Don’t Hold Critical Assistance to USPS Hostage to Political Goals

Robert D. Atkinson April 7, 2020
April 7, 2020

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During the negotiations over the recent $2.2 trillion stimulus package, congressional Republicans rightly complained that, rather than get on with the business of expeditiously passing a relief package in the face of the COVID-19 crisis, some Democrats were using the moment as an opportunity to push their own ideological agendas, including a $15 minimum wage, required profit-sharing agreements, and other long-standing progressive priorities. Whatever one thinks of these provisions, in the spirit of coming to a bipartisan compromise, congressional Democrats rightly did not stick to their guns on them.

Unfortunately, the Trump administration is now doing the same thing Republicans complained Democrats were doing: sticking to its guns on the critical issue of helping the United States Postal Service (USPS) survive the current crisis. The Postmaster General reports that mail volumes are down by around one-third because of stay-at-home requirements and the deepening economic recession. They could soon fall by half, leading USPS to potentially lose $12.6 billion in mail revenue this year. In December, USPS had $8.4 billion in cash, and as such it reports it could run out of money as early as June, meaning approximately a half-million U.S. postal workers would be without pay. Today, postal workers are still on the job, with postmen and women going out six days a week to ensure Americans get the mail and package deliveries they vitally need, especially at this time. As the Chicago SunTimes editorial board wrote, “The postal service is on the front line in the COVID-19 battle, processing and delivering 500,000 pieces of mail daily, including the prescription medicines, lab tests and medical supplies needed during the pandemic.”

Both the Senate and the House understood the importance of providing relief for USPS in this critical time. The original House stimulus bill included $25 billion in emergency relief payments to the Postal Service Fund, plus $11 billion in loan forgiveness and $15 billion in new borrowing authority. After bicameral negotiations, the Senate reportedly agreed to include $13 billion in emergency relief payments to the Postal Service Fund. However, when it came time to negotiate the package with the White House, the Trump administration reportedly would only accept a deal that dropped direct aid and put in place added borrowing authority. Moreover, the administration wanted the borrowing authority terms and conditions to be set by the Treasury Department.

It is bad enough that, unlike many other major sectors of our economy that have been hard hit by the government-mandated shutdown, the USPS did not receive direct funding to tide it over until the crisis recedes. But President Trump has long argued that the postal system under-prices package delivery, and that it should raise the prices. So, now it appears the administration will hold USPS hostage, not allowing it to borrow funds until it capitulates to White House pressure and raise package prices.

President Trump tweeted in December 2017, “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!” He went on to call USPS Amazon’s “delivery boy.” The president’s tweet and other public statements—including the announcement on April 12, 2018 of an executive order calling for a task force on the USPS to, among other things, examine “the expansion and pricing of the package delivery market and USPS’s role in competitive markets”—spurred the administration to push for USPS to raise the prices it charges to deliver packages. The president and some private shippers argue USPS is competing unfairly, hurting private package delivery companies, and unfairly helping shippers like Amazon.

Getting this issue right is important, because as the volume of traditional mail continues to decline and e-commerce increases (something COVID-19 is only accelerating) package shipping will only grow in importance to USPS. Yet, because USPS operates both a traditional “monopoly” business (first-class mail) and a “competitive” businesses (packages), it is critical that it not unfairly subsidize package shipments in order to gain competitive advantage over private shippers like the United Parcel Service (UPS) and FedEx.

However, as ITIF has shown, notwithstanding the president’s assertions, the facts are that USPS is not getting taken to the proverbial cleaners and is in fact making a significant profit on packages, which plays a key role in helping offset USPS’s chronic financial losses from its declining traditional mail business. In fact, it is clear that USPS is abiding by the provisions in its governing statute. The Postal Regulatory Commission (PRC), whose job, among other things, is to regulate the prices USPS can charge for products that compete with the private sector (e.g., packages), has determined USPS is abiding by the law and not using its mail monopoly to unfairly subsidize package delivery. Moreover, in May 2018, the U.S. Court of Appeals for the District of Columbia ruled in favor of the PRC in a complaint brought by UPS that asserted USPS was unfairly competing in the parcel marketplace. The court ruled that because “the Commission’s exercise of its authority [was] ‘reasonable and reasonably explained,’ we deny UPS’s petitions for review.”

But that was not enough for the administration, which continues to try to force USPS to raise its prices on packages.

What is perhaps most troubling about the administration’s efforts to make aid to USPS contingent on doing what the president wants is that, at the very moment more Americans—including millions of rural Americans—are reliant on e-commerce package delivery, the administration would have USPS raise prices for those deliveries.

Any efforts to change package rates that impact USPS’s core mission of tying the nation together should not be made by the Trump administration at the 11th hour, holding a gun to the head of a USPS will be have no other choice but to capitulate if it is to survive. If the administration wants to step in and take the responsibility of running the postal service away from the congressionally created USPS Board of Governors, then it should go to Congress and make its case. Absent that, it should get on with providing USPS the lending authority it needs, and let the Board of Governors and the Postal Regulatory Commission set prices.