Various forces converged to doom the promising E-COM. Officials in the Commerce and Justice departments during the Reagan administration raised the possibility of violations of antitrust laws. The private companies’ lawyers and lobbyists protested against government competition, found receptive ears within Congress, and initially succeeded in limiting the post’s role to the physical delivery of the messages after transmission by independent firms. The final blow involved the funding. The pilot program’s launch had been expensive, but E-COM had to be priced low to attract a high volume of customers; nevertheless, the post’s overseers would not allow the rates to be cut. Despite the surge in electronic communications in general and its own volume in particular, which rose from two million transactions in 1982 to twenty-three million in 1984, Bolger could do nothing without Congress’s approval, and E-COM was halted that year.
The precedent had been set, and later digital pilot programs faced similar obstacles. Start-up costs were high, deadlines for demonstrating profitability remained unrealistically tight, and private firms railed against government competition. When Postmaster General William Henderson, who served between 1998 and 2001, announced a secure, downloadable email service called PosteCS in 1998, UPS acted to protect its own proposed service and filed a complaint with the Postal Rate Commission. Other digital efforts around the same time, including eBillPay, Mailing Online, NetPost.Certified, and Electronic Postmark, met similar fates.
Some of the problems that plagued the post’s digital pilot programs, however, were of the USPS’s own making. It had little internal expertise in electronic media, and some of its efforts were poorly designed. Postal managers variously described as overly protective or arrogant made matters worse by trying to conceal details about the projects and expenses from their regulators, which cost them credibility and created bad feeling. An aggrieved Congress ordered the General Accounting Office (GAO) to examine the pilot programs’ cost-revenue ratio, and its scathing report in 2000 convinced powerful politicians and even members of its own board of governors that the USPS should stop experimenting and stick to delivering traditional mail.
The GAO’s grim analysis set the tone for President George W. Bush’s commission on postal reform, whose 2003 report was tellingly titled Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service. The group concluded that the post’s efforts to innovate had been “largely disappointing” and had also “drained time and resources that could have been spent improving traditional postal services.” The report recommended that the USPS be required to focus on its core mission, described as providing “products and services related to the delivery of letters, newspapers, magazines, advertising mail, and parcels”; it should not even provide other government services, such as expediting passports, unless they covered their own costs.
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THE NEWLY NARROW DEFINITION of postal service was soon reified by the Postal Accountability and Enhancement Act (PAEA) of 2006, a major piece of legislation that made 150-odd changes to the Postal Reorganization Act of 1970. Those who wish to see mail service privatized lament that the law fell short of their ultimate goal. Others believe that it imposed enormous financial burdens on the USPS while simultaneously obstructing its efforts to modernize, thus consigning it to a slow death by a thousand cuts.
The gravest of the wounds dealt by the PAEA—and the single most important reason for the post’s recent crisis—concerns a serious labor issue. Despite mechanization, employees’ wages and benefits still account for 80 percent of the USPS’s operating expenses, which is significantly more than private carriers’ 60 percent, although the latter’s lower costs also reflect their ownership of their means of transportation. However, meeting the payroll of the current workforce is less worrisome for the post and many other organizations, both public and private, than the obligation of covering retirees’ health care and other benefits, which are already costly and projected to rise steeply. The PAEA required the post to prefund the retiree health care benefits already earned by its employees, although the money will not be used until they actually retire—a complicated formulation that’s often abbreviated as prefunding for the next seventy-five years. Starting in 2007, at the onset of the major recession, the post was ordered to pay the Treasury, via the Retiree Health Benefit Fund, $5.5 billion annually for ten years. The service began to report huge annual deficits beginning that same year, even though the USPS’s actual operations have recently been profitable.
The PAEA’s draconian retiree health care benefits burden was soon widely criticized as outlandish and unfair, but Congress refused to ameliorate it. The official explanation was that the massive prefunding protected taxpayers from an eventual bailout, but the real reason was political: the need to keep the larger federal budget “neutralized.” That is, because the post’s payments to the Treasury count as a revenue “plus,” any relief from them, according to the Balanced Budget Act of 1997, would have to be offset by equivalent tax increases or cost cutting—steps sure to annoy some lobbies and constituents somewhere. Since 2011, the post has simply defaulted on the payments, and efforts to reduce them to a more manageable level have been complicated by various legislators’ insistence on attaching political strings to potential solutions.
The PAEA also replaced the Postal Rate Commission with the Postal Regulatory Commission, which was charged with monitoring the USPS’s performance in important respects. The most controversial is ensuring that postage rates are capped according to the Consumer Price Index regardless of the post’s increased costs—an unreasonable demand that no private business would accept. Finally, the act took a very hard line regarding innovation and ordered the USPS to conform to a very tight definition of postal service, namely “the delivery of letters, printed matter, or mailable packages, including acceptance, collection, sorting, transportation, or other functions ancillary thereto.”
Back in 2002, already worried that the post suffered from “oversight blight,” Murray Comarow, the Kappel Commission’s executive director and a major architect of the USPS, had anticipated the PAEA and its effect on postal management: “If the nation’s best executives occupied every top postal position, they would find themselves at a loss to run an organization that has only marginal influence over how much it pays its people, how much it charges its customers, or whether it can make sensible service changes without political or union resistance.”
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WHILE AMERICA WENT ONLINE, the USPS and Congress remained intent on improving and increasing what the people already called “snail mail.” Although it had become much more efficient in performing its traditional paper and parcel functions by the early twenty-first century, the nation’s official communications and information system had failed to join the revolution that had already transformed modern life.
Moreover, the post’s image in the minds of average Americans remained stuck in the era of its midcentury meltdown. A soggy magazine or a letter that takes a week to arrive is a relatively infrequent occurrence, considering each person’s hundreds of deliveries per year, but people stubbornly if unfairly continued to regard such occasional lapses as characteristic of the whole enterprise. Just as most hadn’t realized that the price of a stamp previously covered just part of the cost of actually delivering a letter, most didn’t understand that, as of 1971, the stamp was supposed to cover the entire expense. When postage prices necessarily climbed, they were vexed, even though rates remained relatively stable when adjusted for inflation. Very few appreciated that between the early 1980s and 2007, the USPS had supported itself without any tax dollars while continuing to provide universal service at reasonable rates—an achievement that would have impressed Benjamin Franklin and every postmaster general since. Perhaps most important, Americans and their elected representatives had by now long taken the post for granted and largely expected it to function without their interest or input. The transformation of the Post Office Department int
o the United States Postal Service seemed to erase the last vestiges of their awareness of the dynamic institution described by Congressman Clyde Kelly, who had anticipated and fought against its slow decline:
Throughout all past history, whatever political party was in control of the Government . . . conservative or progressive, the Post Office has been used in new ways for the promotion of the general welfare. . . . When new conditions arose where additional benefits could be extended through this nation-wide enterprise, there was no hesitation in following the path of national progress.
AFTERWORD
WHITHER THE POST?
ANYONE WHO TROUBLES TO LEARN about the post’s long, eventful past must also take an interest in its present and future. Even without the benefit of hindsight, a few things are clear. The post is in trouble again, but to paraphrase, the reports of its death have been greatly exaggerated. The $68.9-billion-per-year enterprise is the world’s most productive postal system, handles 40 percent of its mail, and charges its lowest rates. If it were a private company, the USPS would rank in the top tenth of the Fortune 500. Its enormous assets, which are distributed across 3.5 million square miles, include a phenomenal physical delivery system built over more than two centuries, the nearly thirty-two thousand post offices, and the nation’s second-largest civilian workforce (after Walmart). Moreover, the post visits more than 154 million addresses almost daily and, in a dangerous, unpredictable world, continues to be a bulwark of the democracy as well as the economy. As Postmaster General Arthur Summerfield said, “We live by communications, and at any moment we may find that we survive because of them.”
Predictions that the post’s end is nigh are hardly new and were more justified during its crises in the 1840s and the 1960s and ’70s. The recent jeremiad began in 2007, when the USPS reported a seriously alarming deficit just as the great recession began. The common wisdom blames its ongoing financial crisis on the Internet’s decimation of first-class mail volume, which has indeed decreased by 25 percent since its peak in 2004. Better-informed observers add a highly politicized Congress’s pattern of inaction alternating with interference, particularly in the form of such legislation as the Postal Accountability and Enhancement Act of 2006, which imposed the staggering Retiree Health Benefit Fund payments that mostly account for the USPS’s recent deficits.
Everyone agrees that “something must be done about the post office,” which can’t operate indefinitely without enough money. Determining exactly what should be done is a political decision that only Congress can make, yet legislators have been in no particular hurry to act. Some of their reluctance reflects pressure from the powerful lobbies that pay for political campaigns and benefit from maintaining the postal status quo. The labor unions want to keep members’ jobs. The mass mailers strive to preserve their cheap rates, regardless of increasing costs. The private carriers support the post’s commitment to serving nearly every address in the country six days a week, because they often pay the USPS to do the “last mile,” or final stretch, of their deliveries for them, particularly outside metropolitan areas.
If certain paradoxical postal policies reflect the influence of special interest groups, others arise from politicians’ efforts to please their constituents. The fate of unprofitable post offices, most of which are in rural or low-income areas, is a good example. Budget hawks since the Early Republic have griped that there are too many of them, but most were established back in the days when people had to walk, ride a horse, or drive a wagon to get their mail. The number of post offices peaked in 1901 at about 76,000, rapidly diminished with the advent of Rural Free Delivery and the automobile, and continues to decline. Of America’s 31,800 post offices, stations, and branches in 2014, slightly more than 3,000 of the largest brought in 46 percent of the post’s total “walk-in” revenue. Many of the rest are either underperforming urban offices that could be consolidated with others nearby or among the half that are still in rural places.
A private company would simply close the unprofitable retail facilities—a logical move for any revenue-driven enterprise. Indeed, the USPS management has already shut down half of its major distribution centers, with consequent delays in mail delivery that are particularly noticeable in rural states. It has also eliminated 10,000 jobs, mostly by attrition, and reduced hours at 13,000 small post offices, which prevented many from closing. However, of the 3,700 unprofitable facilities the postmaster general proposed shutting down in 2011, only about 140 were actually terminated. What prevents the USPS from further pruning its operations is the opposition from postal unions as well as aggrieved citizens and legislators from vulnerable, mail-dependent areas, who stress the post’s public service dimension over mere business considerations. They also observe that closing more rural offices wouldn’t make much of dent in the postal deficit at the cost of compromising the national infrastructure and a part of daily life that’s important to many citizens—also a rational point of view.
Coming up with a consistent policy for resolving the fate of small post offices would require Congress to consider these two legitimate choices—prioritizing cost-effectiveness or public service—and make a principled decision. Legislators, however, are well aware of the venerable maxim that one of the few things your congressman can do for you is to save your post office. Some politicians argue for preserving them in general, but others who loudly lament their financial toll will fight like tigers to keep the unprofitable post offices in their own fiefdoms. In short, both Republican and Democratic politicians share an unusually bipartisan view of the matter: “I think it’s smart to close post offices that aren’t cost-effective—but not in my district or state.”
Congress may deserve the lion’s share of the blame for their dysfunctional relationship, but the USPS contributes to it as well. The fracas over Saturday mail delivery in 2013 is a good example. Legislators bewailed the post’s net losses of $45 billion since 2007 and once again insisted that something must be done. Postmaster General Patrick Donahoe eagerly agreed and offered to slash billions in costs by taking various steps, which included, in a historic reversal, slowing down first-class mail delivery by a day or more—sometimes much more, particularly outside cities. He also proposed stopping Saturday letter delivery, which alone would save $2 billion per year. The majority of Americans have favored this sensible economy since 1977, when the Commission on Postal Service found that most people said they could easily live with five-day-a-week letter mail. While Congress was debating the idea, the Government Accountability Office stepped in to contest the postmaster general’s claim that Saturday service was no longer legally mandated, and the Postal Regulatory Commission questioned the size of the alleged savings. Instead of rising to these challenges, however, the USPS withdrew its own plan, allegedly because of backstage lobbying by the unions, which want to maximize jobs and work hours, and mass mailers, which want Saturday advertising to encourage weekend shoppers. Thus, despite the opinion of the public over almost forty years and at least some of the USPS’s top management, costly six-day letter delivery continues.
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POLITICS CONTRIBUTES TO THE USPS’s current predicament, but its fundamental challenge is existential: What should—and could—America’s information and communications system be in the twenty-first century?
One reason why answering that question is difficult is that the post is not a one-size-fits-all operation. It must serve a huge geographically and socioeconomically diverse population whose members have very different needs and are spread over a vast, various terrain stretching from Key West, Florida, to Barrow, Alaska. It delivers mail in the canyons of Wall Street and to the bottom of the Grand Canyon, reached by mule, and even operates a boat service for Great Lakes ships in transit. Urban and rural Americans, the young and the old, householders and businesses, the healthy and the disabled, the well-off and the disadvantaged—all have different expectations of the post.
The briefest consideration of the post office
’s role in community life is enough to convey the difficulty of setting postal policy for the whole nation. Most Americans now live in metropolitan areas, where they enjoy an array of media services as well as easy access to consumer goods and mass entertainment. They generally like their letter carriers but go only when they must to their big, crowded, impersonal post offices. As population density decreases, however, this dynamic changes dramatically. Some 20 percent of Americans live in rural areas, which are concentrated in the Midwest and West but exist all over the country; indeed, at 82.6 percent, Vermont has the highest proportional percentage of country and small-town folk. These less populous places also have the largest share of small post offices, which are often vital social and commercial hubs. A trip to the P.O. tends to be an enjoyable break that’s part of life’s rhythm and an opportunity for spontaneous interactions—so much so that many country people who could have home delivery prefer to pick up their mail.
Even among Republicans and Democrats, opinions about the post and its future are not as predictable as might be assumed. As regarding the federal government in general, conservatives are more inclined to want to scale it back, progressives to preserve it. The post has historically enjoyed significant bipartisan support, however, and there are many exceptions to the rule on both sides, notably Republicans who represent large swaths of the rural population that’s more dependent on mail. Even postal management harbors different perspectives on the institution’s future, particularly regarding innovation.
That said, there are three basic schools of thought about the post’s future. Those who dispute the government’s right to monopolize a service that business could provide want to privatize it. They observe that the nation is increasingly bound by commercially supplied electronic communications, and they assert that the post should simply close down and cede any traditional mail operations that can turn a profit to the independent carriers.
How the Post Office Created America Page 29