The unions also oppose moving to a five-day mail delivery service. PMG Potter has been lobbying Congress for the authority to restructure retiree obligations, move to a five-day delivery service, introduce more flexibility in the postal workforce, make price adjustments, and increase retail offerings. According to a March Rasmussen survey, only 31 percent of Americans polled are opposed to cutting back to a five-day mail delivery schedule.
However, the only real reform that would save the USPS is full-scale privatization. Centrist think tanks have also weighed in. Robert J. Shapiro, a Clinton administration veteran and author of a UPS-funded report claiming that the Postal Service had an unfair advantage over competitors Shapiro , participated in a panel discussion at the Brookings Institution Brookings c , which received funding from UPS Brookings a.
Pitney Bowes was an early supporter of privatization efforts. Walker, a long-standing supporter of privatization GAO ; Walker Like some earlier Republican administrations, the Trump administration flirted with overt privatization.
Currently, unlike its rivals, the Postal Service is not allowed to engage in lobbying or make political donations—but a privatized postal service could Fisch ; Jacobson It also suggested offloading accrued pension liabilities onto taxpayers to make the Postal Service a more appealing target for would-be buyers.
In short, the report did little to hide the fact that privatization would lead to a massive transfer of wealth from rural residents, small customers, taxpayers, and workers to corporate shareholders. That task force, headed by Treasury Secretary Steven Mnuchin, called for stripping postal employees of their right to collectively bargain over pay and benefits while preserving a role for a downsized public postal service Task Force Whether the task force was more politically realistic or more cagey about privatization than the authors of the OMB report is an open question.
The administration may have become aware that overt privatization faced serious opposition, even from segments of the Republican Party base. Echoing libertarian arguments long used to promote the privatization of government functions, the task force framed the historical argument for a government postal service as stemming from its resemblance to a public good—a term economists and political scientists use to describe goods or services whose benefits cannot be limited to those willing to pay for them.
Even doctrinaire libertarians accept that lighthouses and armies should be funded by taxpayers for this reason, but they allow few if any other rationales for government provision of goods and services. The task force argued that the Postal Service once resembled a public good, but that the rise of internet communications had relegated it to a safety net role.
Aside from the highly debatable claim that a delivery network operated as a public service is less important in the age of e-commerce, framing the question around whether the Postal Service is or is not a public good makes little sense since the Postal Service is not funded by taxpayers. The Postal Service does, however, have features of a natural monopoly with positive externalities, similar to other public or regulated utilities.
A natural monopoly means that an established postal network can fend off competitors due to the fixed cost of building the network and network effects that make a service more valuable and cheaper to operate the more people who use it. In the postal context, a private service left to its own devices will reduce or stop offering services in higher-cost areas, especially rural and poor regions of the country.
While the task force claimed its proposed business model would not disadvantage rural residents, it defined this narrowly as maintaining uniform postage rates, while suggesting service reductions for rural customers, including closing post offices and reducing access points by clustering mailboxes.
In short, while you can make an argument for replacing a government postal service with a regulated private monopoly, the advantage of either option depends on the relative effectiveness of a government provider or regulator.
The new postmaster general was a controversial pick. His candidacy was promoted by Robert M. The other board member who resigned, Vice Chair David C.
DeJoy is no friend to workers. A Cornell University analysis of the mailing industry commissioned by the American Postal Workers Union in Hickey painted a scathing portrait of New Breed Logistics not simply as a company that actively opposed unionization efforts—hardly uncommon in the United States—but as one whose central business model was encouraging unionized companies and government agencies to outsource their supply chain management to nonunion New Breed.
The Cornell study recounts the lengths DeJoy went to in order to achieve this. When New Breed took over a contract for a container facility on an Army base in California, it refused to hire the 12 unionized employees, instead conducting a secret hiring process offsite. Since this is illegal, the company falsely claimed that the former employees had not applied for the jobs. The National Labor Relations Board ruled that New Breed had acted with anti-union animus and pursued a rare motion for injunctive relief, which New Breed tried to challenge all the way to the Supreme Court.
More recently, a series of New York Times articles reported on unsafe working conditions and charges of unfair labor practices in warehouses managed by XPO, the company that bought New Breed in Silver-Greenberg and Kitroeff ; Kitroeff New Breed was also cited for retaliating against workers who had filed sexual harassment complaints.
As the Postal Service is under pressure to save costs by degrading middle-class jobs, union-busting and health hazards in this sector are serious causes for concern. DeJoy has wasted no time making changes that sacrifice service with directives banning late trips and extra trips to deliver late items Bogage a.
These are presented as cost-saving measures but smack of sabotage, since on-time delivery is a major selling point for the Postal Service and its competitors. The Postal Service is very popular, especially with rural Americans.
Republican-controlled states have been slow to expand Medicaid under the Affordable Care Act, forgoing billions in federal dollars in addition to harming the physical and financial well-being of families in these states. With increased polarization and sorting of districts and states into Republican and Democratic strongholds, Republican incumbents often face more danger from primary challengers than from opponents in general elections, making them reluctant to provoke the ire of more ideological voters and big-money donors.
Nevertheless, the fact that 26 House Republicans recently broke ranks to support pandemic aid to the Postal Service reflects its broad popularity Fandos and Cochrane But this presents political risks, both in terms of being blamed for deteriorating public services and because state and local government cutbacks further damage an economy already suffering from insufficient demand for goods and services Tahmincioglu Big-money donors also tend to be antagonistic to public-sector unions, including the four that represent rank-and-file postal workers Pilkington In addition to resisting pay cuts, unions are often the most effective champions of public services, and this has certainly been true of postal unions.
But while some conservatives do not like government in the abstract, most voters like programs they have direct experience with, including those the ideologues are most eager to eliminate or radically transform, such as Social Security, public schools, and the Postal Service. Even the much-maligned Affordable Care Act is increasingly liked by voters, which helps explain why President Trump and other Republicans have tried to claim credit for its benefits while quietly trying to kill it in the courts Sullivan ; Rizzo This may have been the primary goal all along.
There are parallels with Social Security. While President George W. In the case of the Postal Service, overt privatization attempts have never gone beyond an exploratory phase.
Nevertheless, the hollowing out of the Postal Service has proceeded apace, mostly a result of workshare discounts offered to bulk mailers and third-party service providers.
The PAEA sped up back-door privatization. Its onerous requirements spurred the Postal Service to cut post office hours, close distribution centers, and outsource more of its functions Christensen, Francis, and Hatch The Postal Service also came under increased pressure to move to five-day-a-week delivery even as e-commerce boomed and customers became accustomed to faster service Christensen Congress has left the Postal Service to wither on the vine.
The following year, then—Postmaster General Megan Brennan told Congress that no amount of cost-cutting and defaulting on contributions to employee benefit plans would balance the books given the fundamental imbalance between costs fixed by law and statutory constraints on revenue-generating activities imposed by Congress Brennan The incoming Biden administration will have its hands full repairing the damage inflicted by its predecessor.
This will require new leadership. The USPS Board consists of up to nine presidential appointees, who serve seven-year terms, plus the postmaster general and the deputy postmaster general, who are selected by the board and serve indefinite terms. There are three openings, not counting the vacant deputy position and a seat held by a board member whose term expired and who is serving in a holdover capacity.
President Trump has nominated a fifth Republican, who has not been confirmed. However, DeJoy and the Trump appointees on the board may be able to maintain control long enough to inflict more damage on the Postal Service, especially if they are able to hand-pick a deputy postmaster general who would also have a seat on the board. A change in leadership will not be enough. There are glimmers of hope. In February, the House passed a bipartisan bill, with the support of 87 Republicans and Democrats, that would eliminate retiree health prepayments and forgive the remaining balance Katz ; U.
House Clerk However, the Republican-controlled Senate has yet to schedule a vote on a companion bill. Congress urgently needs to provide the Postal Service with the same pandemic relief as airlines and other private-sector employers facing a collapse in demand Steinberg Allowing the Postal Service to fail would have negative economic and social consequences throughout the country, especially in rural areas and low-income urban neighborhoods.
Postage rate caps should be relaxed after the economy recovers. A postage increase is not the answer during the coronavirus crisis. Raising rates now would amount to a tax on businesses and households at a time of high unemployment. The bigger issues that need to be addressed are outsourcing and limits on Postal Service activities that benefit big corporations at the expense of American families. We should worry less about regulated public monopolies and more about underregulated large corporations.
While the e-commerce and package delivery sectors tend to be highly concentrated due to network economies, there is also increasing consolidation in mail-processing and related industries due to technological, regulatory, and other barriers to entry.
Industries undergoing consolidation include direct mail printing, mail-processing software, and third-party logistics Patel and Qian ; Stoller ; Burnson The goal of government should be to raise, not lower, labor standards. A range of federal, state, and local laws are designed to ensure that government actions do not exacerbate poverty and inequality.
Living wage ordinances in many municipalities around the country require businesses that have government contracts or receive government assistance to pay above-minimum wages to ensure that workers and their families do not live in poverty. Though Postal Service contractors are generally covered by these laws, the laws do not apply to companies taking advantage of worksharing discounts as opposed to directly contracting with the Postal Service.
Steep workshare discounts allow outsourced work to be profitably performed by any company with lower labor costs than the Postal Service, not necessarily the most efficient company. This would have the dual benefit of allowing the Postal Service to capture some cost savings and potentially reduce race-to-the-bottom outsourcing to low-wage companies. Though this change would not require legislative action, the Commission has not implemented this recommendation. A more far-reaching solution should address the loophole allowing low-road employers who would be prevented by the Service Contract Act to perform contracted work for the Postal Service to take advantage of workshare discounts to perform outsourced work.
The Postal Service should not be prohibited from entering markets that fit with its public service mandate. If there were less resistance to expanding the scope of government to meet unmet needs and take advantage of natural monopolies, the Postal Service could not only offer postal banking services but could also compete with Amazon as a one-stop shopping and delivery conduit to independent retailers. Another way to look at this trend is to see that a private monopoly—Amazon—is replacing a public one, without, however, a public service mandate.
The Republican Party has historically balanced individual and community values; the interests of global corporations and patriotism; free enterprise and public service. In its support for privatizing a beloved public service, however, libertarian and narrow business interests have trumped tradition and broader community interests, including those of rural residents and small business owners.
Rather than openly attacking popular government programs, anti-government activists try to paint these programs as obsolete and inefficient. For would-be reformers, recessions and other crises present opportunities for radical change. But privatizers can cite no hard evidence of poor service or a reluctance to innovate Keating If anything, the fact that Postal Service jobs—unlike many in the private sector—provide a decent middle-class income has forced the Postal Service to innovate and invest in labor-saving technology because it is less able to rely on low-wage labor than competitors such as FedEx.
The incoming president, who has signaled that creating good jobs will be central to his economic agenda, should include bringing back Postal Service jobs lost to outsourcing among his priorities.
The Trump administration and other would-be privatizers simply assume the answers to the key questions of whether a privatized service would be more efficient and whether allowing the market to set prices would make people better off.
Even with textbook competitive markets and in the absence of externalities, Kenneth Arrow and other economists have demonstrated that you can never assume that free markets maximize well-being because people have different tastes and inherited advantages, among other reasons. A competitive market can only be said to be Pareto optimal, meaning that no one can be made better off without making someone else worse off.
The real issue is whether the Postal Service should reflect egalitarian democratic values or profit-maximizing free market ideals.
A functioning democracy serves as a counterweight to unequal resources even in a capitalist society, and voters may prefer a Postal Service with more equal pricing and services than would occur in an unfettered marketplace. In addition to the fact that a postal network does not operate in an environment where it is easy to assume that private-sector competition will lower prices and improve quality, there are many areas of society where most people prefer government or nonprofit providers over for-profit ones, including education and health care Quilantan ; KFF Often these are areas where it is important that those providing the services be motivated by a sense of responsibility more than personal gain.
Like public schools and hospitals, the Postal Service is a concrete reminder that while for-profit companies may make the best smartphones, civic-minded institutions are better suited for many other purposes, especially when public trust is paramount. Another common refrain is that government services should be targeted, not universal.
This allows small-government advocates to stake the moral high ground by offering to take better care of those who really need it while reassuring vulnerable but influential groups. Comedian P. Despite these attempts at sabotage, most Americans, including Republicans, value government services. Rather than trying to shrink government on the false assumption that the private sector is always more efficient, we should consider expanding government entities—like the Post Office—that have proven their worth.
Note: This is a corrected version of the report as of Feb. The original discussion of USPS board nominations incorrectly stated that all current board members were Republican. It also failed to note that a Democratic board member whose term had recently expired would remain on the board for an additional holdover year.
The author would like to thank Sarah Ryan, Jim Sauber, and David Williams for taking the time to share their expertise; Krista Faries for skillfully editing an unwieldy report; and Melat Kassa for excellent research assistance. The author is alone responsible for the views expressed and any errors remaining in the report.
In both regression results reported here, the dependent variable is the natural logarithm of inflation-adjusted annual earnings. In Appendix Figure B, the baseline is the earnings of male, white, non-Hispanic NH workers without a high school diploma. A log-linear model is used to estimate percentage differences from baseline earnings, controlling for education, hours worked, age, year, and, in some cases, gender, race, and ethnicity. Confidence intervals are wider for postal workers than for other government or private-sector workers because sample sizes are smaller, especially for subgroups such as postal workers with advanced degrees.
Confidence intervals that cross the zero line indicate that differences in earnings from the baseline are not statistically significant. Postal Reorganization Act , Pub. Thus, earnings are earnings from March through February Amounts are inflation-adjusted based on a not consumer price index CPI-U because reported pay is backward-looking.
Changes in the accounting treatment of retiree health benefits did spur many private-sector employers to cut these benefits or begin prefunding them to minimize the liability on their books Munnell, Aubry, and Crawford Likewise, state and local governments must estimate how much they would need to contribute to prefund benefits within 30 years, but they are not required to actually make the actuarially determined contribution GASB Anderson, Darryl J.
Arkin, James. Arrow, Kenneth J. Baertlein, Lisa. Baradaran, Mehrsa. Barro, Josh. Berman, Ari. Berman, Russell. Biden-Sanders Unity Task Force. August Bivens, Josh. Economic Policy Institute, October Blake, Aaron.
Block, Geoffrey. Lawfare , May 1, Blom, Kirstin B. Congressional Research Service, Report no. R, January Bogage, Jacob. Postal Service Battered by Coronavirus. Bogage, Jacob, and Josh Dawsey. Brennan, Megan J. Postal Service Stimulus Needs. Broadwater, Luke. Broadwater, Luke, and Hailey Fuchs.
Brookings Institution Brookings. Annual Report Bui, Quoctrung, and Margot Sanger-Katz. Why the Recession Could Actually Help. June 18, Burnson, Patrick. Butler, Stuart M. Butler, Stuart, and Peter Germanis. Campaign for Postal Banking. Postal Banking: Know the Facts. May Cato Institute Cato. Cato Institute website, accessed November 30, Cep, Casey. Chandler, Adam.
Cheney, Kyle. Cheng, Andria. A law makes the USPS' problems worse. Despite these unique requirements, the USPS continued to net positive cash flows, and was actually profitable until -- at which point Congress passed the Postal Accountability and Enhancement Act during a lame-duck session. Under this law, the USPS was required to pre-fund 75 years worth of retiree health care benefits in the span of roughly 10 years.
Still, those delayed payments still count as an expense -- meaning that regardless of the agency's financial successes over the last few years, its balance sheets will continue to report enormous losses. The Postal Service's debt "is a direct result of the mandate that it must Some policymakers see a chance for reform without resorting to the controversial cost-cutting measures from Postmaster General Louis DeJoy.
One such solution is a proposed bill from DeFazio that would eliminate the retirement pre-funding requirement. Others object to the very idea of the USPS funding itself with its own revenue. So why should we have a different standard for the postal service? The USPS loses money, but cash flow has been more stable. That is because as mentioned above, the USPS has some unusual expenses, imposed by Congress, that artificially depress earnings.
The requirement hit cash flow until the post office could deal with the expense no longer. Now the Postal Service just records the cost on its books, cutting into the bottom line, but without setting aside any cash.
Congress required the Postal Service to prefund its health-care obligations. No other company has to do that, though companies have to prefund pension liabilities, a requirement that became part of the law in the s. Companies put money into a trust that can continue to pay retirees even if the business goes under.
Corporate health-care benefits are paid as they are incurred. Congress, essentially, decided that the USPS should go a step beyond what corporations do, taking some of its profits and using them to prefund health care as if it was a pension. Employees, of course, deserve health care. The issue boils down to how the USPS will pay those benefits—as they are incurred, or out of a huge trust built up very quickly by Congressional mandate.
Benjamin Franklin—yes, that Ben Franklin—was the first postmaster general, appointed in , a year before the Declaration of Independence. Louis DeJoy is his 74th successor, as the 75th postmaster general.
DeJoy then worked at XPO and joined its board of directors.
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