A Conflict of Visions: The Pension Dispute, Periodicals Mail, and the Great Postal Debate


October 17, 2011

GUEST POST BY POSTMASTER MARK JAMISON

Two competing visions are defining the great postal debate of 2011. 

The management of the Postal Service, along with the mainstream media and many stakeholders in the mail industry, are advancing a narrative that blames the Internet and postal workers for the “crisis” in the postal system.  The Internet is making the post office “irrelevant,” and workers’ wages and benefits are egregiously out of line with the private sector and other federal workers.  The solution?  Optimize the system by closing post offices and cutting the workforce and benefits. 

There’s an alternative narrative, but it’s not getting much play in the media.  According to this vision, the Postal Service continues to play a vital role in the nation’s social and economic life.  The fault for its financial problems lies not with the Internet or postal workers, but with a Congress addicted to half measures and feckless posturing and with a postal management that’s become a prisoner of its own circular, dead-end thinking. 

Two recent reports – the GAO opinion on the CSRS pension over-funding issue and the PRC-USPS study on cost apportionment for periodical mail — speak to critical elements in the debate about the future of the Postal Service.

 

The GAO report on Pension Responsibilities

The General Accountability Office's report, “Allocation of Responsibility for Pension Benefits between the Postal Service and the Federal Government,” should come as no surprise since it reflects the GAO’s consistently negative appraisal of the reasons for the existence of the Postal Service.  In this case the GAO takes a position contrary to the wishes and desires of the management of the Postal Service, but ironically the GAO conclusions flow logically from the visions expressed by postal management.

Essentially the GAO found that it is just wishful thinking to believe that the Civil Service Retirement System (CSRS) has been over funded as a result of the accounting principles utilized in apportioning pension costs to the old Post Office Department.  The GAO concluded that the original legislation creating the USPS, as well as subsequent legislative efforts, does not sustain the idea that the accounting methods ought to be in any way adjusted.  Their contention is that this is not a matter of equity.  Rather it is solely a matter of policy.

Perhaps the best response to the GAO is offered by Ruth Goldway, Chairman of the PRC, in a letter appended to the report.  Ms. Goldway accurately recounts the various legislative attempts to adjust some of the inequities inherent in the original legislation creating the USPS.  Policy ought to be equitable, she argues, and the thorough analyses offered by both the USPS-OIG and the Segal Group demonstrate clearly that modern accounting procedure comes down solidly in favor of adjusting the calculating methodology and the pension obligations.

Unfortunately, the GAO’s opinion on the subject, though rejected as simply “wrong” by the OIG and the PRC, has grabbed the media headlines and given support to Issa’s Postal Reform legislation.  The Postal Service and all those opposed to the direction postal reform has taken put a great deal of stock in correcting this supposed inequity.  The hope was that if this inequity were corrected, some $50 to $75 billion might move into the Postal Service coffers and make its fiscal picture much rosier.  Now, at least for the time being, those hopes are pretty much dashed.

But the CSRS over-funding issue is actually not central to what’s going on right now.  The operations of the USPS have been essentially break-even over the last five years.  Virtually all of the reported deficits are attributable to two causes: the ridiculous pre-funding schedule for retiree health care and the overages in the FERS system.  Correcting these two problems would be more than enough to set the USPS on a sound financial footing without resorting to draconian layoffs and reductions in service. 

The retiree healthcare pre-funding mandate, established in the 2006 PAEA, was implemented less as a protection against unfunded liabilities than as means to make the bill “score neutral” under the arcane budget rules employed by Congress.  But funding 75 years of health care benefits in ten — at a cost of over $5 billion a year — has proven too great a burden for the Postal Service to bear.

The set-aside for future healthcare benefit now stands at $42 billion, and the Postal Service actually pays those expenses out-of-pocket and current revenues to the tune of $2 billion per year.   As for the FERS, there is no dispute that the Postal Service has over funded this pension fund by $6.9 billion.  Further, it is likely that with the drawdown of employee complement over the last several years, the pension and benefit funds are even more actuarially sound.

The undisputable facts indicate that postal pension and benefit liabilities are more solidly funded than those of virtually any other entity, public or private, in this country.  The bottom line is that even without the CSRS money, the fiscal picture of the Postal Service is not nearly as bad as has been portrayed by postal management, the media, and right-wing ideologues whose agenda demands failure for the Postal Service.

 

The Periodicals Mail Study

For years many have believed that second-class publications — periodical mail — don’t carry their proportional weight in institutional costs.  The recent report from the PRC and USPS, Periodicals Mail Study, seems to confirm that. The question here becomes not how to bring this class of mail into rate compliance but whether it should be brought into compliance at all.

We need a serious discussion in this country about the value of public goods.  As the beginning of the report’s executive summary points out, the distribution of periodical mail was seen as an essential function that promoted our democratic values.  In their book The Death and Life of American Journalism, Robert McChesney and John Nichols discuss journalism as a public good, something that brings value and benefit to society as a whole. To some degree we already recognize that in the context of postal services. We provide special rates for non-profits and free matter for the blind.

Periodical mail — the county newspaper, the news-and-opinion magazine, the journal of scientific thought — are necessary and important parts of our society.  We are told that print is a dying technology and to some degree it is in decline, but it is a technology that has unique properties that we will not easily discard.  Print provides a finite accuracy, a point in time when something was directly recorded in a complete way.  A digital newspaper story may take fifty iterations — which one do we archive?  Print is a neutral technology when distributed through a postal system providing universal service.

As part of our future postal service we need to look at our rate system and structure.  We need to identify and place value on those services we provide that also serve as a public good and we need to identify who and how we will pay for those services.

 

Management’s failed strategy

Over the last twenty years, postal management has embraced a vision of postal services in this country that increasingly seeks to marginalize the principles of universal service in favor of a profit-driven corporate structure designed to serve the needs of a narrow group of “stakeholders” in the mailing industry. 

Management has pushed the vast and complicated set of ideas that are the foundation of the universal service obligation into a very narrow corner of the discussion.  They have been able to convince themselves that the national postal infrastructure has no other purpose but serving narrow business interests, and they have forgotten its primary function — serving the public good.  In doing so, they have given far too much weight to stakeholders who represent a relatively small part of the mailing industry.

This narrow view is an extension of the way we've come to look at business and commerce generally in this country.  We have devoted ourselves to the creation of financial value without a concomitant connection to social value.  When we come to worship at the temple of “money for nothing” — that is, when we use finance as a tool of manipulation rather as the provider and distributor of capital — then we also lose the sense of public and social good arising from commerce. 

When the marketplace becomes a virtual arena devoid of and devolved from any real substance, when traders sitting in their underwear at 3 a.m. simply manipulate the overnight spreads, then we lose contact with the very important concept that work — our participation in the marketplace — has a social value and a public good.  We forget the very purpose of work, the way it occupies, enervates, enriches, and helps us assign value and meaning to life.  The question, as writer Wendell Berry puts it in a 1985 essay, comes down to this: “What are people for?”  It’s a question we must confront, sooner or later.

 

The last mile and the postal infrastructure

We are constantly being told that because of the Internet, the mail — and consequently the people who deliver and process it — are becoming increasingly “irrelevant.”  But this is very flawed and limited view of the mail and the postal system.

In an article entitled, “Clicks and Mortar” (New Yorker, Dec. 6, 1999), Malcolm Gladwell explains that the promise of the Internet is not about the elimination of physical substance in favor of some form of virtual, ethereal commerce.  Rather, it is about shifting how we use our physical resources.  Gladwell argues that the Internet, rather than eliminating the need for people in the conduct of commerce, actually requires a robust and healthy back-office presence — something that one might legitimately call infrastructure.  

Interestingly, Gladwell introduces the term “last mile delivery” in the article.  This was at the height of the Internet boom, and many of the businesses trying to take advantage of that boom were looking for ways to combine e-commerce with the delivery of goods and services to the last mile, to individuals.

One of the reasons many of those Internet businesses failed is that the last-mile infrastructure is difficult and expensive to build.  Many tried, but aside from a few local operations, few succeeded.  Both UPS and FedEx have made it clear that they do not wish to tackle the last-mile problem.  Only the USPS has been able to develop a healthy, cost-effective network of last-mile delivery that reaches every corner of the nation.  Although it was partly a matter of intent and design, it was least partially the result of simple inertia.  In any case, the network will never be duplicated.  But it is in danger of being dismantled.

Despite the importance of the “last mile,” search USPS.com and you’ll find very little about it.  It’s mentioned in the 2002 Transformation Plan, and that’s about all until 2007.  Even now we hear very little about the Postal Service’s “last mile” capabilities.  While we engage in a constrained and self-destructive discussion about how to dismantle the Postal Service and reduce its size and capability, we seem to give short shrift to the brilliant and obvious fact that the postal network is a tremendous asset and a magnificent piece of infrastructure.

 

The future of the post office

The Founders saw a healthy postal network as a source of sustenance and inspiration for our growing Republic.  They understood the importance of the ability to transmit information, opinion, news and data over a broad, deep, and neutral network.  They knew that such a network would enable and enhance commerce.  The infrastructure created by a healthy postal system strengthened both democracy and commerce, and the Founders saw how the two were intertwined in crucial ways.

Congress and postal management have joined together to define a narrow and simplistic vision of the potential value of postal infrastructure.  Management particularly has insistently tried to redefine the post office as simply another mailing business, a coequal stakeholder standing alongside the direct mail and advertising industry.  For their vision of the postal service to come to fruition they must abandon both the universal service obligation and dismantle the postal network’s infrastructure, which includes several hundred thousand well paying jobs.  In today’s economy such a vision borders on criminal.

This narrow vision is given intellectual respectability by conservative think tanks that publish papers advocating the privatization of the post office.  They pay great respect to philosophers like Smith, Locke, and Mill, but they completely deny the existence of anything resembling a public good.  They somehow ignore the generations of postal workers — many of them veterans, people of color, and people with disabilities — who were able to join the middle class, buy homes, and send their kids to college thanks to their postal salaries.

The future of the Postal Service relies on understanding the value and potential of the network we’ve built over generations.  It relies on grasping the potential of last-mile delivery, which, coincidentally, embraces the universal service model.  That is one leg of the foundation. 

A second leg is recognizing the potential that exists within our existing retail infrastructure to bring millions of unbanked citizens, now on the fringe of our economy, into full participation in the digital age.  This could also assist the last and late adopters of Internet technologies by developing a universal e-mail address system tied to physical and p.o. box delivery.

The third leg of the foundational stool is finding a way to combine and interface government service and technology providers.  What if the mechanics of the Census were moved, with some additional funding, from the Commerce Department to the Postal Service?  A recent GAO report discusses this in a most limited and unimaginative way, but there is room for greater participation and cost savings.

We speak of the paradigm of B2B but what about G2G? The nature of government service providers is often unique.  There ought to be a way to facilitate the use of our internal infrastructure so that government at all levels derives benefit.  It is often said that government ought to be run more like a business: what better way to do that than finding synergies that can work across bureaucratic barriers?

 

In the name of efficiency

There are some who claim that it would be foolish to “bail out” the Postal Service.  They argue that even if the over-payments to the CSRS were real, transferring billions of dollars back to the Postal Service would be throwing good money after bad.   They argue that even if the fact the Postal Service is essentially breaking even from operations, there are greater efficiencies to be gained by cutting and dicing even further.  They argue that due to the Internet, phones, and electronic communication, the mail is becoming essentially irrelevant and the Postal Service basically just a delivery system for advertising. 

They argue, as does Rick Geddes, author of Saving the mail: how to solve the problems of the U.S. Postal Service (a book about privatizing the postal system), that the government should subsidize a few vital social services, like mailed prescription drugs, and we should let the rest of the institution die a natural death.   “It's silly to say that the nation is bound together by catalogs and credit card ads," says Geddes.

But privatization is not the panacea some would make it.  Many countries have moved toward privatization in recent years, and it has shown to have some serious problems.  And these efforts have been on a significantly smaller scale, demographically and geographically, than in the U.S. 

In any case, while privatization may be the ultimate goal of many, it’s not part of the immediate future, so their plan instead is simply to starve the postal system.  And it’s all being done in the name of “efficiency.” 

But by what measure would strangling the Postal Service provide any “efficiency” to the public?  What is efficient about closing thousands of post offices that cost next-to-nothing to operate but that provide crucial services to their communities?  Why is it efficient to drastically raise postal rates on the newspapers, journals, magazines and publications that educate and inform the public?  Will it be more efficient to let these publications go out of business, to be replaced by blogs that have no editorial oversight?  What’s efficient about putting 220,000 people out of work, whether through layoffs or “attrition”?  Will it be more efficient to pay them unemployment benefits than it would be to collect their income taxes?

Wouldn’t it be more truly efficient if we simply solved the real problems facing the Postal Service?  Transferring back to the Postal Service the $6.9 billion in FERS money and relaxing the health-care pre-funding requirement would go a long way toward addressing the deficit “crisis.”  It would also create opportunities for examining some ideas that might provide real efficiencies.  Like changing the law so the Postal Service could get involved with the census, which might save billions of dollars.  Like energizing efforts to promote last-mile delivery and thinking about other ways to take advantage of our existing physical infrastructure.  Like using the Postal Service and the nation’s credit unions to bring the “unbanked” more solidly into the economy.  Like convening a commission that could direct a serious discussion on the public value of a neutral ubiquitous post.

 

Fundamental Questions

The debate over the future of the postal service is ultimately about the first principles articulated by our Founding Founders.  The issues are far too important to hinge on a single report from the GAO.  And the scope of the discussion should not be narrowly defined by a myopic management.  At its core, the debate is about the fundamental questions our Founders asked when they designed our system of governance.

Are we as a people and as a government who we think we are?  Is ours a land of opportunity, equality, and fairness?  Are we bound together by a Constitution and a common vision? 

Or are we nothing more than a collection of individuals striving to be on top or get ahead?  Do we pay homage to our founding documents as little more than icons of justification and rationalization for the demonstration of our worst selves?  

In his first inaugural address, President Lincoln spoke eloquently of his hope that the nation might avoid a civil war by remembering that the people, despite passionate disagreements, were ultimately not enemies but friends.   The people of this country would come together when they are touched, said Lincoln, “as surely they will be, by the better angels of our nature.”  

Perhaps it sounds too hyperbolic to recall Lincoln’s vision in the context of the post office, but I think not.  The postal system played a key role in the country’s founding, the idea of universal service is one of our core principles, and the postal infrastructure is one of our greatest accomplishments.  The future of the post office will define who are as a people, and what we will become.

(Photo credits: post office rally in South Bend;  GAO signperiodicalsadvertising mail; New Yorker cover; Milton PA post office, photo by Evan Kalish;  privatization sign, from a great blog, The Worley Dervish; Signing the Constitution)

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