Trump Makes His Move to Cripple U.S. Postal Service

First President Trump said the U.S. Postal Service must quadruple its rates for package delivery if it expects to get the $10 billion line of credit voted by Congress as coronavirus relief. Expecting a $13 billion loss

from the pandemic, the Service says it will not be able to operate beyond September if it does not receive the funds authorized in the $2 trillion Cares Act, monies that the Trump administration now says it will hold hostage. Now, to force the rate changes, Mr. Trump has named his own man to be the new head of the Postal Service. Credentials? He is a major donor to his election campaign and to the Republican National Committee.

The pandemic has reminded us that we like getting mail, that the workers who process it into our mailboxes from all over the country and the world are essential, along with grocery clerks, farm workers, pharmacists, medical personnel — it's a long list. They deserve a thank you note in your mailbox.

Yet, since early in his tenure at the White House, Mr. Trump has shown particular animus toward the Postal Service, or USPS, accusing it of financial mismanagement. There may be valid reasons. The USPS loses money every year — $8.8 billion in fiscal 2019, heavily burdened by pension fund costs. But it needs to be stated at the outset that the forced increase in package rates would be costly for Amazon, a heavy user of the Service, and that means Amazon boss Jeff Bezos. Raising package rates would be using the public service relied on by America's hundreds of millions as a private vendetta to get back at Bezos. Why? Because Bezos is the owner of The Washington Post, a newspaper that has been a relentless critic of Trump. The president has raged against the Post for years, calling their exposés of his administration "fake news".

Trump’s demand would be costly for Amazon because its free-shipping deals such as Amazon Prime make it difficult for the company to pass costs on to customers. Making his motive obvious is Trump saying, “The post office should raise the price of a package by approximately four times”. The USPS does not need a price increase. They are able to offer low prices to deliver packages because they have an advantage over rival delivery services. Because they deliver mail, they already go "the last mile" to America's homes and businesses. A forced price increase in the highly competitive delivery arena would drive Amazon and others to UPS and Fed Ex overnight, worsening the Service's financial condition. Yet Trump claims…

“[E]every time they bring a package, they lose money on it…If they don’t raise the price of the service they give, which is a tremendous service, and they do a great job and the postal workers are fantastic — but this thing’s losing billions of dollars…If they don’t raise the price I’m not signing anything, so they’ll raise the price so that they become maybe even profitable but so they lose much less money, okay?”

Well, no, not okay (and that is his wording). To the contrary, package delivery is the USPS's sole profitable business line. It is 5% of delivery volume but 30% of its revenue. Raise prices and they stand to lose that 30%, left with only money-losing mail at rates the Service doesn't control.

“This is about as catastrophically stupid an idea that anyone could ever imagine,” said Mark Cohen, director of retail studies at Columbia University Business School to The Washington Post. “As if anyone, from Amazon to the local mom and pop delivery businesses, would ever put up with a rate increase like that when they have alternatives.”

The administration's demands go much further than a package delivery rate hike. As the condition for the release of the virus funding, Mnuchin's plan, with Trump's support assumed, calls for the Service to hand over much of control to the Treasury Department. Early in his job as treasury secretary, Steve Mnuchin was charged with studying what should be done with the perennially ailing Postal Service. A task force he set up produced a 74-page report last fall that presaged the key requirements he is now pushing in negotiations with USPS management:

• Mnuchin wants to oversee hiring and firing decisions at upper levels including the postmaster, currently controlled by the Postal Service’s five-member board of governors.

• Treasury would review all large contracts for package delivery, a means of forcing pricing higher.

• The department would press for tougher concessions from the powerful postal unions on salaries and benefits.

This is not Mnuchin's first attempt. Before 1970 the "Post Office", as it is sometimes called, had for a hundred years been a cabinet level government department. As a financial backstop when it was made partly independent, the government has for five decades extended to the service a low-interest line-of-credit, currently $15 billion. Last fall, Mnuchin broke with precedent for the first time when he attempted to impose terms on the balance of the credit line not yet drawn down. He was rebuffed by the unions and the USPS leadership.

Mnuchin is this time using the pandemic to exact his and Trump's terms, never mind the rather impolitic moment considering that the 630,000-person postal system workforce has been working without a supply of masks, gloves, sanitizers, or wipes; 1,219 workers had tested positive with the coronavirus by late April; and 44 have died. The Service needs the money, more than the $10 billion, but Trump himself cut the original request to that amount, according to insiders. It faces a liquidity crisis from mail volume cut in half by the pandemic — no one is sending out shopping flyers, cataloguers have held back — and a 57% drop is expected in the 4th quarter, normally the peak season.

The Postal Service has struggled ever since first-class mail began to plummet in the Internet era. We once communicated by sending letters through the post. Long-distance phone calls were expensive and there was nothing else. Now we have social media and e-mail, both in most cases even free. Banks, credit cards, investment accounts nag at us to receive invoices and statements by e-mail for them to avoid paying for postal mail. We pay our bills online. But do we want there to be no mail service?

Adding to its difficulties, the USPS is not its own boss. Congress must approve post office closures. It has aggravated Postal Service loses by resisting closure of thousands of money-losing post offices because Congress members fear the backlash in their districts. A move a decade ago to save $3 billion a year by ending Saturday delivery was thwarted for the same reason. Rate increases are controlled by the Postal Regulatory Commission. A federal appeals court ruled a five-cent first-class increase illegal last fall because there is a law that says increases cannot exceed inflation.

Worst of all, the Postal Service is the only agency in or connected to the federal government that must fund in full its future pension fund obligations. Congress in 2006 passed a law requiring the USPS to pay $72 billion over 10 years to prefund 75 years worth of retiree benefits, a burden mandated of no other federal agency or private corporation. A further requirement is that the Service can only hold the pension benefit reserves in Treasury bills. In other words, Congress used its residual controls over the Post Office to squeeze it for money to fund the George W. Bush administration's budget deficits.

Beginning in 2011 the USPS simply stopped paying for lack of money, but the annual burden stays on its books and exaggerates its annual loss. That plays into conservatives' hands who want to privatize various government services, turning them into for-profit corporations. Which makes suspect a president and his treasury secretary now angling to take control of the Postal Service and break it financially by destroying its one profitable business. House Speaker Nancy Pelosi (D-Calif.) sees through this. “Right now, I see a big danger for our country in the form of the administration’s interest in privatizing the post office,” she told reporters. “This is just about somebody on the outside making money off the post office instead of recognizing the important role [it] plays."