The future of the United States Postal Service isn’t really in President Trump’s hands, despite what his critics are saying. The service is hemorrhaging money.
The COVID-19 crisis has imposed demands on the USPS that may be unprecedented. And Congress may eventually need to provide some emergency assistance for it to survive. But its future course will be charted by others. The one person who really counts is Louis Dejoy, the North Carolina businessman whom Trump recently named (and whom the postal Board of Governors unanimously approved) to be the next postmaster general.
Critics have derided Dejoy as nothing but an influential GOP fundraiser and Trump supporter named to the job to carry the president’s water. That’s unfair. He’s a successful entrepreneur who, in 1983, started a company, New Breed Logistics, that brought him into collaboration with the Postal Service as well as Boeing, Disney, and other well-known U.S. companies needing supply chain logistics, program management, and transportation support.
After New Breed was acquired by Connecticut-based XPO Logistics for more than $600 million, Dejoy became CEO of its supply chain business and, after he retired in 2015, a member of the board of the parent company. Clearly, he knows a thing or two about shipping, packaging, and the other functions that are the core business of the U.S. Postal Service.
He’s only the fifth person from outside the Postal Service chosen to lead it since 1971 when it was spun-off as a quasi-private corporation. His experience in private business should be a tremendous asset in helping right a ship afloat on a sea of red ink.
Hopefully, he will be of independent mind and push back against Trump’s instant call to triple, quadruple, or quintuple the price the Postal Service charges to ship packages. It’s one of few parts of the USPS that makes any money — according to some estimates, it now accounts for over $8 billion in net annual revenue — because it competes effectively with private shippers.
Trump’s plan to charge more to get more would work if the package service functioned like first-class mail, over which the Postal Service has a monopoly. It doesn’t, so raising package delivery prices will not work as he hopes. The environment is highly competitive, meaning one vendor’s price increases will generally drive customers to other vendors who do the same thing, but cheaper.
What the president wants will add to the Postal Service’s operating debt, not pay it down. As an experienced, successful businessman, Dejoy should be able to comprehend this easily. The question is whether he can resist the political pressure coming from 1600 Pennsylvania Ave. once he takes over on June 15.
None of this is an argument against postal reform. The USPS is in bad trouble, has been for years, and can’t make up its debt just by raising the price of stamps. Serious changes are needed, the kind which postmasters general coming from inside the service probably reject instinctively. If Congress is to give the Postal Service the money House Speaker Nancy Pelosi and others say is needed to see it through the end of the year, reform is in order. Handing over a blank check without insisting things be done differently would just be putting off the inevitable.
Postal reform legislation is unlikely in the middle of the COVID-19 crisis, but there are steps Dejoy can take that Congress, the board of governors, and the American taxpayers would probably endorse enthusiastically. The first would be to announce a hiring freeze — a tactic common in private business when annual revenue looks to be less than expenses. The second would be to order a thorough audit of USPS-owned and leased real estate in preparation for selling, subdividing, and surrendering space that is no longer needed. The third would be to embark on a program to expand third-party relationships in midstream logistics and processing, which, remember, is the industry in which the future postmaster general proved himself to be quite adept.
The USPS doesn’t need to keep doing everything it does. It doesn’t need to keep losing money. It doesn’t need to be a living synonym for waste, sloth, and mismanagement. And it doesn’t need to keep getting bigger while its assets and potential pool of clients get smaller. What it does need to do is find a pathway to profitability. That will only come from focusing on core functions growing out of its universal service obligation. The sooner Louis Dejoy starts down that road, the better things will be.
Frontiers of Freedom expressed great alarm this week over the U.S. Postal Service’s (USPS) latest financial results which showed $748 million in losses during the first quarter of FY 2020.
George Landrith, President of Frontiers of Freedom, said:
“The U.S. Postal Service is hemorrhaging money! In the first quarter of FY 2020, they have already reported $748 million in losses. And it isn’t like 2019 was a good year. Last year, they lost an unbelievable $8.8 billion in FY2019. To put that into perspective, the Postal Service has posted 13 consecutive years with a net loss of a billion dollars or more, and its unfunded liabilities and debt now total more than $143 billion. It is extraordinarily difficult to lose that kind of money when you are operating a government-granted monopoly like the Postal Service has on First Class Mail.”
Frontiers of Freedom President George Landrith also called out the agency over its negligence and financials, stating:
“It is readily apparent that the current USPS business model is failing. It is up to Congress, the Postal Regulatory Commission, and the new heads of the USPS Board of Governors to address the ongoing challenges. This includes ending nonsensical postal subsidies, trimming down the agency’s excessive costs, and complying with new laws impacting the USPS.”
Frontiers of Freedom previously hailed the work of Congress and President Trump to address some of USPS’ major systemic flaws with the enactment of the Synthetics Trafficking and Overdose Prevention (STOP) Act in 2018. This bill was an essential step in requiring the Postal Service to meet industry standards in data collection and monitoring practices of packages that enter the U.S. from abroad.
Despite the required protocols to protect our communities from hazardous and criminal items, the Government Accountability Office reports that USPS continues to fall short on its requirements to provide Customs and Border Protection (CBP) with advanced electronic data (AED).
Failing to keep up with the directives of the STOP Act prompts further troublesome questions as the Department of Homeland Security embarks on robust initiatives to impede the flow of counterfeit and pirated goods. However, in assessing the Postal Service, DHS finds a “significant gap in the information CBP receives,” among numerous critiques and findings. Landrith remarked, “Ultimately, the work to intercept illicit drugs and contraband is an immense challenge, and there is simply no excuse for USPS to not do its part.”
On the USPS’ array of responsibilities, Landrith concluded:
“Americans should be greatly concerned about the USPS procrastinating on its priorities. Looking ahead, it is crucial for the board to install a new Postmaster General with well-qualified business expertise. The demands of stakeholders, legislators and citizens continue to go unanswered. The path to reform will be wide-ranging, and USPS leaders and lawmakers will need to act with urgency.”