On Feb. 5, the House of Representatives overwhelmingly passed legislation that was as meaningful as it was little noticed. It repealed a 2006 law requiring the U.S. Postal Service (USPS) to prefund its retiree health benefits and put USPS on a pay-as-you-go program for retiree health funding, just like every other federal agency. Moreover, the measure absolved USPS of billions of dollars in prior defaults on its prefunding obligations. Both steps removed massive sums from USPS’s sagging shoulders.
Wisely, lawmakers knew their limitations. In recent years, Congress tried to make postal reform legislation too broad and came up short. This time, the language was purposely crafted to be narrow in scope. Stakeholders, USPS’s management in particular, knew this was a good first step to restoring USPS to viability. But all knew it was just a first step. Full-scale reform would still be required. However, an important foundation had been poured.
Unfortunately, the bill was overtaken by other events before the Senate could consider it. In the mind-bending days that ensued, USPS became a political football kicked around by President Donald Trump and Treasury Secretary Steven Mnuchin. In an astounding display of venality and ignorance, Trump warned he would not sign the $2.2 trillion CARES (Coronavirus Aid, Relief, and Security) Act if it contained direct aid for USPS. It didn’t matter that even the GOP-controlled Senate had agreed to provide USPS with a $13 billion cash infusion.
Mnuchin, for his part, would not extend aid beyond a $10 billion loan with terms strictly dictated by the Treasury Department. Either accept the loan with strings attached, Mnuchin warned congressional negotiators, or get nothing.
The insanity was just starting, however. Trump warned that no coronavirus bill would get past his desk unless USPS quadrupled its shipping rates. Never mind that USPS has raised rates on all of its parcel and shipping services during the past two to three years, or that it would lose about three-quarters of its business from its largest shipper, Amazon.com Inc., should Amazon determine that it would be much cheaper to take the delivery work in-house, according to ShipMatrix, a consultancy.
Trump’s and Mnuchin’s hardball tactics, aside from their deplorable timing given the sacrifices made by USPS workers to process and deliver mail through the pandemic, ignore the fact that the agency has a viable path forward if it can get through this. A critical first step would be to end the onus of prefunding retiree health benefits. Then, the structural reform can begin. For one, USPS must be allowed to price parcel and shipping rates competitively and free from bureaucratic roadblocks. It needs to monetize its mailbox monopoly. And its universal service mandate may need to be narrowed to include the daily pickup and delivery of “essential” goods and documents.
USPS was taking on major water before Covid-19. First-class and marketing mail revenue and volume are in an irreversible decline. UPS, Amazon, and FedEx Corp. have moved a large part of their parcel business in-house, leaving USPS with huge revenue holes to fill. Its future lies with parcels, yet there will be challenges to replace the volumes lost from its Big Three customers.
It must be remembered that USPS is not a business. It is a service established 245 years ago to bind the nation by providing a channel for written communication. It will be very difficult to reform it to meet the demands of 21st century commerce. Maybe it doesn’t need the $75 billion it has requested. But it needs far more than the back of Donald Trump’s hand. It needs to get through this and then put itself back together.