The U.S. Postal Service has traditionally been one of the more popular government agencies in America. In a March 2020 Pew survey, 91 percent of both parties rated it favorably, and a RAND Corporation report found that trust in the USPS increased between May and October 2020 even as trust in the CDC fell.
But the disruptions of the digital age have combined with changing assumptions within the Postal Service itself, culminating in a noticeable slowdown of mail delivery over the last year and ongoing uncertainty about the agency’s future.
A simplistic version of this story centers around a singular villain: Louis DeJoy. In May 2020, DeJoy, a businessman and Republican donor with experience in logistics, was appointed postmaster general by the USPS Board of Governors with then-President Trump’s support. He soon found himself mired in controversy when he implemented a flurry of operational changes—including the dismantling of some mail-sorting machines and a pilot program cutting back overtime delivery in certain areas—that exacerbated mail delays.
A subsequent report by the Postal Service’s inspector general found that the agency was not adequately prepared for the impact of those changes, regardless of their merits. “No analysis of the service impacts of these various changes was conducted and documentation and guidance to the field for these strategies was very limited and almost exclusively oral. The resulting confusion and inconsistency in operations at postal facilities compounded the significant negative service impacts across the country,” the report said.
The changes were eventually suspended before the election, but the slowdown hasn’t stopped—in fact, service performance has continued to worsen this year. The crisis has led to calls for DeJoy—who is also under investigation by the FBI for potential campaign finance violations before becoming postmaster general—to be removed from his position. (While he cannot be directly fired by President Biden, he could be removed by the nine-member Board of Governors, but that is unlikely since he has vocal support from Chairman Ron Bloom, a Democrat.)
“I think the reaction to those changes was overblown,” Michael Plunkett, the president and CEO of the Association for Postal Commerce who formerly held multiple managerial roles in the Postal Service, told The Dispatch. “As the postmaster general pointed out, they did have excess capacity in the mail distribution part of their network. So I don’t think the removal of equipment, for example, had much of an impact at all. Now, the decisions to halt extra transportation trips and to temporarily cut back overtime—that probably did have an impact. … It was noticeable.”
If it’s not all the postmaster general’s fault, where should the blame fall? Plunkett pointed to a variety of 2020-specific factors, including pandemic-induced labor shortages, limited air transportation capacity, and an unprecedentedly high volume of packages, particularly during the holiday season. “The confluence of those multiple factors created gridlock in a few postal facilities,” he said. “And, you know, the Postal Service is a network, and if you cause a complete shutdown of parts of the network, it has ripple effects throughout the system.”
Even as the pandemic wanes, though, we shouldn’t expect a return to 2019-level service anytime soon. In fact, long-term trends that predate the pandemic may continue to disrupt the agency and its finances for years to come.
“There’s been a consistent deterioration in the timeliness of mail delivery since 2012,” Paul Steidler, a senior fellow at the Lexington Institute in Arlington, Va., told The Dispatch. Over the last decade, the USPS has gradually come to deliver relatively fewer pieces of mail but more packages. Consumer demand explains some of this—people don’t write letters often these days, and many pay bills or handle other transactions online—but it has also been indicative of a philosophical shift within the agency.
“It’s been this entire orientation, wanting to chase after packages, which are a competitive product, which many in the Postal Service see as the salvation for the Postal Service, because volumes of packages are expected to grow [and] volumes of mail are expected to decline,” Steidler said. “… The Postal Service for hundreds of years has been delivering mail. They have the systems, they have the processes to do that very well. … It’s in their institutional DNA. The packages are much more difficult and much more expensive to deliver—and frankly not as important.”
The USPS released a 10-year plan in March that reflected that shift. One aspect of that plan aims to transition “from a current 1- to 3-day service standard within the continental United States to a 1- to 5-day service standard”—lengthening delivery times for approximately 39 percent of first-class mail, per a Lexington Institute estimate. The USPS plan argues that since it has failed to meet its first-class service standards for years, the current standards “are simply unsuitable for setting realistic expectations for timely and reliable mail delivery in today’s environment.”
Before implementing this change, the USPS is seeking a non-binding advisory opinion from the Postal Regulatory Commission (which is a separate entity with its own inspector general). Steidler hopes the PRC will advise against the change, at least until the USPS can demonstrate that maintaining the current standards is truly unworkable. “Before any consideration is given to an advisory opinion supporting USPS’s service standards reductions, USPS should be ordered to provide information about the costs of meeting the current standards, instituted less than seven years ago in 2014,” he wrote in a Lexington Institute position statement filed with the PRC.
In addition to lowering service standards, the 10-year plan also includes postage rate hikes. Aside from occasional grants such as those received through the CARES Act in 2020, postage rates are USPS’s sole source of revenue since they stopped receiving public service appropriations money from Congress in the 1980s.
On the surface, raising postage rates makes sense. Most of the Postal Service’s revenue comes from mail, and mail volumes are declining. But the proposed increases are more drastic, and in Plunkett’s view, more reckless, than what we’ve seen historically.
In 1970, the Postal Reorganization Act placed the Postal Service’s pricing structure under a system known as “cost-of-service regulation,” which tied postage rates to “what the true cost was to run the Postal Service,” according to Steve Kearney, a Postal Service veteran who is now the executive director of the Alliance of Nonprofit Mailers. The Postal Accountability and Enhancement Act of 2006 (PAEA) did away with that system, and tied postage rates to the Consumer Price Index (CPI) instead.
But a regulation introduced last year allows the Postal Service to add new surcharges to its rates, including one based on a “mail density” formula created by the Postal Regulatory Commission that is inversely proportional to mail volume. The “mail density” surcharge “basically rewards the Postal Service with higher rates following every year where business declines,” Kearney said. “It’s kinda like building a death spiral into the system: as long as your mail volume goes down, you can raise rates even more next year.” Mail volume was already falling, but now the Postal Service has financial incentives to keep it that way.
The Postal Service says these drastic steps are necessary: it lost $87 billion over the last 14 years and is projected to lose $160 billion over the next decade. But do those figures really portend financial doom for the agency? Plunkett is skeptical. The Postal Service is on track to set an all-time revenue record this year, he said, vastly overperforming the projected losses and calling into question their reliability.
The Postal Service’s balance sheet could also soon receive a boost from Congress. Under PAEA, USPS is subject to an unusual requirement: It must pre-fund retirement benefits for all of its employees, something no other agency is required to do. The Postal Service Reform Act of 2021 would nix this requirement, giving the Postal Service substantially more financial breathing room. Other parts of the bill would integrate all postal service retirees into Medicare (rather than Federal Employee Health Benefits plans) and unite USPS and PRC under one inspector general—exactly the kind of streamlining and cost-trimming provisions DeJoy and Bloom incorporate in the 10-year plan.
The bill boasts broad bipartisan support in both chambers. “We’ve been trying to do this for some time, to make sure their retirement system works in more reasonable ways—we’ve taken some steps in that direction—but to also have some greater appreciation for first-class mail as opposed to all of the other things the Postal Service now does,” Sen. Roy Blunt, a Missouri Republican who cosponsored the bill, told The Dispatch.
It is unclear where the bill fits into the legislative calendar, but Blunt is hopeful things can start moving soon.
Kearney supports aspects of the legislation, but he worries it won’t be enough to turn things around for Post Office customers—not only individuals, but also organizations such as the nonprofits he represents. “By itself it’s a good thing to reduce an unnecessary cost of retiree health benefits, but it could really hurt in the long term if Congress thinks that this is all we need to do for postal reform,” he said. “I think it’s a misnomer to call it the Postal [Service] Reform Act of 2021. It doesn’t really reform the Postal Service. It takes one big cost off the table but it doesn’t reform the overall funding model or the operating model of the Postal Service.”
The Postal Service has long held a monopoly on the mail. In contrast to the market in package delivery, where it is one of many competitors, the Postal Service is the only entity allowed to put letters in your mailbox. Despite this arrangement, the Postal Service also has a “universal service obligation” that prevents it from acting exactly like a monopolistic business would. Thus far, federal laws and regulations have hemmed it in. For example, the requirement that the Postal Service deliver mail six days a week is vocally supported by Postmaster General DeJoy and will once again be codified into law, assuming the PSRA passes. Still, the Postal Service’s willingness to raise prices while lowering service standards could signal that it is losing sight of its public service mission.
“They have a monopoly, and they’re poised to exploit it,” Plunkett said.
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