the roster.  Martinez used three sayings that encapsulated his approach: “Stay in the fight,” “Go 1-0 today,” and “Difficult roads often lead to beautiful destinations.”  The key thing Dave Martinez did as a leader was to not panic.

The Nats finished the regular season with a 93-69 record, good for second place in their division and qualified for the wild card game.  They won the loser-go-home game on a hit by their 20-year old star Juan Soto in the late innings.   Only nine teams in MLB history have come back from 12 games under .500 to reach the postseason, and only four of them — the 1914 Miracle Braves, 1973 Mets, 2005 Astros and these Nationals — reached the World Series.  And of course, the Nationals won the World Series over the Houston Astros who were later revealed to have cheated.

The United States Postal Service is at the 19-31 point in their season.  But USPS will come back.  Our Postal Service is an essential government service designated in the U.S. Constitution.  It will persist in providing necessary services to our nation.  The debate now is about how to fund and manage the USPS going forward, not about whether or not to let it go under.

In yesterday’s briefing, the Postal Service predicted the following losses and asked for a total of $75 billion from the government:

Losses

• Fiscal Year 2020     $13 billion
• 18 months                $22 billion
• 10 years                    $54 billion

Asks

• Cash appropriation to offset losses            $25 billion
• Cash appropriation for capital projects    $25 billion
• Borrowing authority                                     $25 billion
•                                                                           $75 billion

This morning we were given the following USPS volume changes for this week through Wednesday:

• Mail -32%
  • Flats -40%
  • Letters -25%
• Packages  +17%

While there is no doubt that it needs help from the government that owns it, the USPS asks are a big reach driven by the “gold rush” underway to get government assistance.  And the assumption that you will always get less than you ask for.  Postal management and the USPS Governors are taking the approach of a bailout without near-term structural reform or conditions.  The Administration seems to prefer an approach with more accountability and reform.  The politicization of vote by mail is making a rational solution more difficult.

The bottom line is that after the messy political process, we will still have a USPS.  And it is likely that annual public service appropriations will be back.  This crisis should be the death knell of the 100 percent mailer-funded “businesslike” USPS.  It should be patently obvious to everyone, including the Postal Regulatory Commission, that you only make this problem much worse with above-inflation rate increases.

Whether there will be service reductions, such as the number of days of delivery, is an open question.  But with Congress kicking in money, they are even less likely to allow service reductions.

The amount and type of structural reforms of the USPS will likely hinge on the results of the November elections.  But again, the question is not whether we will continue to have a national postal service.  It is more about how we will traverse these difficult roads.