September 13, 2018

White House shelves release of internal report on postal reform

Trump unhappy with recommendations, people say.

By Mark B. Solomon

The Trump administration has shelved the release of an internal task force report containing recommendations to reform the U.S. Postal Service, according to people familiar with the matter.

The report, prepared under the guise of Treasury Secretary Steven T. Mnuchin, was delivered to the White House on Aug. 10 as originally scheduled. However, President Trump was unhappy with the recommendations and postponed the report's release, according to these people. It is unclear what parts of the report the President was unhappy with. No one knows the report's contents besides a circle of White House officials and those involved in the report's preparation.

An Aug. 30 report in the publication "Government Executive" said the White House would keep the report secret until after the mid-term elections in November.

The possible privatization or sale of USPS was one of the issues that the report had been expected to address. However, widespread Congressional opposition to such a measure is likely to eliminate it from consideration, according to one of the people familiar with the matter.

In June, Trump directed the Treasury Department to study ways to reform USPS' operations and pricing mechanisms. The report was expected to address whether USPS needed to raise its parcel rates to improve its profitability. At the same time, the administration proposed a restructuring of the quasi-governmental agency that would either restore its money-losing model to sustainable profitability, or position it for privatization either through an initial public offering or a sale to another entity (USPS).

In citing USPS' profitability problems, Trump directed much of his ire at Amazon.com, Inc., USPS' single-largest parcel customer. In various tweets, Trump claimed that USPS loses money on every Amazon shipment because it prices its parcel services too low. That view has been greeted with extreme skepticism from those familiar with the Amazon-USPS relationship. "The Post Office makes a lot of money from Amazon," said a person close to the matter.

Many have speculated that Trump singled out Seattle-based e-tailer because its founder and CEO, Jeff Bezos, personally owns The Washington Post, which has frequently been the target of Trump's attacks because of its aggressive coverage of his administration.

In a letter sent yesterday to Mnuchin, a coalition representing e-commerce companies, advertisers, newspapers and other business interests that use USPS cautioned against wholesale privatization and rate increases that "would drive away mailers and shippers" who combined generate more than 90 percent of USPS' revenues.

"Increasing postal rates would be folly in an environment in which there are cheaper and reliable alternatives," said Art Sackler, manager of the group, which calls itself the "Coalition for a 21stCentury Postal Service. "Packages have been almost the lone bright spot for the Postal Service, earning much-needed new revenues for the system. Raising rates for them may halt or even reverse this beneficial impact from e-commerce as shippers find other options."

Package traffic and revenue have been consistently growing at high single-digit, and in periods like the fourth quarter with busy holiday volumes, at double-digit levels. Meanwhile, USPS' core and most-profitable product, first-class mail, continues its secular decline as more correspondence that once moved in the USPS system is handled digitally.

The group has called for the White House to back Congressional legislation to help shore up USPS' finances without the need for privatization measures. USPS is required to pre-fund retiree health benefits for decades, a billion-dollar burden that effectively prevents it from being profitable. Bills in the House and Senate would shift the approximately 20 percent of retirees currently in the postal system to Medicare. In return, business users have agreed to a roughly 2 percent increase, baked into postal rates into perpetuity, to offset the increased cost to adding those individuals to the Medicare system.

Another group, the "Package Coalition," which has some of the same members but is more focused on e-commerce, has also called on the White House to put the brakes on any recommendations to hike postal rates. The group has scheduled a meeting tomorrow on Capitol Hill to brief Congressional staff members on the postal reform issue.

 

 

 

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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