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.
A twofold problem
The problem with postal banking is twofold. First, the bills working their way through Congress — the bill that has passed out of committee in the Senate and Darrell Issa’s proposal in the House — are both based on the view of the Postal Service as nothing more than a corporate entity. Most of our politicians see this network simply as overbuilt and technically obsolete industrial capacity. They seem incapable of understanding that the postal network as an essential national infrastructure, an asset with the potential for providing invaluable public services and broad public benefit.
Rather than viewing the postal network through a prism of public benefits, our legislators constantly invoke scary terms like “bailout” and “bankruptcy” and resort to distortion and demagoguery to justify their goal of dismantling the system. They have been willing to sacrifice service to the American public and hundreds of thousands of jobs on an altar of ideology that crams the idea of public goods into an ill-defined corporate box.
The second part of the problem is postal leadership. Even if Congress were to become instantly enlightened as to the value of our postal network as essential infrastructure, the officials in postal headquarters have another agenda. For over forty years now, they have been drunk on the idea of transforming the post office into a corporate entity, seduced by visions of a business model that gives them unrestricted autonomy.
PMG Patrick Donahoe, his predecessors, senior HQ staff, and their enablers at the Board of Governors have all failed to develop a positive vision for our nation’s postal service. They lack both the will and the competence to manage the Postal Service in a way that preserves our nation’s postal network, maintains high standards of public service, and adapts to changing environments and technologies. What Donahoe and his team have done is play at the game of being corporate bigwigs while actually engaging in something more akin to crony capitalism.
The PMG and his enablers at the BOG have utterly failed in their responsibilities to the American public generally, the vast majority of the mailing community, and a half million postal workers. They have pursued a vision that makes the Postal Service the lapdog of a few major corporations like FedEx, UPS, and Amazon. They have wasted billions of dollars on the Flats Sequencing System (FSS), they have demonstrated an obsession with scanning that goes past the point of marginal returns, they have turned the Postal Service into a promoter rather than facilitator of advertising mail, and they have used a manufactured financial crisis to paint a false picture to Congress, dismantle the network, and degrade service. They would turn the Postal Service into a virtually unregulated monopoly in complete disregard for the role of an essential piece of American infrastructure that serves as a mainstay of democratic principles.
Something it’s not
The cable and Internet industries offer a cautionary tale on where the Postal Service is headed. As this story on NPR about high-speed Internet access makes clear, Americans suffer poor service at an expensive price. The development of poorly regulated monopoly conditions in the cable and Internet industries is based on a failure to understand both the importance of infrastructure and its role as a support to markets, rather than merely as a market itself.
The PMG would duplicate the errors that plague the development of our cable and Internet markets and impose heavy costs on the American public. Instead of a regulated postal infrastructure, we would be led into dangerous territory where we would have to deal with unregulated postal monopolies and also limited competition in the increasingly essential package delivery markets.
Postal workers are not the problem, postal rates are not the problem, the cost of delivering to doors and curbs isn’t the problem, and the mailers themselves aren’t the problem. The problem is the same as it has been for the last forty years: The Postal Service is trying to be something it cannot be.
The Postal Service cannot be a functioning network that provides the kind of service the American public needs and at the same time be a corporate wheeler-dealer. The Postal Service cannot have it both ways, both monopoly privileges and the freedom to act as it wishes without regulatory restraint. The terms of the universal service obligation cannot be fulfilled by degrading standards and creative use of language to redefine the mandate. The Postal Service is too damn important to too many people — its workers, rural communities, the mailers and the many businesses that rely on its efficiency — to be left to the visions of its management and their delusions of grandeur.
The voices of industry
Over the years I’ve been very critical of elements of the mailing industry. Companies like Valpak have been so self-centered that they would break the entire system to preserve their own special interests. On the other hand, there are sane and reasonable voices in the mailing industry, people like Lisa Bowes of Intellisent, who have tried to work closely with the Postal Service to improve mail entry and a convoluted and cumbersome set of mailpiece standards.
There are other informed and intelligent voices out there as well. If Gene Del Polito of PostCom could get past his incessant bashing of postal workers, he actually has some reasonable things to say about the importance of the mailing industry to the viability of our postal network. If folks like Rafe Morissey of GCA could get past their kneejerk advocacy of cost-cutting cluster boxes, the elements of their message that are valid would gain wider credence.
The problem with the mailing industry is that it puts too high a priority on low rates at the expense of everything and everyone else. The mailers must realize that some rates, especially some of the workshare discounts, are completely self-defeating. Should every mailer and advertiser suffer so that Pitney Bowes can extract rents out of the system?
Shifting to cluster boxes and eliminating door delivery may save money, but making mail more impersonal like this isn’t going to lead to more mail and it will also undermine much of the value of mail. Cutting hours at 13,000 post offices under POStPlan has saved a pittance in comparison to the damage it has done to the Postal Service’s image in rural America.
The mailers need to recognize that cutting services to average customers (which Valpak calls “non-paying customers”) and undermining postal workers will do more harm than good in the long run. Surely the mailers must understand that as we eliminate postal jobs and change those remaining into low-paying drudges, we undermine the ethic that underlies a respect for service, a respect for timely and accurate delivery, and a respect for the sanctity and importance of the mails.
While politicians grandstand about debt and deficits in ways that are meant to obscure rather than clarify, America engages in the sorts of austerity policies that are proven to be damaging to the overall economy and, most of all, to the average working American. The same politicians throw the word “bailout” around like a nuclear weapon. We’re supposed to be horrified that the Postal Service might need a bailout from the taxpayers. The bankers got a bailout that allowed them to continue profiting while the vast majority of the American people suffered, yet somehow a “bailout” for the Postal Service would be the height of irresponsibility, the end of civilization as we know it.
We have invested in a large and essential piece of infrastructure that has the capability to interact in a multitude of ways with virtually every individual and business six days a week. Maintaining that investment, assuring that it grows and adapts to changing technologies and new opportunities, is not a bailout. Instead, Congress, in its infinite stupidity and stubbornness, set the Postal Service up to fail. In doing so our legislators put at risk hundreds of thousands of workers and thousands of mailers.
Their insistence on designing a postal model that was doomed to fail and then adding provisions that served no purpose other than to extract billions out of the system was the height of irresponsibility. The retiree health benefit fund wasn’t only unnecessary, it was a missile designed to destroy the Postal Service as a public service. It was designed to take out postal workers, and as collateral damage it’s going to take out much of the mailing community.
Why should the Postal Service be absolutely self-sustainable? We ask the Postal Service to provide universal service because it satisfies our basic principles of public service. But it is also good for business to maintain a broad and potentially efficient network that offers opportunity and possibility for mailers both large and small. As Internet sales expand, the ability to reach the front porch of every American is useful and valuable.
We are Americans and that means we value, or at least used to value, the idea that we want broad participation in the economy. So let’s not begrudge the folks in Alaska or those in other rural and remote areas by taking away important services like the local post office. Let’s remember that a rising tide can lift all boats and that every program doesn’t have to benefit every individual directly to benefit us all.
Paying for service
There is no reason that mailers should be the only ones to support universal service. Universal service benefits us all; the costs of universal service ought to be borne broadly. The same goes for the discounts we extend to nonprofits and periodicals. Our principles tell us that community newspapers are an essential part of American culture and society. Our principles lead us to create special privileges for nonprofits because they add to the greater good. Our principles tell us that periodicals, especially small periodicals and particularly those set up as nonprofits, are essential to our basic civic discourse.
A corporate behemoth like Time Warner may not need special breaks, but scientific and educational journals, literary magazines and political journals could use some help. Publications about contemporary issues, from Foreign Affairs to The Nation and the National Review, from Mother Jones to The American Conservative, spur political dialogue and help maintain an informed and engaged citizenry. Our principles ought to honor and support that role.
There is no honor in a self-sustaining postal system that sacrifices hundreds of thousands of postal workers and bludgeons mailers with unsustainable price increases. Had we not burdened the postal system with the idiotic RHBF and instead engaged in reasonable reform that brought health costs down through the use of Medicare and other efforts, we would be better off today. Had we backed up our principles by paying for universal service and special discounts for deserving classes of mail, we would be both better off and more honorable than we have been. Had we supported even a minimal appropriation of $5 billion a year, things would be very different today. It is likely that we would have saved 300,000 jobs and we wouldn’t be arguing about an exigent rate increase. We would have gotten our money’s worth many times over.
Filling a hole
A postal bank could certainly fill a hole in our current financial services system, but only if done correctly. It would need to be driven by principles of public service with the goal of bringing even more people into the economy, not primarily as a way for the Postal Service to bring in billions of dollars in new revenue. If the current management team embraced postal banking, it’s likely that the Postal Service would become nothing more than another extractor of fees, a giant governmental loan shark. The current management has neither the vision nor the honor to embrace public service as a means of increasing opportunity.
Our problem today is less a matter of the size of government than a matter of misplaced ethic. Government exists to serve, to provide both service and stability. In our infatuation with business and markets, we forget those things only work when the underlying rules and infrastructures are properly focused.
Maybe an innovative postal system would have found ways to leverage its presence in every town and county in the United States to assist other governmental entities, Federal, state, and local in performing their missions more efficiently. Maybe an innovative postal system would have found ways to fill the gaps in our Internet coverage, thus allowing for more efficient bill presentment and payment. Maybe by helping to fill those gaps in a neutral, public-service oriented way, we would have created opportunities for entrepreneurs and businesses. E-Bay and the peer-to-peer economy exist because of technological development, but also because of the presence of a robust postal infrastructure. Our postal system has an ongoing role in our future growth if we can simply understand the value of public infrastructure and the opportunity that it provides.
My grandfather used to say that you can’t stuff fifty pounds of manure into a twenty-five pound sack, but the management style of the Postal Service is based on exactly that premise. They dodge their responsibility with doubletalk that recasts bad service as good. If there are long lines at windows, it is because management has refused to staff those windows. If clerks don’t always tell people the least expensive way to mail something, it is because management tells them to repeat a sales script designed to extract money from customers rather than actually serve their needs.
Some people blame the unions for window clerks who don’t seem to care about how long the lines are and carriers who seem unconcerned that they delivered the mail to the wrong address, but the unions don’t create the negative atmosphere nor do they violate agreed-upon contracts.
We changed the name from the Post Office Department to the Postal Service, but somewhere along the way we either forgot or never understood what service really meant. No postal reform legislation, no matter how well crafted or designed, will succeed with the current management structure and focus. It isn’t so much the individuals, although they do bear responsibility, as it is the basic structure and mission which has been debased and corrupted by a desire for autonomy that evades and avoids our fundamental reasons for having a public postal infrastructure.
We have the best postal system in the world. It handles more mail more accurately and at lower rates and with better service than almost all of the rest of the world combined. Our system is that good in spite of forty years of postal management that has set it eyes on the prize of privatization while creating a dysfunctional and incompetent management culture. One need only look at the recent reporting on the load leveling N-case before the PRC to see an example of management’s arrogance and willingness to distort and dissemble in the pursuit of misguided goals.
While postal management’s best efforts have been directed towards dismantling the system and degrading service, Congress has, for the most part, stood by and cheered. Many commentators in major media like the Washington Post have argued that the answer is for Congress to get out of the way and give Mr. Donahoe and BOG more leeway.
But the problem has not been Congressional meddling. Rather, it's a failure on the part of Congress to ensure that an asset that belongs to the American people is managed in a way that benefits people, communities, and businesses in positive ways. Instead of enabling postal management while it sells off public treasures like the Bronx GPO, destroys hundreds of thousands of good jobs, undermines service standards, and raises rates, Congress has an affirmative responsibility to oversee the postal system and the postal network to ensure that it continues to provide solid service at fair rates while providing meaningful employment and supporting intangible values like binding the nation together.
Our postal system has succeeded despite the failures of Congress and the lack of vision and incompetence of postal management because the vast majority of postal workers actually care about service. Small town postmasters added tremendous value to the communities they served. City and rural mail carriers get the mail to people’s doorsteps in an ongoing demonstration of a commitment to service. Mailhandlers and clerks move the mail and serve the public. These folks do this in spite of a management system that is badly broken.
Just as important to the success of the nation’s postal system has been the ingenuity and entrepreneurial skills of American businesses as they’ve seen the value of and taken advantage of the postal network.
We talk about American exceptionalism, but listen carefully and you will hear postal management tell us that we should not be exceptional. They will point to European postal systems that have been privatized, even though the record shows that costs haven’t been contained, service has deteriorated, and the public is generally unhappy.
Postal banking is one of a thousand good ideas, but good ideas won’t save our postal system if we simply lay them on a rotten foundation. The corporate model of a postal system that eschews the idea of public service and public infrastructure has brought us to our current state. More of the same is not a winning prescription.