Why the Postal Service Is So Screwed

A hand sticks out the window of a mail carrier to place mail inside a mailbox.
A U.S. Postal Service carrier delivers mail in El Paso, Texas, on April 30. Paul Ratje/AFP viaGetty Images

The Postal Service has been around forever. It’s in the Constitution. But despite how ubiquitous post offices are, and despite the fact that many people feel thankful for the work mail carriers are doing during the pandemic, the USPS is in trouble. A few weeks back, Democratic legislators warned that economic devastation from the coronavirus might force the Postal Service to shut down entirely over the summer—the agency just doesn’t have the money to keep operating. Meanwhile, Washington has bailed out various private industries, but that money hasn’t gone to the Postal Service.

On Thursday’s episode of What Next, I spoke with Devin Leonard, a writer for Bloomberg and author of a history of the USPS, about why the Postal Service is in such a terrible state, the surprising factors that have blocked further reform, and what can be done to save it. Our conversation has been edited and condensed for clarity.

Mary Harris: Throughout the past couple of decades, mail volume has plummeted. Recently it’s gotten even worse. The agency projects that business could be cut in half by June. Part of what tipped the USPS over and made it so fragile during this time is that it lost a lot of mail from advertisers, in the form of junk mail. It seems to me like if the USPS is relying on junk mail to remain solvent, maybe we just need to rethink this thing.

Devin Leonard: Four or five years ago, junk mail surpassed first-class mail as the largest portion of the Postal Service’s volume. We kind of have a government-subsidized junk mail system.

But in the early 2000s, the USPS was making money. And then around 2005 and 2006, that really changed. What happened?

In 2006, Congress and the George W. Bush administration started looking at the future of the Postal Service. Everybody could see that volume was trending downward, and that probably wasn’t going to stop. So they passed a big postal reform bill. What they were concerned about was that postal workers get very generous health benefits. And there was this concern that at some point in the future, mail revenue wouldn’t be able to cover that. During that time, the Postal Service was still doing pretty well. The economy was doing really well. So Congress passed a law saying that the agency had to pay about $5 billion a year to pre-fund those retiree health benefits. And the Postal Service could do it for about two years. Then the bottom fell out of the economy, mail volume kept going down, and the USPS just got crushed.

Let’s talk about what that means, because pre-funding retirement sounds great. But it also means you have to set aside a lot of money right away that you could be investing or spending in different ways. Explain a little bit why it became a problem.

Health care costs were going up. So the idea was to build up a fund so that at some point down the line, taxpayers wouldn’t have to pick up the bill for that. The problem is, people didn’t realize mail volume was going to go down to the extent that it did. Even before the coronavirus hit, mail volume was down 30 percent post–Great Recession.

The post office has been thinking about its bottom line ever since the 1970s, when President Richard Nixon signed the Postal Reorganization Act. Before that, the post office operated as a government department, part of the President’s Cabinet. The point of this legislation was to get Congress—and politics in general—out of the Postal Service’s way. But that’s really not how it panned out.

Now the agency can’t close a post office without going through this extensive review. And there’s always a lot of backlash. Nobody in Congress wants to let a post office close. Oftentimes that basically keeps the USPS from doing so. Also, it can’t raise prices. The Postal Service would like to raise prices, but again, that has to go through a long review before the Postal Regulatory Commission, which sort of treats it like an arbitration. And there’s always a lot of pushback from the big mailers, the junk mailers and such. They don’t want prices to go up. I think the Postal Service, left to its own devices, knows what to do and has a lot of good ideas. The problem is it’s not really allowed to do any of them.

Let’s talk about the workers’ unions. What is the role they’ve played in terms of making change for the Postal Service, or even preventing change?

The interesting thing about the postal worker unions is that they’re all in a bind too, because they know that the future is pretty grim. I know in particular the letter carriers have worked to try to combine routes and save money. But at the same time, they don’t want to do anything that would threaten their membership. They don’t want to give up jobs. There’s a limit to how much they can go along with cost cutting. So they’ve definitely worked to try to stop a lot of proposed changes, like ending Saturday delivery.

The junk mailers are also very active and effective at lobbying. They’re on the same page on a lot of stuff with the unions: Both would like to see costs cut a lot more, but they don’t really want to see big change. They benefit from the way things are working now.

It’s funny because you’re talking about the junk mailers like a constituency. I’ve never thought of them that way.

Well, they’re the biggest users of the Postal Service. When you have a big constituency like that, they usually get organized and try to make sure their voices are heard in Washington, just like the unions do.

What are the reforms that you see out there that could dig USPS out of this mess?

It needs to have more control over pricing. And it needs to be able to reduce its infrastructure. You know, there are 31,000 post offices. But a lot of the rural post offices have really reduced hours. They save money doing that. Some post offices could also be closed—I think a third of them lose money. Then you have about 250 big distribution centers. Some of those could probably be cut. And at some point the USPS has to reduce its workforce because about 80 percent of its costs are spent on employees. So it has to be able to make some adjustments, make more money, lower costs. And then maybe there’s a future.

One really interesting proposal I saw talked about the retirement investment for USPS. Someone wrote that if we changed the way the retirement worked, it could become a massive influx into the stock market, which needs that right now to potentially jolt it back to life. That could bring together some constituencies that otherwise wouldn’t be on the same page. I’m curious if you see anyone who’s looking to do that work.

Something previous postmaster generals have wanted to do is shift the all the postal workers into Medicare. That has support from the unions too. It would take care of the need to pre-fund care because it would just be picked up as part of Medicare.

So not “Medicare for All,” but Medicare for all postal workers. 

Yeah. But there are issues with that in Congress because Republicans don’t want to increase the size of the Medicare trust fund. But some blending of a few things—some cost cutting and business model changing—would please the more conservative side, and then a change in the retiree health care pre-funding would please the liberal side, since you wouldn’t have to cut as many employees if you shifted from that system.

Off and on, people talk about privatization, and if you look around the world, countries like Germany and England have privatized their postal services. It seems to be working OK for them. But that seems like a leap too far right now in the U.S.

A little while ago, I saw this video on a Facebook group for a Postal Service union in the New York metro area. I was struck by the fact that the union leader was talking about shutting down the USPS for a couple of weeks and resetting because the workers felt vulnerable right now, because of the coronavirus and because they don’t know where the money is going to come from. It got me wondering what a postal strike would look like right now, because we are all at home and in some ways are relying on the Postal Service more than ever. There have been postal strikes before, in different times.

In 1970, there was a big strike by postal worker unions, mainly in big cities like New York and Chicago. But even just that almost brought the country to its knees because people still depended so much on the mail. That was the crisis that sort of led to the reconfiguring of the Postal Service itself.

But you don’t think another strike will be necessary to force Postal Service reform in Congress. And you don’t think the USPS will completely shut down either, because the prospect of hitting financial rock bottom is scary enough for legislators.

It’s not going to shut down. But what happens when it doesn’t have the money? I think the short answer is that Congress is going to do something. I don’t think Senate Republicans actually want to be responsible for shutting down the Postal Service.

What’s more interesting is that you had the postmaster general telling Congress weeks ago that mail volume is going to be down by 50 percent in the next few weeks compared with last year. That’s a huge drop in volume. What’s that going to going to look like? The losses are going to skyrocket. The Postal Service is going to need some kind of a bailout because even in this sort of diminished state, Americans want their mail.

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