THE NEW GILDED AGE (Part 2)
THE NEW GILDED AGE (Part 2)
04th September, 2020 0
A lot of fear and misinformation has spread about the post office. People seem to think the sky is falling, nut they’re missing a lot of important context. Let’s check some facts, shall we?
The U.S. Constitution creates the post office and requires Congress to fund it.
False. Several people seem to be under the belief that the Constitution mandates the existence or funding of the United States Postal Service. The U.S. Constitution does mention the postal system in a sense, but doesn’t create the post office or require its funding. Article I, section 8, clause 7 of the Constitution gives Congress “the Power […] To establish Post Offices and Post Roads.” It requires nothing; it merely permits Congress to act, if Congress so chooses. The clause gives Congress the ability to create post offices and the implied authority to create and provide services through the United States Postal Service. And Congress has.
USPS relies on Congress for funding.
False. USPS is an independent agency that is almost exclusively self-funded since 1971. It may receive some small appropriations for “public service costs” and “revenue forgone.” Public service costs are “reimbursement to the Postal Service for public service costs incurred by it in providing a maximum degree of effective and regular postal service nationwide, in communities where post offices may not be deemed self-sustaining.” 39 U.S.C. 2401. USPS may request an appropriation for public service costs for up to $460 million annually. However, USPS has not requested or received this reimbursement since 1982.
Revenue forgone is funding providing to subsidize the mailing costs of groups such as the blind and overseas absentee voters. Under the Revenue Forgone Reform Act of 1993, USPS was supposed to receive about $29 million in appropriations every year from 1994 through 2035, but for most years, that funding has not actually been appropriated. For context, USPS’s revenue for the fiscal year ending in 2019 was $71.1 billion. So these payments would make up less than 7% of USPS revenues even if the agency did receive the payments.
But USPS has asked this year for an emergency appropriation from Congress. USPS is in financial distress and will be insolvent before the November 2020 election. True about the distress; insolvency is off by 10 months. USPS is in a financial bind. The agency has had a net loss for most of the last several years. This is because the demand for shipping letters and flats (large envelopes, newsletters, magazines) has declined steadily for over two decades. Costs for shipping letters and flats, however, have not declined as much. Less revenue with the same costs has resulted in USPS taking financial losses.
COVID-19 has exacerbated these issues even further. Mail volume dropped, while expenses, like for PPE, increased. So much so that USPS sought a $50 billion emergency funding and the authority to borrow another $25 billion from the Treasury. This was contemplated for the CARES Act that addresses so many other COVID-19-induced financial crises. USPS estimated in the spring that they would have an estimated $13 billion budget shortfall (compared to a $9 billion shortfall in fiscal year 2019).
But we now know that USPS will survive at least a little longer. While their income is still not what it needs to be, the increase in online shopping during COVID-19 has helped it stay above water. And the Treasury made a $10 billion loan available. So USPS is in a critical condition, but it does not appear that it will shut down before the November election.
USPS is in distress because it is required to pre-fund retiree pensions and health benefits.
Mostly true, but that’s not the only reason. This is a pervasive half-truth. The Postal Accountability and Enhancement Act of 2006 required USPS to pre-fund future retiree health benefits (not pensions though). Previously, like most agencies, it funded these benefits on a pay as you go basis: the benefit is claimed, then they pay the bill. Instead, USPS was supposed to pay $5–6 billion per year from 2007 until 2017 into a retiree health benefit fund (RHBF) that is supposed to cover retiree health benefits for over 50 years. The idea is that pre-funding these benefits ensures that the benefits get paid even if USPS does go into crisis.
The problem is that USPS hasn’t been paying into the fund since 2012, and didn’t even make full payments in every year before that. It was supposed to have completely funded the RHBF by 2017, yet less than 44% is actually funded. It has become clear the current RHBF requirement is not sustainable and is harming USPS’s financial survival.
Payments for RHBF have stopped, but USPS is still accruing new costs of $3–4 billion per year. On the other hand, USPS had a loss of $8.8 billion for fiscal year 2019, and will likely have at least an $11 billion shortfall for fiscal year 2020. These losses are greater than the annual accrual for the RHBF. So without the RBHF, USPS would have still had losses for 2010, 2011, 2012, 2019, and 2020–five of the last ten years.
This means that while a significant portion of the financial trouble can be attributed to the RHBF, USPS is still incurring other losses that would result in a net loss in some fiscal years even if the RHBF mandate did not exist.
The new Postmaster General Louis DeJoy is a big donor and partisan operative.
True. Louis DeJoy is a large donor to President Trump and the Republican National Committee. But Trump is not the first president to put a large donor in a key position. It is also worth noting that DeJoy is the first postmaster general in two decades who has not risen through the ranks of USPS in some other capacity before being appointed to the position. To DeJoy’s credit, he does have a long career in logistics and operations, which is the key area of expertise needed for managing the expansive, complex network of our mailing system.
The appointment of DeJoy was entirely Trump’s choice alone without any checks or balances.
False. The Postmaster General is selected by the Board of Governors. The Board of Governors is appointed by the president with advice and consent of the senate. No more than 5 of the 10 Governors may be from the same party. There are currently multiple vacancies on the board. At the time that DeJoy was appointed, three were Republican and one was Democrat. DeJoy was unanimously selected by that board. DeJoy was appointed in early May, and did not fully transition into his position until June. An additional Democrat and an additional Republican have been appointed since then.
USPS just started having these problems since Dejoy started.
Half-true. USPS has definitely been experiencing some problems with service lately, but USPS’s service woes cannot be entirely attributed to DeJoy and his policies. Many communities, for example, experienced significant delays and even some non-deliveries during their primary elections this year, long before DeJoy took his role. Issues have ranged from changing operations to avoid COVID-19 spread, workforce shortage due to COVID-19 quarantines and illness, working out kinks of handling mail voting where it’s new or increased substantially, and managing the influx of packages due to increased online shopping. There also have been some changes to delivery policies since July that have slowed service. These changes were put into place by DeJoy. However, they generally fall into a few categories: Stay on schedule. No overtime. No errors. No duplicate work.
Those elements aren’t a recipe for disaster; to the contrary, they’re the main ingredients to staying organized and cost-efficient. And while people are panicking because the document suggests mail will be left to sit, the document is clear:
One aspect of these changes that may be difficult for employees is that — temporarily — we may see mail left behind, which is not typical.. Any mail left behind must be properly reported, and employees are charged with ensuring this action is taken with integrity and action. The key word being temporarily. Mail is not intended to sit for days. A piece of mail may be left behind on one day merely because it missed the boat, so to speak, but it will be delivered the next day.
DeJoy fired the whole leadership team of USPS in a Friday Night Massacre.
False. This is in reference to the Saturday Night Massacre, when Nixon fired several high level staffers or forced them to resign in an attempt to cover up the Watergate Scandal. DeJoy did make some changes to the leadership of USPS when he became Postmaster General. But leadership changes when there’s a new Postmaster General is not unusual. In fact, the previous Postmaster General, Megan Brennan, made her own leadership changes when she took the position in 2015 and made leadership changes again in January 2019.
DeJoy is making illegal or unethical investments in competitors of USPS.
To be determined. DeJoy and his wife own stock in companies that have a stake in the package delivery business. $30 million is in his former company, XPO Logistics, and he recently bought stock options on Amazon. Former director of the Office of Government Ethics, Walter Shaub, says the situation “doesn’t pass the smell test.” The law prohibits officers of independent agencies like USPS from having financial interests in companies that intersect with their official duties, which has been interpreted to include possession or transactions of stocks. 18 U.S.C. 208. The Inspector General for the USPS — the watchdog who ensures there’s no waste, fraud, or corruption — is already opening an investigation and will make the final determination.
USPS is (re)moving blue mail collection boxes.
True, but for cost-efficiency reasons, and they almost immediately stopped. A wild panic spread through social media on Friday, August 14, because people were sharing photographs of piles of blue mail collection boxes being hauled away. USPS admitted that it was removing some mail collection boxes, and transferring some to other locations.
First, some of the images floating around social media are misleading or have false captions.
Second, USPS has already paused removal and transfer of collection boxes until after the election. It realized they were causing a panic, and will delay its actions until a later date when people are less paranoid.
Next, let’s discuss the rationale. People panicked because they assumed this was a tyrannical attempt to prevent mail voting. But there are costs associated with a low-use collect box, and there may come a time when the collection box become too much of a cost burden. It costs money to travel to and check a collection box that sits empty or collects very few envelopes. And collection boxes are moved all the time to adjust to the ebb and flow of mail volume. Given USPS’s financial crisis, it seems reasonable to believe that these changes were to increase efficiency.
During Obama’s Administration, the number of mail collection boxes declined by more than 12,000 nationally from 2011 to 2016, according to an August 2016 report, largely because they were underused.
USPS was destroying mail-sorting machines used to sort mail-in ballots.
True, but likely for cost-efficiency reasons. USPS is deactivating mail-sorting machines that sort some types of mail, including mail ballots. Some of these are being relocated, but there does appear to be an outright reduction going on with the remainder being dismantled. The plan to reorganize and rightsize the sorting machines is dated May 15, a month before DeJoy took office and less than a week after the Board of Governors announced his selection. Not only that, earlier deadlines were missed and gives extended deadlines, which implies that this plan had already been around for quite some time. The type of mail these machines sort are decreasing in volume, including down more than 15% just this year compared to last year. This action also aligns with the five-year strategic plan that was published before DeJoy was even selected: “Continuously optimize location of network processing operations and equipment as mail volumes decline and parcel volumes increase.”
USPS told election officials that voters’ ballots won’t arrive in time to be counted.
True, but not in the way you think. This one is mostly a miscommunication issue. USPS has warned 46 states about how it can handle election mail. When local election officials distribute pre-paid postage envelopes with absentee ballots, they have two options: use First Class Mail or use Marketing Mail. First Class Mail is more expensive but faster (2–5), whereas Marketing Mail is cheaper but slower (3–10 days). Apparently, USPS has informally treated both types of election mail the same, expediting both whenever possible. So local election officials have been opting for Marketing Mail in order to save on costs. (Side bar: elections are funded at the local level and chronically underfunded.) But USPS cannot do that anymore, because it’s costly. And therefore, election mail will be treated as its paid category. This means some election officials may be advising voters to return ballots on timelines that wouldn’t actually meet the state law’s deadlines. For example, many election officials are saying to return mail ballots a week ahead of time; but seven days might not be enough time for some Marketing Mail, which could take up to ten.
A lack of communication and understanding by the public, combined with a volatile political atmosphere, has made people panic that there is some kind of authoritarian seizure happening. We should be worried about the financial future of USPS, but not panicking as if there is an imminent crisis. There are many, many, many things to be worried about right now.
Don’t burn yourself out by panicking over this. Keep your fire lit for another fight.
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THE NEW GILDED AGE (Part 2)