November 11, 2020

What we learned from this summer’s postal fiasco

The summer of 2020 was like no other in USPS history.  It already was a historic summer as the Postal Service grappled with the pandemic that threatened to shut down the economy but also boosted package volumes by 50 percent or more.  Inside the USPS, it was dealing with massive employee availability problems and a large reduction in commercial air transport that is normally used for First Class and Priority Mail.  Mail delivery service scores, already well below promised goals, dropped even further.

A second layer of problems exacerbated the pandemic’s impact on our postal system.  The USPS Board of Governors, all of whom were appointed by the current president (a rarity), named an experienced logistics CEO who also was a major donor and fundraiser for President Trump to be Postmaster General.  Postmaster General DeJoy proceeded to act on major efficiency and cost reduction initiatives more quickly than any previous PMG, with little or no communication to customers, employees, media, and the general public.  And he ordered all these efforts in the midst of the aforementioned pandemic, less than six months before a contentious national election, while President Trump made repeated unfounded attacks on the safety and validity of voting by mail.

The USPS Office of Inspector General looked into allegations by members of Congress and found over-aggressive implementation and poor communication of efficiency initiatives, but no conspiracy to threaten the USPS and interfere in the election.  The initiatives included better adherence to existing operating plans, 57 individual improvements developed by dozens of USPS veterans, and faster removal of excess machines and collection boxes.

So, what did we learn from all this?  At least five things.

1. Keeping politics out of USPS is very important.
2. The postal unions are much more powerful than postal management.
3. The current structure of USPS precludes it from being successfully businesslike.
4. Relying on current rate-paying mailers to cover the full cost of USPS public services and inefficiencies will not work.
5. America loves and needs her Postal Service.

1. Keeping politics out of USPS is very important.

The seeds for this summer’s postal fiasco were planted way back during the Obama administration.  For several years, the U.S. Senate refused to confirm any of the nominees put forward by President Obama for the USPS Board of Governors.  Usually, the Board experiences regular and staggered turnover of USPS Governors who serve for seven-year terms.  By law, no more than five of the nine Governors may belong to the same political party.  So, any given president nominates a mix of Democrats, Republicans and independents over the course of his four or eight years in office.  By usual practice, the Senate brings forward pairs of nominees belonging to different parties for confirmation.

Why were none of Obama’s nominees confirmed by the Senate?  The widely held, but not proven, belief is that Senator Bernie Sanders put a hold on the confirmation of James C. Miller III, who previously had served as a Postal Governor and as the Director of the Office of Management and Budget under President Reagan.  Individual Senators can put a hold on any nominee without public disclosure.  Sanders, who has been endorsed more than once by postal unions, presumably put the hold on to prevent the conservative nominee from re-joining the Governors.  It appears that Senate majority leader Mitch McConnell then refused to advance any of the other nominees unless Sanders lifted his hold, which Sanders did not.

President Trump entered office with the unprecedented opportunity to appoint all of the USPS Governors, albeit adhering to the party limitation.  For the first time, critics were able to say that the President formed and potentially controlled the entire governing body of the USPS.  And then the Governors selected a major Trump donor and fundraiser who also has extensive experience running a logistics company that contracts with USPS.

The modern-day USPS always has been politicized in the sense that many members of Congress interfere directly in its operations and force it to perform money-losing public services without funding.  But in 2020, for the first time, the top leadership appeared to be under the influence, if not perhaps full control, of the President in office.

Depending on one’s point of view, the politicization of USPS was a major cause of this summer’s chaos, or at a minimum fueled the widespread allegations that the agency had abandoned its 250-year history of binding the nation together and had become a political tool to affect the elections.

The bast way to avoid this?  Don’t hold up nominations of USPS Governors, and don’t appoint a major political donor and fundraiser to run the agency’s operations.

We nonprofit mailers want and need the USPS to operate reliably and affordably without political interference.

2. The postal unions are much more powerful than postal management.

We have written before that, while the USPS needs to operate more efficiently and cut its costs,  attempting to do so: (1) under new management; (2) during a pandemic; (3) preceding an election with an unprecedented demand for voting by mail; (4) with a president falsely claiming that mail voting is fraudulent; and (5) with poor communication to stakeholders is ill-advised.

The firestorm of attacks on postal management, however, was arguably ignited by the postal unions.  When PowerPoint slides depicting cost reduction initiatives were leaked to the public, the unions went into action.   They received more reaction and support from sympathetic elected officials and media than postal management has been able to generate for much-needed postal reform in the prior decade.

When Postmaster DeJoy and USPS Governors tried to respond that they were implementing the very kind of businesslike improvements that we and many other parties have been calling for, they were quickly dismissed by the unions’ allies as political conspiracists.  And the media, politicians, and courts supported this point of view.

It is quite an irony that the Postal Service has for many years, most recently spearheaded by former Deputy Postmaster General Ron Stroman, tried to convince more states and voting jurisdictions to embrace vote by mail.  And with six months or less to go until the election, they had massive nationwide demand for election mail.

Just as the Postal Service tried to respond to the need for universal voting by mail, it was battling ferocious political attacks and microscopic attention to delivery reports by politicians, courts, and the media, while having to comply with court orders that exemplified previously unprecedented judicial intervention in USPS operations.  In short, the Postal Service’s reputation took a big hit right when the nation turned to it for help with the election.

Perhaps realizing that the anti-USPS leadership campaign had gone too far, the unions joined an election task force with management and began promoting the idea that in spite of all the rhetoric and data indicating a falloff in service, the Service would be able to get ballots delivered to voters and back to election officials on time for the whole country.

Postal unions have excess leverage compared to USPS management and to private sector unions.  The unions have political action committees that donate to elected officials and political parties, while USPS management is specifically precluded from any lobbying activity or from making political donations.  The unions also endorse political candidates while management must remain non-partisan.  Unlike private sector unions, postal unions cannot strike or be locked out.  More importantly, they do not have to worry that their employer might go out of business if they push too hard.

Evidence of the power of postal unions is ubiquitous.  They do better than private sector employees in just about every metric: pay, cost of living adjustments, benefits, no layoffs, generous healthcare, retirement healthcare, and pension benefits.

Don’t forget overtime.  USPS overtime has grown tremendously in recent years, to over $5 billion in 2019.  As documented by the Office of the Inspector General, it is not hard to believe that receiving overtime has become an expectation for many postal employees.  It appears that the prospect of PMG DeJoy’s efficiency initiatives reducing that overtime was a major motivator for the unions this summer.

3. The current structure of USPS precludes it from being successfully businesslike.

The events of this summer validated the point we and many others have long made.  The current structure of USPS makes it impossible to act in a businesslike fashion.  Many have written and spoken about the vaguely-defined universal service obligation the USPS must adhere to.  The USO precludes the USPS from acting like a business, as it includes things the Postal Service is obligated to do for public policy reasons that no business would do if it wants to stay in business.

Delivering to every address in the U.S. six days a week no matter what the volume or urgency of mail is a great universal service that worked when volume was doubling between 1980 and 1999.  But it no longer works.  Operating tens of thousands of retail outlets that do not cover their costs is not businesslike at all.  Witness the bankruptcy and closure of so many retailers, malls, and small businesses this year alone.

This summer brought distinct confirmation of another aspect of business that USPS is not permitted to do.  The kinds of efficiency and cost control reforms implemented this summer would have been demanded by owners and shareholders of a business long before the USPS reached this point.  Private sector management would have been pressured to bring costs under control and streamline operations to remain competitive, and likely would be fired for failing to do so.  Yet, as much as mailers who pay the freight urge efficiency, it has not happened for years.  This summer provided a very visible and swift illumination of the fact that businesslike efficiency is anathema to the current USPS.

4. Relying on current rate-paying mailers to cover the full cost of USPS public services and inefficiencies will not work.

This one goes hand-in-hand with #3.  Most of the revenue that USPS receives is from businesses and organizations.  This includes the new revenue from packages that are mostly business-to-consumer.  The organizations and businesses that pay the USPS mostly operate with competitive businesslike models.  That is, if they do not control their own costs as well as their competitors do, they are at a disadvantage and at risk for going out of business.  And, yes, nonprofits do go out of business too.

A supplier that does not operate as a business but competes with private sector companies and supplies customers that do operate under a competitive model will not last.  Customers at some point are forced to move to alternatives.

USPS has long operated as a strong government-granted monopoly providing a service that customers had no alternative for.  To some extent, that is still true.  But push them enough, give them enough reason, and customers will find an alternative and leave.  For example, the recent move away from offices to working from home is going to hit the commercial real estate industry hard.  And that is an industry that thought its customers had no alternative to downtown office space.

Mailers will pull out of the mail if the Postal Service and the Postal Regulatory Commission move forward with their plan to bust through the Consumer Price Index cap on postage increases.  USPS has been publicly chastising the PRC for taking almost four years to review the market-dominant mail rate system.  Of course, customers have pushed back hard because they want to stay with mail and know they will have to greatly reduce its use if the proposals go through.  Also, much in the postal and political landscape has been changing, and the need for fundamental reform instead of mere price hikes has become apparent to a much wider audience.

5. America loves and needs her Postal Service.

The most positive thing to come out of this summer’s postal fiasco is a newfound expression of love for the USPS by the American public.  There’s nothing like the threat of losing something you need to rouse emotions and pledges of support.

People were ordering postal swag and stamps to help support USPS.  All of a sudden, so many commentators, politicians, media, and the general public were experts in the Postal Service.  After the election, there were reports of crowds spontaneously cheering postal trucks and spraying them with champagne.  We who have focused on USPS for a while were taken aback with the sudden attention our little part of the world was receiving.

Many of us also were dismayed at the apparent beating the reputation of USPS took this summer.  We thought it was largely undeserved.  Much of it was based on less than accurate information or misinterpretation of data.

Perhaps the silver lining is that it’s often been said that we would need a crisis to finally get Congress and the Administration to pay enough attention to USPS to actually reform its structure and funding model.