By Default or Design: The Demise of the Postal Service
August 3, 2012
BY MARK JAMISON, FORMER U.S. POSTMASTER
Default. It’s an ugly and dangerous word. It gives the impression that the individual or enterprise attached to it has utterly failed. It implies defeat and irresponsibility.
The news media use the word with relish. Like a car crash, a hurricane, or a murder, it sells newspapers. Combined with the word “bailout,” it’s also a surefire way to advance a particular political agenda.
On August 1, 2012, the United States Postal Service did not make a payment of $5.5 billion to the United States Treasury. On September 1st the United States Postal Service will fail to make a second payment to the Treasury of $5.6 billion. The Postal Service, blare the headlines, is thus guilty of an “historic default.” But it’s all hot air. The Postal Service is simply not making payments it should never have been required to make in the first place.
Whose fault is the default?
The two payments behind all the headlines were prescribed by the 2006 Postal Accountability and Enhancement Act (PAEA). The payments were ostensibly designed to pre-fund the health benefits of future retirees from the Postal Service, but they were actually nothing more than an accounting place holder used by Congress to mask federal budget deficits and to satisfy an arcane accounting system that exists primarily to deceive and dissemble.
In 2002, an examination of the postal pension liabilities revealed that the Postal Service was actually overpaying into one of its pension fund by tens of billions of dollars. But lowering the payments would have added to the federal deficit, so Congress had the Postal Service put the money it was saving from reduced pension payments into an escrow account.
A few years later, when PAEA was being crafted, Congress created a retiree health care fund, and shifted the money from the escrow account to the new fund. It also mandated that the Postal Service pay off the balance of its retiree health care liability in ten years. A forty-year payment schedule would have been totally adequate, since the fund was intended to cover retirees for the next seventy-five years, but the payments would have been too small to balance out what the federal government was losing with the reduced pension payments.
The retiree health care fund now has in excess of $44 billion. As it grows with interest, the fund will have more than enough to cover the costs of retiree health care for decades to come. The fund, it’s important to note, isn’t even being used for current retirees. As with most businesses, that expense is paid for out of current revenues, on a pay-as-you-go basis. The $5 billion payments to the fund were excessive to begin with. They are now totally unnecessary.
Yet in spite of all this, the word DEFAULT issues from the lips of Congressmen as a foul epithet. It reverberates through the media as an example of the failure and profligacy of government. It is worn as a talisman of triumph by those who insist that government cannot, will not, and must not succeed in a utopian world of free unfettered markets.
The Postal Service has over $320 billion dollars in its pension and health care plans. These plans are widely recognized to be significantly overfunded. Claiming that the Postal Service has failed to meet an obligation and has therefore defaulted is a little like saying that a man who fails to add a monthly payment to his multi-million dollar 401K ought to file for bankruptcy.
Claiming that the Postal Service has defaulted is merely an excuse to further the notion that the Postal Service is an anachronistic dinosaur that ought to be broken up or privatized. It’s also a means for Congress to avoid and evade its responsibilities to govern effectively.
The reality of the situation is that several groups and forces have combined, through ignorance and cupidity, to dismantle a significant piece of our national infrastructure and to eliminate 500,000 good, solid middle-class jobs. The truth, at this point, is that the fate of the Postal Service is the result of a bad dream, a dream that has us on a runaway train heading for a cliff. Solving the problem is less a matter of saving the train than simply waking up.
It was a very bad year
I’ve written many times over the past year, on Save the Post Office, other websites, and filings with the Postal Regulatory Commission, about the value of the postal infrastructure, the mismanagement of the Postal Service, and steps that could be taken to put things on the right track.
Last August, in post entitled “The Perfect Storm: How everything is coming together to take the Postal Service apart,” I suggested that Patrick Donahoe may go down in history as the last Postmaster General of the United States Postal Service and that he would almost certainly be considered the worst PMG of all time because of his substantial efforts to dismantle and decapitate a cherished national institution.
In “How to Save the Postal Service Before It’s Too Late,” I offered a series of modest, reasonable, and realistic proposals designed to both calm the growing mentality of crisis surrounding the Postal Service and to begin updating the business model of the Postal Service so it could build on its significant assets and retain its relevance into the 21st Century.
Over the past twelve months, the situation has only gotten worse. It’s been an endless stream of overwrought claims of impending disaster. The fire has been stoked by the media, which look for conflict and controversy rather than reason and fact. The crisis mentality has been furthered by a Congress that seems of incapable of discerning the public interest, let along legislating and governing in a responsible manner. The situation has been exploited by ideologues, who have used it to advance their agenda of privatization, and by many stakeholders in the mailing industry, who have licked their lips over the prospect of a postal system operated for their benefit alone.
There is a great deal of blame to go around — virtually everyone involved in this theater of the absurd has failed in some manner — yet the simple fact of the matter is that we stand today in a situation that can be easily and reasonably resolved to the benefit of the American people. A great and useful institution has been damaged and demeaned. Tens of thousands of jobs have been lost, while ill-considered and even idiotic plans have been advanced. But the damage is all self-inflicted. Despite the weighted words of “default” and “bailout,” the postal crisis — at least the one grabbing all the headlines — is essentially fictitious and fraudulent.
An infrastructure that builds infrastructure
The Postal Service has been and continues to be an essential infrastructure. It furthers our democratic ideals and our commercial opportunities. The postal network — the thousands of facilities and plants, the millions of miles of routes, the machinery and data processing capacity that supports everything, and the human capital that drive the network — the mailhandlers, clerks, carriers, and postmasters — is a useful and important piece of our national infrastructure.
Yes, electronic communication, the Internet, cell phones, and all the other modern means of moving information have challenged the postal system. But the postal network has adapted to technological change before and remained not only relevant but an important driver in the utility and productivity of new technologies.
Those who think that the postal network is no longer valuable should read the recent report from the USPS OIG, Postal Service Contributions to National Infrastructure. As the report makes clear, the postal infrastructure has enabled the country to grow, businesses to prosper, and new technologies to evolve. Even in today’s advanced electronic environment, there is still considerable value and benefit in being able to deliver to every house and business, six days a week. There is still considerable value in having a positive and useful government presence in small towns and communities in every corner of the nation. There is still considerable value in having a means to distribute the printed word across a neutral and trusted network, as well as a system for handling voting by mail.
In addition to the value of the infrastructure and the ongoing opportunity it offers for business and commercial development, one cannot easily discount the social value of the network. The Postal Service has offered meaningful and worthwhile employment to millions of Americans, and it has lifted many families into the middle class. We hear all about how postal workers are paid too much and receive benefits that are too generous, and how this is an unfair burden to taxpayers. But postal workers do not receive a dime of taxpayer money. Their salaries and benefits have been fully paid for by reasonable and sustainable postal rates that are among the cheapest in the world.
The postal network has bound the nation together by making the commerce and goods produced in one part of the country available throughout the country. Thanks to the postal system, a person in a remote region of rural America can shop for the same products as a person in a busy metropolitan area. Certainly television and the Internet now offer windows into other worlds, bringing the world to our living rooms and now even our phones, but as broadening as those connections are, they lack the unique capacities offered by the physical connections embodied in the postal network.
We have built a tremendous asset in the postal network, yet most of our leaders — our elected representatives in Congress and the executive officers of the Postal Service — seem willing to simply disassemble that asset and consign it to irrelevance or worse. This cavalier treatment of an asset owned by the American people borders on the criminal. What is worse, the reasons they offer for what they’re doing are as thin as the paper we claim to no longer need.
The postal network offers unlimited potential. It could be used to assist local and state governments in their missions. It could be used to assist federal agencies, the way it helps with the census and elections. The use of the postal network could save millions if not billions of dollars in taxpayer money if we allowed it to be used effectively and efficiently by other governmental bodies. The network also offers huge potential in data and resource collections through mobile sensors on postal vehicles. Its vehicle fleet could be used as a proving ground for new technologies. Its facilities could be early locations for charging stations.
The only thing that stands in the way of a more productive use of this national asset is our lack of imagination, our parochialism, and our ideological inflexibility. The promise of binding the nation together is an open and ongoing one, providing we are prepared to acknowledge the potential of the postal network.
Instead, that potential is being lost. Instead of dedicating ourselves to finding value in our national infrastructure, we have donned blinders of self-absorption that limit our vision to only those things that offer immediate return. The financial crisis was driven by this narrowed vision of immediate gain, and our failure to find a robust recovery is rooted in the same blindness.
Taking the service out of the Postal Service
Once the Kappel Commission of 1968 laid the foundation for the new Postal Service, the agency’s leadership has been fixated on the idea that it must become something other than what the Founding Fathers created it to be. Rather than performing the essential and necessary work of binding the nation together, the leadership of the Postal Service has been seduced by the idea of privatization. They may not always call it that, but the fact is that when your goal is to jettison every characteristic that makes the postal system a service infrastructure in favor being “more businesslike,” then ultimately the goal is privatization.
Patrick Donahoe and the current Board of Governors represent the culmination of forty years of dishonest thinking. Their plans spell the destruction of a public postal network. They would turn the country’s postal system into a private logistics company. The healthcare prepayments mandated under PAEA and much else that Congress has done are part of what’s behind the current crisis, but Mr. Donahoe and the BOG are also part of the problem. Their actions have served to undermine the stability of a national institution, and thanks to them, there are 400,000 fewer good paying jobs than there were five years ago. They say the cuts have been made necessary by declining mail volumes, but Mr. Donahoe and the BOG seem congenitally unable to tell the truth about the state of postal affairs.
One need only look at the Postal Service’s offerings in the Nature of Service Cases before the Postal Regulatory Commission. In the five-day case, the Postal Service sought to cut 17% of service for about a 3% savings. In the network rationalization case, they withheld research that showed huge revenue losses as a result of the proposed changes in service standards. In POStPlan, they propose to reduce service to 13,000 communities for virtually no cost savings. Worse, the plan is little more than a political sop to disguise office closings.
The sum total of their plans has been nothing short of massive reductions in service with the goal of abdicating their responsibilities to provide universal service. The plans are poorly conceived and poorly presented. More often than not, they have been revised on the fly, as expedience and publicity requires. That’s because the plans lack any fundamental basis in preserving our postal system.
The BOG and Mr. Donahoe have not acted as managers entrusted with a national asset. They have acted more like vulture capitalists stripping the organization of its assets so that what’s left can be sold to the highest bidder.
If the Postal Service stands in dire straits today, it’s because those charged with running the service have done everything in their power to gin up a crisis. Each month, Mr. Donahoe and his senior managers offer up another prediction of doom. We’re told there’s a cash flow crisis, but somehow there are billions of dollars available to spend on unproven and still unproductive systems like the FSS machines. We’re told that volumes are falling precipitously due to the Internet, but instead of showing all the ways it’s adapting to the new environment, the leaders of the Postal Service make ever more hyperbolic predictions of doom. What prudent business that uses the Postal Service wouldn’t be making alternative plans right now?
The management culture of the Postal Service is rotten and bankrupt. For years we have heard reports of managerial bullying. Just the other day, an arbitrator took the unprecedented step of requiring a District Manager to apologize for the ongoing atmosphere of bullying in offices in the Los Angeles area. Many have heard the story of Jerry Lane, the former Cap-Metro Area Vice-President who left the Postal Service after assaulting an employee. How does someone like that reach such a senior position anyway? The behavior that resulted in his “separation” was neither unique to him or others in the organization.
Whether it’s fudging numbers to make a plan more palatable or looking the other way at abusive managers, the senior management of the Postal Service has lost the capacity to be self-critical. The problems of the Postal Service can be attributed, at least in part, to a management culture and a senior management that have become hopelessly dysfunctional. No solution to the postal crisis that does not include a restructuring of the senior management and a thorough housecleaning at L’Enfant Plaza will be effective.
Where’s a Congress when you need one?
While senior postal management bears the lion’s share of the blame for our current circumstances, Congress owns the problem. As the day of the faux default approached, we saw senators screaming that their colleagues in the House were letting the American public down by not acting on a bill to resolve the situation. But in doing so, they unnecessarily amped up the already overheated rhetoric with misleading talk of “$25 million a day” losses and the impending default.
The leadership in the House has run from its responsibilities. Darryl Issa, chairman of the committee with oversight responsibility for the Postal Service, has offered prescriptions that would immediately destroy the Postal Service. At least Mr. Issa is ideologically consistent. He stands for a view of America and the American economy that leaves most of our citizens behind and actively denigrates government. His offerings on postal matters reflect that. It’s no wonder that his colleagues do not support his bill. It’s easy to argue that Mr. Issa may be the biggest beneficiary of the current situation. When words like “default” and “bailout” start getting thrown around, his radical solutions don’t seem so radical.
The problem is that if the House were to act tomorrow on the bill already passed by the Senate, we would simply be taking bad legislation and making it worse. Tom Carper, the Democrat from Delaware, plays the point man in postal legislation. His prescriptions are, for the most part, endorsements of the course Mr. Donahoe and the BOG have set. They dismantle the institution and the postal network and harm hundreds of thousands of postal employees and thousands of American communities. Mr. Carper’s proposals seem designed to satisfy the direct mailers, which is no surprise since they are major contributors to Mr. Carper’s campaigns.
Whatever his motivations or reasons, Mr. Carper has increasingly portrayed himself as the savior of the Postal Service. It is a role similar to the one Mrs. Collins of Maine played during the debate on PAEA, and the results are likely to be the same.
Many news outlets have opined that Congress ought to get out of the way and let postal management and the BOG run the Postal Service, the more businesslike the better. Others have simply said the Postal Service is irrelevant and should be privatized. My response to both of those views is that no government is not good government and it certainly isn’t better government.
While Congress has clearly failed to function as a thoughtful body in governing the Postal Service, that’s not reason for removing the postal system from Congressional control. We, as citizens, ought to demand that Congress fulfill its role in overseeing the Postal Service in a professional and effective manner. Those who think no government is a good idea or that the Founders had no faith in government are delusional. Without a strong government based on democratic principles, the end result will be either anarchy or plutocracy.
The default of leadership
The issue is not large or small government. The fact is that many of those who argue for small government actually support the expansion of government, so long as that government favors their interests. The largest expansion of government in our history has occurred under two Republican presidents.
The issue ought to be effective government. Clearly those who designed our political system understood the need for infrastructure. They understood the need for and value of postal services.
One of the greatest challenges our country faces today is rebuilding our infrastructure. We have done best economically when we focused on investing in foundational infrastructure. Good infrastructure expands economic opportunity and allows more people to participate more fully in the economy. Growth built on broad economic participation is growth that is both sustainable and growth that is broadly beneficial. The postal network has played a major role in providing that kind of growth, and it can continue to do that.
The Postal Service does not have a fiscal crisis. There are billions of excess contributions in retirement accounts. Those accounts, including the ones designed to fund retiree benefits, are well funded. The crisis facing the Postal Service is one of management and governance.
The management of the Postal Service has no credibility. It has offered plans that do not protect or utilize a great American asset. Instead, their plans transfer the assets and revenues of the Postal Service into the hands of a small segment of the mailing industry and serve to dismantle the postal network, a useful and essential infrastructure.
The Congress of the United States has abdicated its responsibility with respect to postal matters. It is not simply about the failure of the House of Representatives to act on a bill. It goes much deeper than that. When the legislature of the United States is no longer able to see the value in an infrastructure that sustains not only our commerce but our democratic values, when they are willing to sacrifice services that thousands of American communities rely on, when they are willing to undermine the useful, effective, and economically efficient employment of nearly half a million Americans, when our legislators are willing to do these things casually and cavalierly, then they have failed the country, miserably.
There is no Postal Service default. The Postmaster General and the Congress of the United States have defaulted on their responsibilities to the American public. Shame.
[Mr. Jamison can be reached at Mij455@gmail.com.]
(Photo credits: The US postal infrastructure, all from the US Postal Museum archives.