Preserving the People's Post Office: A Postmaster's View



When Titans collide: UPS petitions the PRC to change USPS costing methodologies

October 26, 2015


The United Parcel Service is very concerned that you might be paying too much for a postage stamp.  

If you’re wondering why UPS would be worried about something like that, it has to do with the way postal rates are set.  According to the law, each USPS product is supposed to cover its share of the Postal Service’s operating costs, which includes costs attributable to that product as well as a share of total institutional costs.  

UPS believes that market-dominant products — First Class mail, Standard mail, and periodicals — are covering more than their fair share of the Postal Service’s operating costs, while competitive products — Priority and most shipping services — are not paying enough.

As a result, argues UPS, the average customer who buys a First-Class stamp is paying too much because part of the stamp’s price is being used to subsidize competitive products.  UPS wants the cost allocation methodology changed so that competitive products pay a larger share of the Postal Service’s operating costs. 

Then the Postal Service will to have to raise the prices of the products that UPS competes with, which will put UPS in a better competitive position and increase its profits.  UPS doesn't really care that some USPS customers are paying too much for postage.  UPS cares about UPS.


The UPS petition

UPS has been complaining about the costing methodology for many years, but in recent weeks it has intensified its efforts to get the Postal Regulatory Commission to do something about the problem.  In a petition recently filed with the PRC, UPS argues that the costing methodology used by the Postal Service and PRC is seriously flawed, and it recommends several changes that are intended to make the system fairer and bring it into compliance with the law.  (The UPS filing is in PRC Docket Number RM2016-2.)

Under the current system, says UPS, the Postal Service is using its monopoly powers to gain an unfair competitive advantage in the parcel delivery market.  UPS argues that the Postal Service should be allocating a larger share of its operating costs to competitive products, the products that compete with UPS.

If the PRC were to approve the UPS proposals, the Postal Service would need to raise the prices of its competitive products significantly — much more than the 9.5 percent increase announced a few days ago.  UPS would find itself in a much more competitive position.  It could raise its own prices and/or grab a larger share of the parcels market.  That would be good for UPS’s bottom line, but it would come at the expense of the Postal Service.

UPS is already the largest parcel delivery company in the world.  According to a 2014 Forbes article, the company claims 54 percent market share in the e-commerce package delivery market, as compared to FedEx, with 34 percent, and the Postal Service, with about 16 percent — a substantial part of which is providing last-mile service for UPS and FedEx.

In its most recent annual report, UPS shows earnings of $4.39 billion and earnings per share of $2.68. The report claims that UPS will return $30 billion to investors over the next five years.

This is not the picture of a company suffering from unfair competition.  But UPS apparently wants a bigger share of the pie.

The concerns that UPS raises in its petition in RM2016-2 are not wholly without merit, but they are overwrought and disingenuous.  That’s not surprising.  There’s a lot at stake. 

The proposals presented by UPS would affect not only affect the price of nearly every postal product but also the future viability of the Postal Service.  RM2016-2 promises to be a very significant docket.


Epic Fail for the Postal Service: The wrong model and the wrong BOG

March 23, 2015


In 2001 Postmaster General Bill Henderson submitted the first blueprints for a transformation of the Postal Service into a sleeker, more efficient business entity.  To justify the transformation, the rhetoric has repeated one mantra: the problem with the Postal Service is its outmoded and defective business model.  

A great deal of our speech with public policy is often coded — for example, “makers and takers” can often sound a lot like “black and white” — but in this case Henderson and his successor Jack Potter were pretty clear about their goal.  The way forward for the Postal Service, they said, would include cuts to the workforce, post office closings, a smaller postal infrastructure, and a general retreat from the idea of the Postal Service as a universal service provider.

The big mailers talk about the “failed business model.”  Postal commentators going back to Murray Comorow and through Alan Robinson have talked about the ‘failed business model.”  The folks in Congress, Republicans particularly but also Democrats like Tom Carper, all bemoan the “failed business model.” 

In focusing on the idea of a “failed business model,” these voices were able to elude facts like the billions siphoned out of the Postal Service to support payments to the Retiree Healthcare Benefit Fund that were essentially unnecessary.   Any discussion of rationalizing rates in ways that didn’t involve simply handing over postal revenues to narrow interests in the mailing community was avoided.  The idea of supporting universal service and postal infrastructure with modest budget contributions from the federal government was rejected. 

Instead, everyone seemed to agree that the nation’s postal infrastructure must be totally self-sufficient.  That was the preference of postal management as well, since money from Congress never comes with no strings attached.  Management takes every opportunity to remind people of this.  At the end of every press release is this sentence: “The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.”


The real problem

Assertions that the postal business model had failed reflected nothing other than a wish to apply a corporate model to a basic government service and function.  It didn’t matter that we had the most effective postal system in the world, a system that delivered more mail to more addresses at cheaper rates than virtually anywhere else.  It didn’t matter that our network of postal plants and post offices were the hearts of American communities.  It didn’t matter that the Postal Service provided 800,000 good jobs with good benefits, or that the income from these jobs flowed throughout local communities, supporting businesses large and small.

The sad fact is that none of the things that did matter to the average person mattered to those who set postal policy.  They had imbibed from the well that had transformed the American economy from an engine of shared growth and prosperity to a shell game that enriched the few at the expense of the many.  

In a little more than two generations we have watched as all the burdens of the economy have been shifted to those who work for a living.  We have seen the end of defined benefit pension systems, deteriorating access to employer-paid health insurance, and the rise of a model that eschews full-time work for part-time contract labor.  A successful postal business model has thus come to involve cheap labor, reduced service, and the privatization or outsourcing of public infrastructures.

But here’s a thought.  What if the problem with the Postal Service isn’t a failed business model at all? What if the real problem is a corporate structure that is ill suited to manage a fundamental infrastructure?  What if the problems of the Postal Service lay in a hidebound incestuous postal management system that has little accountability or oversight?  Could it be that our problems are related to a failure to properly distinguish between the management of government and the management of business?  What if the supposed failures of our postal system really reflect the failure of our society to value people, community, and basic public goods and infrastructures?

Who owns the Postal Service?

March 18, 2015


Who owns the post office?  Who is the post office designed to serve?  What is the system’s ultimate function?

These questions are fundamental to the future and the fate of the post office, the postal network, and postal services in this country. How we answer them will have a significant impact on businesses, workers, and communities.

We know the Constitution instructs — or more accurately, permits — Congress to make arrangements for post offices and post roads.  That is a good indication that the Founders saw postal services and the infrastructure that supported them as broadly essential to the nation — nation in their reckoning being the sum of the people.

But Congress has abdicated its responsibilities.  It no longer functions as a deliberative body and has become increasingly ineffective as a legislative body.  The Postal Service's Board of Governors has proven to be equally ineffective and has left postal managers to run operations as they see fit.  The regulatory system is relatively limited and not really able to represent the interests of the public as a whole.

All in all, the Postal Service is simply not accountable to the American people in the way it should be — or the way it must be if it is to survive as a vibrant public postal system, as envisioned by the Founders

In the debates about the Postal Service, the public interest is too often forgotten.  It's worth quoting yet again the stirring words of Title 39:

"The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people. The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities. The costs of establishing and maintaining the Postal Service shall not be apportioned to impair the overall value of such service to the people."

If these words are to mean anything, the leaders of the Postal Service, Congress, and the Executive branch must be reminded that the Postal Service is there to serve not some narrow economic interests but the people of the United States. 



The vision of the Founders

There are only a couple of mentions of the post office in the Federalist Papers, the set of writings by Madison, Hamilton, and Jay which offered the explanation and underlying reasoning that supported the new Constitution.  In Federalist 42, Madison wrote:

“The power of establishing post roads, must in every view be a harmless power; and may perhaps, by judicious management, become productive of great public conveniency. Nothing which tends to facilitate the intercourse between the states can be deemed unworthy of the public care." (emphasis added)

Benjamin Franklin certainly had a great deal to say about the post office.  As one of the inspirational leaders of the new nation and its first Postmaster General, Franklin clearly saw the importance and value of a robust postal system.  Early in his career as a printer and publisher, Franklin was disadvantaged because a competitor, Andrew Bradford, used his power as a postmaster to deny Franklin’s papers access to the postal system — an act that impressed upon Franklin the importance of broad access to the post.  In his biography of Franklin, Walter Isaacson says that the benefit of Franklin’s tenure as colonial postmaster, greater than the compensation he received, “was that it furthered Franklin’s conception of the disparate American colonies as a potentially unified nation with shared interests and needs.”

The Founders clearly recognized that an infrastructure that could serve to bind the nation together was essential not only for the free flow of information but also as a means of enhancing commerce. Washington even argued that newspapers and journals should travel the mails for free, while Madison suggested their cost be subsidized but that as matter of economy there should be a charge.  Whatever the expectations on funding or self-sufficiency, it is clear that the Founders saw a need for a public post, a postal system that belonged to and served the American people broadly.

Why Congress should not get out of the way of the Postal Service

November 23, 2014


News that Ron Johnson, the Tea Party favorite from Wisconsin, will be taking over as chair of the Senate committee on Homeland Security & Governmental Affairs has caused an overwhelming sense of panic among progressives and postal workers.  Johnson will control oversight of the Postal Service in the Senate.

There may be good reason to think this has the makings of disaster.  Johnson is on the record stating that it would be a good idea if the Postal Service went into bankruptcy and got privatized.  His training is in accounting, but he has refused, with an aggressive ignorance, to acknowledge the basic tenets of accounting.  When witnesses come before his committee, he bullies them and waves his arm abrasively.  His dislike of unions is so intense he’s willing to set aside his worship of the business principles of a contract to concoct a bankruptcy scheme to abrogate postal labor agreements. 

But is the coming of Ron Johnson any reason to panic?

Tom Coburn, the current ranking member on the committee, has said virtually all of the same things as Johnson (in his quiet, deadly way).   Several of the other Republicans on the committee — Rand Paul, Mike Enzi, and Kelly Ayotte — have also said many of the same things Johnson has.  All of them have shown a disdain for the Postal Service as an institution.  All of them have questioned the Postal Service role as a national infrastructure.

Never mind too that Tom Carper, the Democrat from Delaware and current chair of the committee, has endorsed virtually every cut, every closure, every act of outsourcing that PMG Donahoe has engaged in or even imagined.  On postal matters, his views are not that far from Johnson’s. 


It could be the end

While Ron Johnson will probably just carry on like Carper, Coburn, and the other Republicans on the committee overseeing the Postal Service, the specter of Senator Johnson as chair is haunting progressives. 

The sky is falling at Think Progress, where Kira Lerner tells us that with Johnson “it could be the end of the Postal Service as we know it.”  Lerner therefore hopes that Congress passes legislation — any legislation at all, bad as it might be — before Johnson can pass something worse.

But how likely is that the any legislation to come out of a lame duck session will be any good?  Anything likely to come out of the Senate would carve in stone the current agenda of cuts to the workforce, reductions in service, and secret NSA agreements.  Plus, any bill passed by the Senate would have to go to conference with whatever Darrell Issa comes up with in the House.  The result will be further degradation of the postal network.  There’s little chance it will make those who care about postal services in this country very happy. 

Over at Daily Kos, Laura Clawson seems just as frightened of Johnson as Lerner is.  Faced with Johnson’s statement that the Postal Service should go through a bankruptcy process, Clawson says, “Another solution is for Congress to get out of the way of the Postal Service making money providing needed services like banking for tens of millions of people who don't have access to financial institutions.”

Postal banking might be useful for the millions of unbanked citizens, but it’s worth giving this notion of “getting Congress out of the way” a bit more thought.  The idea seems to be almost everyone’s answer for what ails the Postal Service.  Blaming Congress is apparently something that folks everywhere on the political spectrum can agree on. 

That should come as no surprise, considering that Congress has become less popular than a shady used car salesman.  But would all be right with the Postal Service if Congress just got out of the way?

The answer to that depends a lot on what you want the Postal Service to do with its newfound freedom.


We don’t care, we don’t have to, we’re the Postal Service

May 8, 2014


It looks like the folks in L’Enfant Plaza will be the last to acknowledge what everyone else in the country already knows — customer service at the Postal Service is going way down hill, and fast. 

The plant consolidations have resulted in delayed mail, late delivery, and countless other service problems.  Under POStPlan, service has declined due to reducing hours at post offices and replacing experienced postmasters with poorly trained and underpaid personnel.  The shift from door and curb delivery to cluster boxes has confused and angered thousands of customers.  When customers try calling to complain, they can’t even get hold of their local post office.

Everyday there are news reports about such problems.  Postal officials say they’re just trying to make the system more “efficient” and to act “like a business,” but what they’re doing is taking the “service” out of Postal Service.  When they’re done, we’re going to end up with a United State Postal Corporation, and customer service is not going to be high on the agenda. 


Inventive interpretations

Much of the problem has to do with the way policies and initiatives that come out of postal headquarters get interpreted in the field.  As much as the Postal Service is a top-down autocracy that tries to micromanage everything, many senior and mid-level managers at the district and local level can get quite creative about how they understand directives from above.  In their zeal to please their superiors, employees can end up interpreting policies and regulations in ways that make very little sense. 

For example, it’s well known that the folks at headquarters would like to see a shift from door delivery to cluster boxes, but it’s postal policy not to change a customer’s mode of delivery without permission.  Nonetheless, last year the managers in the North Florida District decided to negotiate with the government agency that oversees Jekyll Island, Georgia, and together they decided that the island could keep its post office only if residents gave up door delivery — without getting the residents’ approval for the change.

In Freistatt, Missouri, Rick Belcher, the POOM representing the Mid-Americas District, decided that cluster boxes were the only alternative form of delivery that would be made available to residents after their local post office was closed because of a lease issue. This was in spite of the fact that rural curb delivery was already available throughout the area.

Then there was the story about the book publisher in Virginia who was told by a local manager that he could no longer use Media Mail to send his books — even though he’d been mailing that way for 22 years.  His customers, by the way, are members of the military.

Giving away the store: The Postal Service discounts the mail

April 20, 2014


In her book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, Susan Crawford describes how the American public has been imprisoned by monopoly arrangements in the delivery of broadband and wireless Internet services. Using pricing and discount strategies, communications corporations have colluded to circumvent competition and make private fiefdoms out of what should have been public infrastructure.  

It’s not a new strategy.  Back in the 1870’s, J.P. Morgan and the railroad barons worked with John D. Rockefeller and Standard Oil to use preferential pricing schemes and discounts to corner markets and consolidate their monopoly powers.

In its quest to act more like one of these giant corporations, the Postal Service has been using similar strategies, like fighting off regulation, making secret deals, manipulating prices, and offering discounts to become more competitive. 

Worksharing is probably the most notorious example of a discount of dubious merit.  Since the practice began in 1976, worksharing has grown dramatically.  Now about 80 percent of the mail arrives at the Postal Service pre-sorted to qualify for discount rates (as discussed in this OIG report).  Worksharing has spawned a huge private-sector consolidation industry that profits off the $15 billion (or more) in discounts that the Postal Service gives out each year.  As repeatedly documented in compliance determination reports by the Postal Regulatory Commission, many of the discounts are so large that they don't even cover their avoided costs.  Worksharing has led to the loss of tens of thousands of postal jobs.

Worksharing is not the only type of discount to be concerned about, however.  For large mailers, there are discounts for bar coding and an ever-increasing number of Negotiated Service Agreements.  For average customers, discounts are available for going online instead of going to the post office.  Now we’ve learned that the Postal Service is apparently giving discounts to Staples as part of the plan to put postal counters in big box stores.

Through the use of such discounts, the Postal Service has transferred large parts of its operations to the private sector.  Besides undermining postal jobs and the postal network, these discounts also threaten to create significant unregulated monopoly power in the communication, mail, and package delivery sector.

The Postal Service may say that the discounts are just good for business and that going online or using a postal counter in Staples is just more convenient for customers, but the real goal is to get rid of post offices, postal workers, and postal infrastructure.  From worksharing to Staples, the discounts mean one thing: The Postal Service is giving away the store. 


Discounts to Staples

Putting postal counters in Staples stores is clearly intended to replace postal workers in brick-and-mortar post offices.  The only way the deal can save the Postal Service any money is by reducing the number of clerks at nearby post offices and then closing post offices completely.  Maybe that’s why one of the provisions in Darrell Issa’s postal reform legislation removes the right to appeal a post office closure to the PRC if there’s a Contract Postal Unit within two miles of the post office.  There are over 1,200 post offices within a couple of miles of a Staples store. 

But there’s another aspect to the Staples deal that hasn’t got much attention.  The Postal Service is apparently giving Staples discounts on Priority and Express mail, domestic and global. 

These discounts have not been discussed publicly by the Postal Service, and the details are a closely guarded secret.  The APWU filed a complaint against the Postal Service and requested more information about the deal, including a copy of the Staples contract.  It received a long document of 58 pages, almost all of it blacked out.  (The APWU posted it here.)

Not everything in the document was redacted, however, and there was enough left to allow us to do a little detective work, which led to two PRC dockets covering Negotiated Service Agreements.  In comparing the APWU version and the PRC version of the documents, it seems almost certain that these NSAs involve the Staples counters.  (You can see some of the points of comparison here.)

Docket CP2013-84 covers an NSA for reselling Global Priority and Express mail, and CP2014-3 deals with an NSA for reselling domestic Priority and Priority Express.  If these indeed are the NSAs for the Staples deal, they tell us that one of the ways Staples is making money on its postal counters is by receiving commercial-based discounts on Priority and Express items.  We don’t know how much those discounts are, but one might reasonably conclude they are even more generous than those offered Click-N-Ship customers on the Postal Service website, which can be as much as 16 percent off retail. 

The masquerade continues: Playing politics with the Postal Service's unfunded liabilities

March 17, 2014


The House subcommittee on Federal Workforce, US Postal Service, & the Census held a hearing on Thursday, March 13to receive testimony on the Postal Service’s $100 billion “unfunded liability.”  Initially the hearing was billed as another Darrell Issa special.  Issa is chairman of the Oversight and Government Reform Committee, under which this subcommittee serves, and the hearings he has scheduled to look into controversies and scandal  — real, imagined, or manufactured — have become notorious for showcasing Issa’s brand of political theater and for their pure entertainment value.

Thursday’s hearing was not chaired by Issa, though, and he was nowhere to be seen.  The subcommittee is chaired by Blake Farenthold, a Tea Party favorite from Texas, and his hearing turned out to be rather anticlimactic.  (The video is here.)

Billed as an inquiry into the Postal Service's large and troubling unfunded liabilities, the hearing featured Frank Todisco, the chief actuary from GAO and a regular at postal related hearings.  Jeffrey Williamson, the Chief Human Resources Officer and Executive Vice-President of the Postal Service, was also on hand, as were two actuaries from the Department of Defense (don’t ask why).  Their written statements can be found here.

The centerpiece of the Postal Service’s ongoing financial crisis has been the idea that the agency has accumulated large unfunded liabilities that threaten its very existence.  We are given to believe that the ratepayers, postal employees and retirees, and, God forbid, the taxpayers may be on the hook for billions of dollars of liabilities.  In order to justify their agenda, the downsizers and dismantlers make these liabilities sound as dangerous and threatening as possible, even though the obligations represent decades of costs – in some cases as much as 75 years.

The fact is that the Postal Service is in the situation it’s in today largely because Congress created funding schedules and funding levels for pension and retiree healthcare obligations that exceeded standard accounting practice.  Only the most naïve or ideologically predisposed observer would believe that the way these obligations have been presented and accounted for represents anything other than an attempt to put the Postal Service in the most damaging financial straits possible.

The history of these obligations is long and well known.  We’ve discussed the nature of these liabilities here at STPO many times, including in this recent post that detailed the latest attempts to gin up hysteria through the use of emotionally charged words like “bailout”, “bankruptcy,” and “default.” Rather than repeat the same story again, perhaps it would be useful to take a step back and look at what these obligations represent and what dangers they really present.

Under same management: Some reservations about postal banking

March 2, 2014


A recent report by the USPS Office of Inspector General on offering financial services at the post office won immediate support from Senator Elizabeth Warren, and postal banking was thrust into the limelight.  A big front-page story in Huffington Post entitled “Breaking the Banks” by Elizabeth Swanson offers polling data (and a poll of its own) that shows 44% of Americans favor letting the Postal Service getting into the banking business.  After the president’s State of the Union message, David Dayen, writing in the New Republic, suggested that President Obama use his executive powers to order the Postal Service to consider postal banking.  Dayan has another piece in Salon about how postal banking could even "save the economy."

While some news sites have been touting the idea as a way of saving the Postal Service, others have dismissed the idea as government overreach.  The division of opinion falls along fairly predictable ideological lines, with the Left largely in favor and the Right mostly opposed, although as recently as last August Reihan Salam of the conservative National Review was touting the idea of postal savings accounts.

As many of the news articles and op-ed pieces point out, postal banking is not a new or very original idea.  The old Post Office Department offered savings accounts up until the early 1960’s.  Japan’s largest savings bank operates out of the post office, and many other foreign postal systems offer some form of financial services or banking.

In several pieces here on Save the Post Office, I’ve suggested that the postal network would provide an excellent platform for limited banking services, like small savings accounts, check cashing, electronic bill presentment, and payment systems.  These services could bring the unbanked and the underbanked, as well as those with marginal or no access to the Internet, into the 21st-century economy.  In many ways those kinds of services are a natural fit with a postal network oriented to public service.  

Done properly, offering basic financial services through the postal network would be attractive and beneficial, not just to those at the bottom of the economic spectrum but also to many in the middle class as well.  An initiative like this could be a wise way to preserve and expand our existing postal assets while preserving hundreds of thousands of good postal jobs.

Considering that I myself have been a proponent of postal banking, I hate to throw a wet blanket on the idea.  The proposal has gained tremendous traction and gotten many people excited, but there are just too many reasons to be skeptical.  Given the current structure of the Postal Service, the mindset of its leadership, and the attitudes and expectations of politicians in both Congress and the Administration, a move towards postal banking would not only be unlikely to save the Postal Service and the postal network, but it could also turn out to be as abusive and harmful as the current landscape of payday lenders and predatory banks.  The last thing we need right now is for the Postal Service to try to balance its books by extracting billions of dollars in fees from some of the most financially vulnerable folks in society.  That’s not the way to save the post office.

Premature motion: PRC dismisses bid to view non-public Amazon docs

February 13, 2014


Almost three months ago, I filed a request with the Postal Regulatory Commission seeking access to documents filed under seal in the docket that dealt with the Postal Service’s deal with Amazon to deliver its parcels on Sundays.  Last week, the PRC finally responded to the request. 

The Commission ruled that my motion was “dismissed without prejudice” as being “premature,” meaning I could resubmit the request again when the time was ripe — sometime next year.  I was also advised to confer with the Postal Service and Amazon "in an effort to resolve the request for access in a mutually agreeable fashion."  The Postal Service and Amazon had both filed briefs vehemently opposing my request, but somehow we were supposed to confer together and thereby "resolve the dispute without court action."  

This seems like a strange way to respond to a request for access to non-public documents, and the whole story illustrates the disturbing lack of transparency in how the Postal Service conducts its business — and with PRC approval to boot. 

The Senate puts the PRC in the backseat — or maybe not even in the car

February 9, 2014


On Thursday of this past week, the Senate held the second of two markup sessions on the postal reform bill, a.k.a. the manager’s or substitute amendment, submitted by Senators Carper and Coburn.  At the first session held the previous week, on January 29, a controversy arose over Section 301 of the proposed bill, which deals with postal rates and the role of the Postal Regulatory Commission.  The controversy resumed on Thursday.  

As originally proposed in the manager’s amendment, Section 301 does several things.  First, it takes the exigent rate increase that the PRC approved on a temporary basis and makes it the new base line.  The bill thus essentially overturns the PRC’s ruling in December and makes the 4.3 percent increase permanent, rather than limiting it to the time frame required to bring in $2.8 billion in profit (about 18 months to two years).

Section 301 also raises the current limit on annual rate increases from the CPI to the CPI plus one percent.  That would all but guarantee higher annual rate increases over the next few years.

In addition to dealing with these two specific rate matters, Section 301 transfers much of the responsibility for setting postal rates in the future from the PRC to the Postal Board of Governors.  The PRC’s role would be reduced to reviewing the BOG’s decision after the fact, rather than approving increases before they’re implemented. 

Finally, Section 301 gives the BOG the primary role in a 2017 rewrite of the ratemaking system.  The PRC can have some input and it will be able to veto the revision, but that's about all.

As Senator Carper explained at Thursday's markup, he and Senator Coburn decided to give the PRC "a very minimal role in terms of actually deciding what that new rate structure would look like" in the 2017 rewrite.  "We really put the Postal Service in the driver’s seat.  I don’t even know if the PRC was in the car, but certainly the Postal Service was in the driver’s seat.”  (video at 2:03:40)

Can it get much worse? The Senate tries postal reform, again

February 3, 2014


The Senate Committee on Homeland Security and Government Affairs finally took up its postal reform bill at a markup session on Wednesday, January 29.  The new S.1486 the committee took up is significantly different from the Carper-Coburn bill released last August.  The current version, aka the substitute bill or the managers’ amendment, has introduced changes to the rate system, regulatory oversight, and facility closings that are worth close scrutiny.

The leadership of the Postal Service has expressed satisfaction with the new substitute bill.  No wonder.  It reads like the fulfillment of PMG Donahoe’s and the Board of Governor’s wish list.  It grants them new powers over ratemaking, adds language regarding contract negotiations favorable to management, and creates a separate postal employee health plan within the current Federal Employee Health Benefit Plan (FEHBP).  The bill also addresses the retiree health benefit prefunding, while adding a new prefunding requirement for workman’s compensation.

Whatever its final form, the postal reform bill that comes out of the Senate will represent the next step in a process that has been going on since the Postal Service was created in 1971.  For the last forty years the leadership of the Postal Service has pursued a course that treats the postal network in terms of a corporate business model that simply provides a delivery service.  Postal leaders do not seem much interested in the view of the postal system as basic national infrastructure that connects American homes and businesses with each other and with their government.  They do not seem very committed to a broad vision of the universal service obligation.  They do not seem to understand what our Founders grasped so clearly — the important role of the postal network as a fundamental element of democracy, furthering access to information and creating connections in a way that bound the nation together.  

The Privatization Ruse

January 24, 2014


Accusations that the PMG’s ultimate goal is to privatize the Postal Service are apparently starting to make some of the folks at L’Enfant Plaza a little touchy.

On January 17, the Washington Post ran a story about the new postal counters in Staples that included a quote from Senator Jon Tester of Montana: Donahoe “can say whatever he wants but I think he wants to privatize.  And I think there’s plenty of people in Congress who agree with that. I don’t.”  

This isn’t the first time Senator Tester has expressed skepticism over the intended direction of the Postal Service.  In two hearings held a week apart last September, Senator Tester expressed much the same opinion.  At the hearing on September 19, the senator opened his questioning of the PMG like this: “I would say that if the goal is to privatize the Postal Service, then we ought to have a bill to do exactly that and move forward.  I think it would be a mistake, but nonetheless we ought to have that debate.”

Postal News Blog recognized the significance of Senator Tester’s remark in the Washington Post article and made it the headline of a blog post.  That in turn provoked David Partenheimer, Manager of Media Relations in the Corporate Communications department of the Postal Service, to post this comment on Postal News: “Privatize? Nonsense.  The Postal Service has no intention to seek privatization.” 

Mr. Partenheimer then proceeded to explain that initiatives like providing postal counters in Staples were solely about access.  He also pointed out that the Postal Service lost $5 billion last year, neglecting to mention that operations were profitable and that the loss was solely the result of the retiree healthcare burden.  Mr. Partenheimer then suggested that the onus was on Congress “to pass comprehensive legislation to provide a long-term solution to our financial challenges.”

This is the first time in my memory that a senior Postal Service official has chosen to participate in the comment forum on a blog.  Not that the Postal Service has been shy about getting its views out into the press.  For example, we regularly see letters from District Managers in local papers promoting various Postal Service talking points.  

And this isn’t the first time Mr. Partenheimer has responded to things he’s read on postal websites.  He contacted Save the Post Office a while back, having taken umbrage at how POStPlan community meetings had been characterized as a waste of time.  Mr. Partenheimer tends to see the Postal Service’s intentions and actions through rose-colored glasses.  But what else would you expect from a corporate PR professional?

Thinking inside the PO Box

January 17, 2014


On January 26, postage rates are going up — about 6 percent across the board, which means a First Class stamp will go from 46 to 49 cents.  But there's another rate increase going into effect on that day, and it hasn't gotten much attention.  

Three weeks ago, deep in the back of the December 26 issue of Postal Bulletin (on page 69), the Postal Service announced that it was raising the fees on post office boxes at some of its post offices.  Depending on the size of the box and the fee group, the new rental prices for a six-month period will range from $16 to $625. 

The new fees are within a range previously approved by the Postal Regulatory Commission back in December 2011, so they do not need any additional approval, and the Postal Service simply informed the PRC of the new fees in a letter on December 27.

Raising rates on boxes at just some post offices is actually a relatively recent event.  Historically, box rates were considered market-dominant products and subject to rate caps. That changed a couple of years ago, though, when some 6,800 postal facilities were classified as “Competitive Post Offices.”  At these offices, the Postal Service could charge higher fees than at its “regular” post offices. The Postal Service also added some service enhancements for these competitive boxes.

The issues surrounding fees for PO boxes are rather arcane, and the story of how the PO boxes at some offices came to be categorized as competitive is not likely to make headlines.  But PO boxes are an important part of the postal infrastructure, and what happens to them is inextricably tied to what’s happening to the rest of the Postal Service infrastructure of post offices, processing plants, historic buildings, vehicles, and workforce.  To understand the significance of what's going on with PO boxes, it helps to start with a little history.


From Kappel to PAEA

In June of 1968, the President’s Commission on Postal Organization — the Kappel Commission — issued its report, “Towards Postal Excellence.”  Its primary conclusion was that the executive departments of the federal government were “inappropriate” for the Post Office, and it recommended instead that Congress charter Government-owned Corporation to operate the postal service.

The Postal Reorganization Act of 1970 implemented the Kappel Commission’s recommendation. It changed the Post Office Department into the Postal Service while moving it from its status as a cabinet agency to a semi-corporate entity owned by the government.

For the next three decades, mail volumes grew — from 50 billion pieces of First Class mail in 1970 to over 103 billion by 2000 — and so did the workforce —  from  550,000 career employees in 1970 to nearly 800,000 in 2000.

Even as the Postal Service was growing, the leadership of the Postal Service, as well many in Congress, were envisioning a downsized Postal Service with a significantly smaller footprint.  That was precisely the point of then PMG Jack Potter’s 2002 Transformation Plan

Potter argued that the appropriate response to encroaching technologies was to treat postal infrastructure as unnecessary and overbuilt industrial capacity.  Rather than adapt, modernize, and find alternate uses for valuable postal infrastructure, the Transformation Plan envisioned a future environment that would jettison much of the retail network and shrink the mail processing network by using workshare discounts to transfer much of the work to the private sector.

A New Year’s Resolution: Support the People’s Post Office

January 1, 2014


Here’s a resolution for the New Year: Support the people’s post office.  

That means working to preserve an essential national infrastructure and rejecting initiatives to dismantle it, like closing post offices and cutting window hours, delivering the mail fewer days of the week, and converting customers to cluster boxes. 

It means working to ensure that the post office continues to be a good place to work — with job security, decent wages, and good benefits — and remembering that the post office provides jobs to thousands of veterans, minorities, the disabled, and women.

It means doing your postal business at your local post office, not some Village Post Office or the postal counter in Staples, and it means challenging workshare discounts, outsourcing, and all the other forms of piecemeal privatization.  

It means demanding more transparency in how the Postal Service conducts its business, questioning secret negotiated service agreements, and taking the universal service obligation seriously.

Supporting the people’s post office means fighting back against those who want to plunder and corporatize the Postal Service for their own self-interest and use it as a tool for enhancing their wealth at the public expense.  And it means calling out those who care more about the postage rates they pay than the health of the postal system and the good of the country. 


The rate increase

Later this month postal rates are going up by 6 percent.  That may make things hard on some mailers, like community newspapers, news magazines, and non-profits.  But the Great Recession has taken a huge toll on the Postal Service, and the rate system is set up to permit such increases when "exceptional circumstances" require it.  The Postal Regulatory Commission therefore determined in 2011 that an exigent rate increase was justified.  It was just a matter of how big or small it would be.  It turned out to be very small indeed. 

The Postal Service presented convincing evidence showing that from 2008 through 2014 the recession had cost it nearly $40 billion in profits, which easily justified the 4.3 percent increase it was seeking.  (Another 1.7 percent increase was already permitted under the price cap.) That increase would have generated about $1.8 billion a year, money that could have been used to maintain and improve the postal infrastructure.

The mailers argued that the recession had cost the Postal Service more like $1 billion, not $40 billion, and they thought a one percent increase for just two years would be sufficient.  That would have generated only about $700 million and done almost nothing to help the Postal Service’s financial situation. 

In the end, the Commission granted a 4.3 percent increase for about 18 months, or until the increase has generated $2.8 billion.  That may help address the liquidity problem, but it won’t do much to help maintain the postal system.  

The ruling was obviously much closer to what the mailers were willing to give than what the Postal Service was asking for, so the mailers came out fine.  They weren’t satisfied, though, and they immediately started complaining. 

What Would JFK Do? The Yale Commencement Address

November 26, 2013


For the past couple of weeks, the media have focused, almost obsessively, on the assassination of President John F. Kennedy, November 22 being the fiftieth anniversary of his death.  I found myself wandering through some of JFK’s speeches and came across his commencement address at Yale University, delivered on June 11, 1962.

In this speech President Kennedy focuses on three questions — the size and shape of government’s responsibilities, public fiscal policy, and confidence in America.  In all three areas, he says, “there is a danger that illusion may prevent effective action,” and his speech seeks to distinguish myth from reality and to “separate false problems from real ones.”

As I read the president’s words, I saw obvious parallels to the situation we find ourselves in today, particularly with respect to our approach to solving the problems of the Postal Service.  While we choke a great national institution and an essential piece of our infrastructure, trying to force it into a mold it can never fit, we also eliminate hundreds of thousands of jobs, dismiss opportunity for future generations, and, worst of all, abandon the basic principles of our country’s founding.

The populist demagoguery of the Tea Party enflames Republicans to rhetoric that portrays government as bad.  The result is predictable — bad government.  Most Democrats are not much better, seeing government as the handmaiden of corporate America, forgetting that this country is more, much more than a series of stakeholders and special interests.  We may be a melting pot of people and interests, but the whole has always been greater than the sum of those parts — something we seem to have forgotten.

In this speech President Kennedy talks about the myths that obscure reality.  He questions the myth of big government and, by implication, the related myth that government ought to be more like business.  He takes on myths of budget and fiscal deficits, the very ones that drive our thinking today, like the myth that taxpayers would rather see government operations privatized than pay for them, which is used to excuse the expropriation of public services and goods.  He also speaks passionately of employment, full employment, as the engine that drives our economy.

The problems of the 1960’s are not the problems of today.  In many ways, we have regressed to 1929, or perhaps to an even earlier time, the Gilded Age of the 1890s.  Though our problems may be different today than the one’s President Kennedy discusses, they are not all that dissimilar.  I have argued in many posts here on Save the Post Office that the problems facing the Postal Service and the proposals to solve them are a reflection of our greater economic problems and the way we have approached them.  Millions are without employment, yet we cut hundreds of thousands of jobs.  Our infrastructure crumbles, and our approach is to privatize it.  Our safety net is shredded leaving millions more vulnerable, and our answer is demand even further cuts.  Wages and opportunity are stagnant, yet an increasingly small number of us are doing quite well, demanding and taking an ever-greater slice of the economic pie.

President Kennedy ends his speech with a call to arms.  I don’t believe it is the same cynical and nihilistic call that drives much of our political discourse today — the call of “I’ve got mine so cut everything and everyone that is not of direct benefit to me."  In his inaugural address President Kennedy asked us to remember country and community.  It is past time that we began rebuilding this country, our economy, our infrastructure, our confidence, and yes, our Postal Service, in ways that benefit the great mass of Americans and the communities they live in — that should be our call to arms.

We would do well to listen and reflect upon these words of President Kennedy.  Here’s what he told the graduating class that June day.  (Some introductory and miscellaneous remarks have been edited out.  The full text can be found here, and an audio version of the speech can be found here.)


The path to postal nirvana: An entitlement program for the mail industry

October 15, 2013


The postal monopolies have been the subject of much discussion recently.  In last month’s Senate hearings, Senator Tom Coburn of Oklahoma offered his view that the monopolies weren’t worth much anymore so the Postal Service doesn’t need much regulatory control.  In the same hearing, Ruth Goldway, Chairman of the PRC, expressed concern that eliminating or modifying the price cap regimen for setting rates would be a serious concern in view of the Postal Service’s continued monopoly position with respect to market dominant products.  In her confirmation hearing for reappointment as a PRC Commissioner, Nanci Langley added her concerns about the ability of the Postal Service to abuse its monopoly powers.

The media has been full of comments and press releases from various mailers groups and lobbying organizations regarding the exigent price increase requested by the Postal Service.  Most of these groups express dismay at the thought of a price increase but also at the idea that the Postal Service would abuse its market dominant position if allowed to raise rates outside of the CPI price cap.  


The road to perdition

One of the loudest voices has been that of Gene Del Polito, president of the lobbying group PostCom.  In a recent commentary, Mr. Del Polito takes Senator Coburn to task for his remarks about the postal monopoly and then goes on to chide every member of Congress who deviates from the Gospel According to Gene.

“One could say there are two roads to postal reform,” writes Mr. Del Polito.  “One is a narrow and winding; the other is a road that’s broad, well-paved, and straight. One leads to postal nirvana; the other to postal perdition.”

Mr. Del Polito’s idea of postal nirvana is one in which rates are kept low for the benefit of mailers — at the expense of infrastructure, postal workers, communities, and consumers.  Giving the Postal Service the authority to set prices without outside regulation, on the other hand, would take us down the road to perdition and expose us to all the evils associated with an unregulated monopoly.

Mr. Del Polito tends to get abrasive in his criticisms of those who disagree with him, using terms like “knotheads” and “socialists” to describe people (like me) who view the postal network as a piece of national infrastructure that must be protected for the sake of the many rather than the few.  Ironically it’s Mr. Del Polito’s sense of entitlement — his view that a few large mailers should be provided with artificially low rates and unnecessary discounts — that smacks of what economist Joseph E. Stiglitz describes as “America’s socialism for the rich.” 

A few modest proposals concerning the rules on post office closures and appeals

September 27, 2013


The Postal Regulatory Commission recently dismissed two appeals on post office closings — Freistatt, Missouri, and the Franklin Station in Somerset County, New Jersey.  Both appeals were dismissed because they were filed late – in both cases, less than a week after the deadline.

There’s no question that the PRC has rules of procedure that it must abide by, but it frequently grants extensions to deadlines, more often than not to the Postal Service.  The PRC’s rules of procedures and the regulations that govern post office closings can be tough to sort through, especially for the average citizen who might not be familiar with bureaucratic and legal language.

For its part the Postal Service doesn’t make it easy on folks who wish to appeal the closing of a post office.  If the post office is a station or branch, the final determination doesn’t even mention that the community has a right to appeal to the PRC.  That’s because the Postal Service believes that only independent post offices are permitted to appeal, even though the Commission regularly hears appeal on stations and branches.

There are other problems with the discontinuance notices.   In Freistatt, because the post office had been suspended, two discontinuance notices were posted in post offices several miles away, and a third was taped to the back of a cluster box unit that replaced the post office.  In some cases the Postal Service has failed to produce a complete administrative record documenting the discontinuance process; in a few cases, there was more than one version of the discontinuance notice, and they contained conflicting information.

The appeals process could be made fairer for communities if there were a few simple changes in the discontinuance procedures that the Postal Service follows and in the process that the PRC uses to review appeals.

Shades of deception: The PMG testifies to the Senate

September 26, 2013


The Senate held another hearing on the Postal Service on Thursday, September 19.  The hearing was titled: “Outside the Box: Reforming and Renewing the Postal Service, Part I – Maintaining Services, Reducing Costs and Increasing Revenue Through Innovation and Modernization.”  Part II, scheduled for today, Thursday, September 26, promises to address workforce issues.

The first hearing didn’t break any new ground, let alone escape any boxes.  It did offer some interesting testimony from the OIG, David Williams, and there were a few interesting exchanges, but like most Senate hearings, it was a fairly scripted event with panelists giving written testimony and senators asking many of the same old questions.  There was one brief exchange between Senator Coburn of Oklahoma and the Postmaster General Patrick Donahoe that’s worth noting.

The exchange, which comes at about the one hour and eight minute mark of the hearing, involves a question from Senator Coburn and an answer by PMG Donahoe.  (The video is here.)  They are discussing the impact of labor on costs.

Senator Coburn: It is presently the law that an arbitrator cannot consider the financial health of the Postal Service in arbitrating a contract. Is that correct?

PMG Donahoe: That is correct.

What could be simpler and more direct?  The senator asks a question and the PMG responds, “That is correct.”

The problem here is that the senator offered a false premise— in point of fact, arbitrators can consider the financial health of the Postal Service — and then Mr. Donahoe confirmed the senator’s premise.  The PMG thus gave false testimony in a Congressional hearing.

What we have here is a failure to communicate: Learning from Jekyll Island

September 24, 2013


On September 12, we reported this story on Jekyll Island, Georgia, where the Postal Service apparently attempted to end delivery service for the island’s residents and businesses in exchange for maintaining a post office.  The island is owned by the state and administered by the Jekyll Island Authority.  The attorney for JIA in charge of negotiations with the Postal Service thought the post office might be closed and trading away home delivery was the best way to keep it open.  Many people in the community disagreed and argued that JIA had no right to make this tradeoff.

In an undated letter delivered to Jekyll Island residents on September 18, the Postal Service reversed course and announced that both delivery service and the location and hours of the present post office would remain the same, at least for now.

The letter, signed by USPS District Manager Charles J. Miller, begins by saying: “There has been some misinformation recently circulating in your community regarding the future of mail delivery service on Jekyll Island.”

The misinformation Mr. Miller refers to began when the JIA circulated a letter indicating that the JIA had decided, after discussions with the Postal Service, to trade the residents’ current city delivery for guarantees that the island would continue to have a post office, which will soon relocate to space the JIA owns in the island’s historic district.  Those discussions were laid out in a series of e-mails between Chris O’Donnell, the JIA attorney, and Damian Rawski, postmaster for Brunswick, Georgia, the office that administers mail service on Jekyll Island.

The announcement of the proposed trade-off stirred local residents to action and generated news coverage by the Jacksonville-based Florida-Times Union as well as Save the Post Office.  Officials at the USPS North Florida District in Jacksonville did not respond for requests for clarification from STPO, and they told residents that they had no knowledge of the negotiations between Mr. O’Donnell and Postmaster Rawski, even though a chain of e-mails indicates that Frank Stephens, Manager of Operations Programs Support, was cc’ed throughout.  In the letter from Mr. Miller, Mr. Stephens is also listed as the postal contact for any questions the residents may have.

Still left unresolved is the ultimate fate of the post office on Jekyll Island.  The office is currently housed in a temporary trailer with a lease running through May of 2014.  The JIA has indicated that the temporary trailers, which also house other Jekyll Island businesses, will be removed after a new shopping center is completed.  In a meeting of the JIA on Monday, September 16, C. Jones Hooks, the executive director of JIA, stated that the authority would leave the matter of delivery up to the Postal Service, according to Bonnie Newell, a resident who attended the meeting.  No mention was made of the JIA’s previous offer to house the post office in the historic district.

It appears for the moment that the issues on Jekyll Island have been resolved by maintaining the status quo.  That’s good news for the folks on the island, but what happened on Jekyll Island illustrate several problems with how the Postal Service operates, and it’s not good news for those concerned about the future of postal services in this country.


The Postal Service has a brand new bag: A post office or mail delivery, but not both

September 12, 2013


Off the Georgia coast just above the Florida border lies Jekyll Island, a popular tourist destination that boasts a beautiful beach, a historic district, and the Georgia Sea Turtle Center.  A couple of hundred miles up the road is Augusta, Georgia, where the Godfather of Soul, James Brown, grew up.

The Postal Service has a new strategy for providing postal services to Jekyll Island that might best be described as a version of Brown’s early hit “Papa's Got a Brand New Bag.” The Postal Service "ain't too hip now" but it's got a new bag, too.  It wants to end door delivery for the nearly nine hundred homes and businesses on Jekyll Island and instead have everyone go to the post office to pick up the mail.  According to postal regulations, the Postal Service can't change a customer's mode of delivery without permission, but that's not how it's going down on Jekyll Island.

The island is owned by the state of Georgia, and it is administered by a state board called the Jekyll Island Authority (JIA). The residents of the island own their homes, but they lease the land on which their houses sit.

The island is served by a small branch of the main office in Brunswick, on the mainland, over twelve miles away and on the other side of a six-mile causeway.  The office is currently open just four hours a day (9 a.m. to 1 p.m.).  For many years the Jekyll Island post office was housed in a retail mall, but when that mall was torn down, retail services were moved to a trailer.  The rent on the original facility was $10,500 per year, but the JAI didn’t charge the Postal Service any rent at all on the trailer.

The homes and businesses on Jekyll Island receive mail delivery from two city routes that originate in Brunswick.  Mail is addressed to individual street addresses and bears a Jekyll Island zip code – 31527.  Currently the carriers deliver to the door – a mode of delivery that has been around for as long as anyone on the island can remember.

The JIA has been constructing a new retail shopping center in the historic district at the south end of the island.  It is a small area serviced by a few small roads, and according to residents, it's mainly frequented by tourists.  After the new shopping center is completed, the temporary trailers that have been used since the old mall was taken down are going to be removed.  The JIA has offered the Postal Service a place for a new post office in the new mall.

According to this article in the Florida Times-Union and other documents, at some point in the discussions between the USPS and the JIA, the scope of the negotiations expanded beyond the topic of the new post office.  It appears that the Postal Service suggested — or at least implied — that it would close the Jekyll Island post office unless the residents agreed to give up home delivery.  The Postal Service isn’t talking, and the attorney for JIA, Chris O’Donnell, has offered varying accounts, but that seems to be what happened.

According to Mr. O’Donnell, the JIA — fearing that the community might lose its post office — reached an agreement with the Postal Service to give up home delivery in exchange for a new post office in the tourist-oriented historic district.  The Postal Service will pay a nominal $2,700 per year in rent.  

The new facility is supposed to be sort of old-timey to fit in with the character of the historic district.  It will have fancy brass boxes, a special postmark, and other “vintage” design features.  

It isn’t clear who is going to pay for all of this.  Mr. O’Donnell says he has the deal in writing, but he hasn’t offered it for inspection, and the JIA has not responded to my FOIA requesting documents related to the negotiations. Originally Mr. O’Donnell indicated that the deal included keeping delivery to the island’s businesses, but he has since backed off that assertion.

In several of his statements to the press, in the FAQ page describing the deal, and in an email responding to a resident’s questions, Mr. O’Donnell has sometimes sounded like he was reading a set of Postal Service talking points.  He refers to legislation in Congress that would eliminate home delivery, but it’s not clear which legislation he’s referring to, and there's a big difference between proposed legislation that may never be enacted and the current statutes and regulations.  

The Postal Service certainly hasn’t been shy about pressing for changes in modes of delivery across the country.  In most cases, it would prefer cluster boxes to door or curb delivery because centralized delivery costs less.  But according to current postal regulations, the Postal Service can’t change a customer’s mode of delivery without the customer’s permission.

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