The Postal Service faces a few simultaneous crises. How does it fit into the stimulus negotiations?
Congress still hasn’t passed another economic stimulus package despite the desperate need for one. Each Friday until they do, I’ll be covering one possible component of a future stimulus bill and explain why it’s needed.
Meanwhile, President Trump’s executive order to extend the boost to unemployment benefits could further imperil state budgets. Since the move lacks more funds appropriated by Congress, more of the extra unemployment cash has to be covered by the states. The National Governors Association isn’t thrilled, nor should they be.
This week’s topic: the United States Postal Service and how it fits into the stimulus talks. We’ll go over some general info on the USPS, how it stacks up against private competitors, and it’s a point of contention in Congress inside and outside of the stimulus negotiations.
General details on the USPS, how it compares with UPS and FedEx
Let’s start with the service’s size. It’s huge. Besides the federal government and Walmart, it’s one of the largest employers in the U.S. with over 633,000 workers.
This is something that gets overlooked unless the conversation centers on “government bloat” or something like that, but it’s actually a strength for the USPS because of who the service employs.
Its workforce is more racially diverse than the one at-large, so it’s a great equalizer regarding inequities in our economy. It’s also a popular employer of military vets—about 100,000 workers are veterans, making up 16% of the USPS’ employees. To compare, vets make up under 6% of the national workforce.
The USPS is also a fairly efficient shipper compared to its biggest private competitors UPS and FedEx. Both UPS and FedEx have at least 400,000 workers—UPS with 413,000 and FedEx with around 400,000 spread out over its different departments.
However, there is an enormous gap in how many parcels these three deliver. UPS and FedEx each delivered over 5 billion parcels for fiscal year 2020 (UPS’ numbers are global, by the way). Comparatively, the Postal Service delivered 143 billion parcels in that same period. It’s been a minute since we used a ridiculous-looking chart, so here’s one (numbers in billions):
Now, keep in mind, the kinds of parcels these three deliver aren’t identical. The USPS delivers a greater mix of packages than the others, most importantly letters and traditional mail. However, that doesn’t invalidate the point here, that the Postal Service is doing a tremendous job in terms of distribution.
I won’t go into comparing delivery rates too much, but for the most part it’s cheaper to use USPS to deliver all types of parcels. The Postal Service also offers other free services, like free pickup, and it doesn’t charge extra for delivering over the weekend.
There’s also the importance of “last mile” delivery. The Postal Service is more often than not the one that completes the last leg of a delivery. While competitors also do this, they frequently partner with the USPS to finish delivering packages. That’s largely due to its footprint; the Postal Service is the only service that actually reaches every address in the country.
The USPS budget and its financial woes
If you’ve been even remotely following the news, this likely isn’t new info. But just in case, here’s a review of earlier this year…
First, the Postal Service announced another year of not breaking even financially. The pandemic hit a few months later, and in April the USPS projected it would have a huge budget shortfall of $13 billion due to a drop deliveries.
President Trump was quick to call the entire Postal Service “a joke” and said it should increase its rates. Renewed calls to privatize it popped up from the right, which happens every few years. Some on the left and elsewhere suggested modernizing parts of its delivery system, or even nationalizing Amazon’s growing shipping network to supplement the USPS.
Congressional Democrats proposed a $25 billion bailout in May, citing the service’s general importance and its role in addressing the pandemic. It was a tough sell for Trump. The CARES Act included just $10 billion instead, though this has not been forked over to the USPS due to onerous requirements from the Treasury.
Reporting annual losses isn’t a new development for the USPS.
For 13 straight years, it has ended its fiscal year with a net loss in funds. As of the end of March, it has lost about $83.1 billion since 2006 (for context, its operating revenue in FY2019 was $71.1 billion) and it owes billions to the Treasury and for pensions.
Part of this is due to rising operating expenses: From 2016 through 2019, costs increased from $69.9 billion to $74.9 billion. Revenues have also increased, just at a slower rate and in a less linear way.
But things weren’t always this way. Much of the USPS’ “mismanagement” can be tied to one particular piece of legislation. In 2006, Congress enacted the Postal Accountability and Enhancement Act (PAEA), which ironically did not entirely enhance the service.
PAEA required the Postal Service to pay the costs of the health and retirement benefits for its workers upfront for the next 50 years.
You might posit that private companies with pension programs have to do this too. This is true—companies are required to pre-fund benefits that employees accrue. But PAEA did more than this for the Postal Service: It required it to fully pre-fund benefits, not contribute amounts that accrue for employees each year. It’s like the difference between paying a down payment for a house before the mortgage and just paying for the house’s entire cost upfront.
It’s no coincidence that the USPS hasn’t broke even since the same year PAEA was passed.
In any case, the USPS has called its own business model “unsustainable” despite making cuts to its bottom line. Here’s a blurb from its recent “Delivers the facts” sheet:
“Even with continued aggressive management actions, absent legislative and regulatory reform, the current Postal Service business model is unsustainable: we cannot generate enough revenue to pay all of our bills and will likely be forced to default on a range of mandated obligations. The Postal Service has therefore been pursuing legislative reform to address its business model—a model that was imposed upon us by legislation in 2006. To address these issues, postal leadership has followed a process that includes significant efforts to educate—and to explore common interests with—all stakeholders.“
Something that we shouldn’t consider: privatizing it. Some of the USPS’ most important distinctions from its competitors are due to its not-for-profit nature—lower rates, free pickups, last mile deliveries, etc. Privatization would also undoubtedly layoff thousands of postal workers.
The vote-by-mail debacle
More recently, there has been a deluge of news about delivery delays by the USPS and how this could affect the upcoming election. Here’s a brief rundown of the last few weeks:
- First, the Postal Service is “reorganizing” some of its operations, though it now seems that “reorganization” means “significant curtailing of operations.” There have been reports of local post offices removing sorting machines and drop boxes. There have also been significant delays in deliveries across the country, leading to calls for an independent congressional investigation.
- The USPS has also explained to most states that it expects major delays in mailing ballots for November, jeopardizing the legitimacy of the election. There has been heavy speculation that this is a coordinated effort by the White House to suppress voter turnout, which brings us to…
- The President explicitly saying that he doesn’t want to offer more funding for the USPS because that would improve vote-by-mail. Which is deeply concerning. He’s since said he would support some funding, just so long as it isn’t put toward mail-in ballot deliveries… which is still deeply concerning.
- Meanwhile, applications for mail-in ballots are reaching historic numbers. Some states have been clamoring to get ahead of any Election Day chaos by trying to extend the deadline to submit mail-in ballots.
- To top it off, Postmaster General Louis DeJoy is now under the scrutiny of ethics watchdogs in the Senate. DeJoy, a Trump donor, has stocks in Amazon, which is projected to become a big competitor to the Postal Service in a few short years.
In short, the USPS is being sabotaged to sway the pivotal 2020 election.
Latest on the stimulus talks
When the House passed the HEROES Act in May, it included $25 billion in funds for the USPS. Meanwhile, the GOP HEALS Act—the starting point for Republicans in the ongoing negotiations—includes no money for the Postal Service.
In addition to Trump’s own quasi-support for more USPS funding, it’s difficult to know exactly what kind of aid will be included in the next stimulus package. This same debate took place during the CARES Act negotiations, but there’s certainly more urgency now with November looming closer.
The fault lines between both sides reflect other issues: Democrats believe the USPS is an essential service, like human services, while Republicans don’t want to add to the deficit by bailing out an entity that was already struggling before the pandemic. It’s a bit like the dynamic in discussing state and local aid.
But you can bet that Congressional Democrats and Republicans are working hard to put something together.
I’m kidding. They’re on recess until after Labor Day.
Where do we go from here?
The USPS remains one of the most popular agencies in the country, and it’s not just because it has an objectively bitching logo. It’s because the Postal Service fulfills an essential part of our communities by connecting us to one another. (It also helps that they don’t use tax dollars to operate.)
While Congress sorts itself out, you can personally support the USPS by purchasing stamps, some of their other merchandise, or simply by using their services.
If we want to truly save the USPS, altering or undoing PAEA needs to be the first step. But we also need to reframe the conversation away from treating it like a private entity. Raising rates to be closer to its competitors’ is out line with its mission. It’s not run for profit; it’s a public service. Individuals, small businesses, and communities rely on the USPS, and this reliance will only grow in the months leading up to one of the most consequential elections in recent history for those of all political stripes.
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