Will the Post Office Go Bust?

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S1: When Devin Leonard started writing a book about the Postal Service, it made him see the world in a new way. He’d walk outside, realize there’s a mailbox. There’s a letter carrier. He was seeing the postal service all around him.

S2: They just had this huge presence. Once you start really paying attention to the postal service, you see their trucks. They see their letter carriers. Everywhere you go, there’s a post office. It seems, you know, sometimes, you know, every four, you know, three or four blocks or, you know, you know, every downtown right now, you are probably noticing the Postal Service a bit more.

S1: To the only people coming to my door these days are post office employees. Neighborhood kids have put up these signs thanking the folks delivering the mail each day. And Devon says all that makes a kind of sense.

S2: The fact that these men and women, they keep coming every day is just some sign. That’s it. You know, your connection with the outside world is there’s some sign that things have. The world hasn’t totally sort of blown up or gone. You know, you’re going to hell with this disease.

S1: But despite how ubiquitous the post offices, despite the fact that many folks are feeling thankful for the work these carriers are doing under such threatening conditions, the post office is in trouble.

S3: We know that the Postal Service has struggled economically for a while now, but the postmaster general is saying that the pandemic is having a devastating effect on its business and calls this moment a critical juncture.

S1: A few weeks back, Democratic legislators warned the corona virus might force the Postal Service to shut down entirely over the summer. The agency just doesn’t have the money to keep operating.

S4: Other looming issue, can the U.S. Postal Service remain afloat? Today on the show, Washington has bailed out airlines, hotels, even Amtrak. Why not the post office?

S2: I mean, even even in 2020, if the mail stopped, people would that people would freak out.

S5: I’m Mary Harris. You’re listening to what next? Stick with us.

S1: The first thing you need to know about Devin Leonard is that he’s not romantic about the Postal Service. He knows it fills this psychological space in our lives ever present steady. But even if we love it. Fewer and fewer people are using the post office in the last couple of decades. Mail volume has plummeted. And in the last few weeks, that has gotten much worse.

S6: Something I struggle with with this story is that part of what tipped the USPS over and made them so fragile during this time with his coronavirus is that they lost a lot of mail from advertisers, junk mail. And I hate junk mail. And I think most Americans do. And it just seems to me like if the USPS is relying on junk mail to remain solvent, maybe we just need to rethink this thing.

S2: Well, four or five years ago, you know, I think Chuck. No, actually, it was longer than that. Junk mail surpassed first class mail as the you know, the the largest part of the Postal Service’s volume. You know, of course, it does say something. I mean, you know, as somebody said to me, you know, years ago when I first started writing about the Postal Service, you know, since we want a government subsidized, you know, junk mail system. But that’s kind of why we have.

S6: So the Postal Service has been around for ever. It’s in the Constitution, 245 years here, but its financial prospects. They’ve started looking poor. Really just in the past couple of decades. So I’m wondering if we can go back and sort of explain how we got here, because I was looking at this graph of revenues for the Postal Service. And in the early 2000s, the Postal Service was making money. Right. And then around 2005, 2006, it seems like things really changed. What happened?

S2: Well, one of the things that happened in 2006 was that Congress and the Bush administration started looking at, you know, plotting out, you know, the future of the postal service. And everybody can see that volume was, you know, was trending down and that probably wasn’t going to stop. So they passed the big postal reform bill.

S7: This bill will help to keep rates more stable by releasing the funds from an escrow account to pay retiree health benefits.

S2: Basically, that what they were concerned about was that postal workers get very generous with health benefits. And there was this concern that at sometime in the future, the Postal Service wouldn’t be able to, you know, the mail volume of mail revenue wouldn’t be able to cover that.

S7: With the passage of this legislation, we can can insure the long term viability of the Postal Service and the continuation of services on which this nation relies.

S2: So at that point, the Postal Service was still doing pretty well. The economy was doing really well. So Congress passed a law saying you have to pay about five billion dollars a year to sort of prefund those retiree health benefits. And the Postal Service could do it for about two years. Then the bottom part of the economy, the mail volume sort of going down and they just got crushed.

S6: Well, hold it. Let’s let’s talk about what that means, because prefunding 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.

S2: They were just trying to build up build up a fund of to cover. Because. Because also health care costs were going up. So the idea was was to build up a fund. So at some point down the line, taxpayers wouldn’t have to pick up the bill for that. The problem is, is that people knew the volume was going down. You know, for the mail, but they didn’t realize it was going to go down to the extent that it did. And again, even before the coronavirus hit, mail volume was down. You know, post financial crisis, the last financial crisis post great, great great recession by 30 percent.

S1: The post office has been thinking about its bottom line ever since the 1970s when President Nixon signed the Postal Reorganization Act. Before that, it 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. Devon says 50 years later, that’s not really how it panned out.

S2: They can’t really close a post office without going through this extensive review. And there’s always, you know, a lot of backlash. Nobody in Congress wants to let them close the post office. So they have to go through this long, lengthy review. And oftentimes that, you know, you know, that that basically keeps them from doing it. They can’t raise prices anymore. They’d like to raise prices. But again, that has to go through a longer view before the Postal Regulatory Commission that sort of treats it kind of like an arbitration. And there’s always a lot of pushback from the big mail or the junk mail or so they you know, they don’t want prices to go up. So I think the Postal Service left to their own devices. They do know what to do and they have a lot of good ideas. The problem is they’re not really allowed to do any of them.

S6: The postal workers also have a really strong union.

S2: It’s unions. They’re for this for major, major unions. It’s not just one. And they’re Ostende. They’re all pretty strong.

S6: So let’s talk about the unions. The Postal Service workers are really organized. So what is the role that their unions have played in terms of making change for the Postal Service or even preventing change?

S8: Well, the interesting thing about the postal worker unions is that they’re all in a bind, too, because they know that, you know, the future is pretty grim. And in some cases, and I know particularly the letter carriers have been they’ve worked for the Postal Service to try to combine routes and save money and do things like that at the same time. You know, they don’t want to do anything that would threaten their membership. You know, they don’t they don’t want to give up jobs. So there’s only limited much they can kind of kind of go along with cost cutting. So they’ve definitely worked to try to stop a lot of stuff. Certainly six day delivery that, you know, ending Saturday delivery. They were really against that. And I think that’s all the reason. What we know why that died, although along with the unions, the, you know, the big mailers, the junk mail or some folks like that, they’re very effective at lobbying, too. And interesting enough, they’re on the same page on a lot of stuff with the unions that they’d like to see costs cut a lot more. But they don’t really want to see a big change. You know, in the way things are working now because they benefit from that and sort of the unions.

S6: It’s funny because you’re talking about the junk mailers as like a constituency. I’ve just never thought of them that way.

S8: Well, you know, when you consider that they’re the biggest users of the Postal Service. You know what, you know, 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 I it’s just like the unions do.

S6: So what are the reforms that you see out there that could dig USPS out of this mess?

S2: Well, it’s that’s both sort of simple and complicated. But I mean, they need to have more control over their pricing. And the other thing is they need to reduce their they need to build it, reduce their infrastructure and work. You know, they have 31000 post offices, of course, and a lot and a lot of this put a lot of the rural post offices that they have really reduced hours. They save money doing that. But they could close and post offices. I a third of them lose money. Third of all post offices lose money. And then you have about 250 big distribution centers. They could probably cut some of those. And at some point they have to reduce their workforce because about 80 percent, Exxon’s 70, 78 percent of their of their costs are employees. So they have to be able to make some adjustments. And all that had to be looked to make more money, lower their costs. And then, you know, then maybe there’s a future.

S6: Is there anyone that you see in Washington who you think is willing to take this on? Like I said, no one really interesting proposal that was talking about, you know, the retirement investment for USPS, which is, of course, a massive part of their debt problems, retirement fund. And this person wrote, you know, listen, if we changed the way the retirement worked, USPS workers, it could be a massive influx in to the stock market, which needs a massive influx right now to kind of potentially jolt it back to life. And I thought, oh, that’s interesting. That could bring together some constituencies that otherwise wouldn’t be on the same page. But I’m curious if you see anyone who’s who’s kind of looking to do that work, that might break people out of their sort of typical viewpoints here.

S2: Well, the the thing that’s been proposed, you know what the postmaster general, Megan Brannon, would like to do and you know, her predecessor, Patrick Don, who wanted to do was shift all the postal workers into Medicare. And that has support for, you know, from the unions, too, that would take care of the need to prefund their health care because that would just be picked up as part of Medicare, not Medicare for all, but Medicare for all postal workers. But they they’ve had issues with that in Congress because Republicans don’t want to increase the size of the Medicare trust fund, but some blend of all these things. So cost cutting and business model changing to please, you know, people more conservative and then, you know, a change in the retiree health care prefunding. Know, that would that would please I guess, you know, people in the more, you know, bought more liberal side and, you know, you know, measures like that. So you don’t have to cut as many as many employees, you know, off and on. People talk about privatization. And if you look around the world, you know, in Sweden and Germany and England and Japan, they privatize their postal services. And it seems to be working OK for them. But, you know, but that but that’s that seems like a kind of a leap too far right now in the U.S..

S6: Yeah. I wanted to talk about that because privatization, it sounds extreme and it’s sort of brought up as something that could be really bad. But why? Because other other countries do have private postal services. So why in United States is that seen as dead on arrival?

S2: I just think privatization kind of has this has a stigma now. You know, it shouldn’t. But the unions are dead set against it. There’s no reason why a privatized United States Postal Service, you know, wouldn’t still have a unionized workforce. I mean, U.P.S., as you knows, is their workers. There are members of the Teamsters. And once again, I don’t think, you know, the big mailers that the junk mailers and those folks, they don’t I don’t think they’re happy with the system now and again. They don’t like the costs, but they they prefer the postal service. They can’t just sort of go out and raise prices overnight.

S6: You know, I saw this video on a Facebook group for a postal service union. This is for the New York metro area. And this is a little while ago. And, you know, things have changed. But I was struck by the fact that the union leader was talking about. I think we just need to shut down the USPS for a couple of weeks. And, you know, just. Cold reset because the workers feel vulnerable right now with the Corona virus 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, as you point out, you know, we are all at home and in some ways relying on the postal service more than ever. There have been postal strikes before, but it was a very different time in 1970.

S2: There is a big strike. And by the way, it wasn’t all across the country. It was primarily postal worker unions in New York and Chicago and, you know, sort of big cities. But even just that, that almost brought the country to its knees because people still dependent so much on the mail. And by the way, that was the crisis that sort of led to their reconfiguring of the Postal Service itself. I’m not you know, that’s that that’s the question is, is this going to be strike or no strike? Is this going to be the moment, you know, somehow in the midst of all this that everybody decides it? You know, Drew it really trying to fix the Postal Service’s was the fight about it.

S6: It’s interesting, though, that it was a strike that forced the major changes last time.

S2: Well, people wanted to do it. It really didn’t. Congress wasn’t really galvanized until the mail stopped, you know, after that.

S8: That’s what everyone decided they would. They really had to do something about it.

S1: Devin doesn’t actually think another strike will be necessary to force postal service reform in Congress. And he doesn’t think the Postal Service will completely shut down either. The prospect of hitting that kind of financial rock bottom is scary enough for legislators.

S2: They’re not going to shut down. But then you know what happens? They don’t have anybody.

S8: I mean, I think that the shorter answer is that Congress is going to do something I don’t think Senate Republicans want to be responsible for, you know, the shutting down of the U.S. Postal Service. I guess what’s what’s sort of more interesting is or least is interesting is, you know, you had Magan Bread and the postmaster general telling Congress, you know, two weeks ago that mail volume is going to be down by 50 percent the next few few weeks compared to the last year. I mean, that’s that’s a huge drop in volume. I mean, what’s that going going to look like and how. I mean, their losses are just going to skyrocket.

S2: They’re going to need some kind of a bailout because even then, they’re sort of the mainstay people. Americans want their mail.

S6: Devin Leonard, thank you so much for joining me. Sure. Thanks for having me.

S1: Devin Leonard is a writer for Bloomberg and Bloomberg BusinessWeek.

S9: He’s also the author of Neither Snow Nor Rain A History of the United States Postal Service. And that’s the show. But before I sign off, I’ve got a little request for you.

S1: We’re working on a show about the post Cobbett economy right now, and we’re looking for your stories. I want to know if you’ve applied to the paycheck protection program and what your experience was.

S9: I want to know if you or someone you love has been laid off. And I want to know if you’re currently trying to decide how you would turn to your job and whether you feel like you have to keep staying home. So tell me how you’re making financial decisions in this time of uncertainty. Give a call. Share your story. You can reach us at two zero two eight eight eight two five eight eight. What next is priest Mary Wilson, Jason de Leon and Daniel Hewitt. Special thanks to Maurice Solvers on this episode. We miss you. I’m Mary Harris. What next? TBD is going to be in your feed for you tomorrow. I will be back next week. Until then, have a safe weekend.