As the U.S. Postal Service remains a topic of great interest for lawmakers, taxpayers, and the general public, a non-profit group, American Oversight notably received a vast trove of documents dating back to early 2020. The collection of nearly 10,000 pages released on September 17th includes communications of former Postmaster General Megan Brennan on the subject of the agency’s finances, the USPS Board of Governors, and postal operations amidst Covid-19. These documents revealed a plethora of information including the agency’s rapidly worsening financial situation, as well as preparations for the upcoming election, which is expected to be heavily reliant on absentee ballots.
One aspect that was conspicuously absent was a clear and adequate plan for solving the agency’s $160 billion debt. For PMG Brennan, the subject of the Postal Service’s finances and the long path towards solvency came under intense scrutiny during a hearing held by the House Oversight committee in April 2019. At the time, Brennan communicated to lawmakers that Postal leadership would submit a robust 10-year business plan to the Committee within 60 days. For months, rumors about the arrival of the promised business plan persisted, but Brennan ultimately retired in May 2020 without completing this responsibility.
Even within the vast amount of information collected by American Oversight, the 10-year business plan, or any similar proposals to fix the postal business model or accounting systems, remain a mystery. Rather that pursuing substantive structural reforms, Postal leadership instead discussed priorities during a meeting on April 9th. At this time, PMG Brennan addressed the heightened importance of “Short-Term Legislative Relief” and “Longer-Term 10-Year Scenario 3 Business Plan Initiatives.”
Consistent with the Postal Service’s inability to grapple with meaningful systemic reform, the majority of USPS’ priority items would brazenly require a handout from the government in the form of either a direct cash infusion or by erasing debts owed by USPS.
The proposals listed included the following:
- $25B grant to cover COVID losses over the next two-year period;
- $25B modernization grant to ensure USPS can maintain and modernize the infrastructure to support the nation;
- Debt forgiveness of the $14.4B in outstanding debt;
- Unrestricted borrowing authority up to $25B;
- Prospective Medicare Integration with vested liability; and
- Pension Relief.
In fact, only two of the “Longer-Term” initiatives – “price flexibility” and “product opportunities” – were independent of vast government spending and use of taxpayer dollars to absolve the USPS from its self-inflicted difficulty.
If price flexibility is addressed on the competitive side, it could be beneficial as demand has skyrocketed and now places immense added pressure on the USPS. However, in the past, rate changes have been regularly limited to increasing stamp prices, which are only effective given the monopoly they have on mail delivery. Product opportunities could also be helpful, but there are an array of unanswered questions about whether the USPS will properly ensure they are financially viable. Furthermore, assuming one or both of these initiatives work, the benefit may not be enough to tackle the massive financial issues.
Current Postmaster General Louis DeJoy, who started in June 2020, will unquestionably face many challenges. He has hit the ground running, instituting a reduction in employee overtime hours and he is considering more reforms at the Postal Service after the election. Additionally, one of his first actions was to ask the Postal Regulatory Commission for the authority to temporarily raise prices on its commercial package offerings during the holidays, its busiest season of the year. This implies that, to some degree, DeJoy has started to figure out the stress and costs of competitive deliveries on the postal system. This action was approved and a temporary price change took effect on Oct. 18th. This will provide a good example of how much the Postal Service will have to review prices in order to help return it to balance.
By taking a closer look at how much the Postal Service spends and how much it earns, PMG DeJoy is beginning to scratch the surface on the business reforms that the agency needs. But really, if there is anything to be learned from the American Oversight discoveries, it is that DeJoy will have to truly kickstart efforts to repair the Postal Service’s operating model so that it can deliver on its promises of core services to the public.
PUBLISHED IN THE ECONOMIC STANDARD.