On November 13th, the U.S. Postal Service reported its Fiscal Year (FY) 2020 results. This revealed many insights about the agency with the largest takeaway being a disappointing $9.2 billion net loss. USPS, like so many other operations, has been adversely affected by the Covid-19 pandemic; mail volume, for example, declined 13.8 billion pieces. However, it is important to note that the USPS financial troubles far predate the coronavirus pandemic.
Frontiers of Freedom president George Landrith states, “The USPS has been consistently losing money year after year and has requested up to $75 billion in taxpayer money to remain solvent, but until thoughtful postal reform is completed, this money will merely kick the problem down the road.” He continues, “If we give USPS the money they are requesting, but allow the agency to continue with failed policies, we will inevitably have to bail them out again in the future.”
The agency states in the report that losses within the management’s control was $3.8 billion this year. This is a $334 million increase from the controllable loss in 2019. The agency is trending in the wrong direction and without postal reform it will only continue to decline.
In fact, although operating revenue has actually increased by nearly $2 billion due to a surge in e-commerce and greater package demand, the USPS’ out-of-date pricing system means the agency is unable to afford package costs or make a profit on these deliveries. Further, USPS calls shipping and packages its most “labor-intensive” effort, which is especially true during Covid-19, but how and to what extent that translates to its costs and full accounting picture continues to be unclear.
Landrith concludes, “In order to effectively manage and reduce the agency’s $160 billion debt, the USPS must update its policies and work with the incoming Biden administration to create thoughtful reform that will help preserve and ensure the success of our most important public institutions.”
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.
By Red State•
The COVID-19 virus, which was effectively shipped to the U.S. and around the world from China, and the political response to the virus seem to be the lead story every day.
In this veritable flash flood of virus news coverage, one thing many media outlets have missed is the U.S. Postal Service’s release of its second quarter financials. Perhaps, Postal Service financial information sounds boring, but we must pay attention because they’ve been requesting $85 billion in what is essentially bailout funds as part of the numerous stimulus packages.
If the Postal Service gets its way, you and your children may be on the hook once again for the Postal Service’s failed business model and its refusal to get its finances in order. After all, the USPS has lost more than a billion dollars for 13 consecutive years. And it has promised time and again to revise its business model and reform itself but has not made good on that promise. As a result, they are coming back to the taxpayer asking for billions in bailouts.
Maybe the public doesn’t really care if the USPS is losing money or uses a failed business model. After all, if some local business operates inefficiently and loses money, the problem will solve itself as it will go out of business and others who perform the service or provide the product more efficiently will take its place. But that’s not how government related things work.
When a government related organization loses money and begins to fail, the taxpayer is asked to pump billions into it to keep it afloat. It refuses to change its business model or to right its financial ship because it doesn’t have to. It can go to Congress and ask for more cash. Why restructure? Why innovate? Why focus on core profitable business products? Just ask Congress to give you billions to maintain the inefficient and wasteful status quo. That’s the Postal Service’s business model.
One of the curious things revealed in the financial report is that the Post Office claims that its package delivery business is highly profitable and it experienced an almost exponential increase in its package delivery business. That should be good news. Anytime a normal business is able to sell more of its profitable goods or services, that means higher profits. But not so with the Postal Service which still claims to be losing billions. How do you dramatically increase the sale of your most profitable products and still lose money?
Separately, in regard to letter mail, the Postal Service has a government granted and enforced monopoly on First Class Mail. It is illegal for any competitor to provide a competing First Class Mail service. So naturally, the Postal Service makes a lot of money on First Class Mail. Quite frankly, if you can’t make money as a legally sanctioned monopolist, you’re horrible at what you do.
The Postal Service takes the profits from that monopoly business and uses it to compete with other private companies in the package delivery business. And despite the Postal Service’s claims, it is clearly losing a lot of money on its package delivery business. Their financial records and cost attribution practices are so poor and substandard that they can lose billions and still claim that almost all of their products, including packages, are profitable. But the bottom line can’t lie and the bottom line reveals that the Postal Service is losing its shirt in package delivery.
That may explain why a group of USPS customers have come out to support the Postal Service’s request for a taxpayer provided bailout. If you could get taxpayer subsidized shipping and thereby lower your costs, you’d be for it too. It’s just a matter of self interest.
So these companies using the Postal Service’s package delivery services are effectively asking every American to subsidize their multi-billion dollar business and help them keep their shipping costs below market rates so that they can increase their profits. Wouldn’t it be great if all of us could reach into the taxpayer’s pocket to increase our salaries?
All of this is troubling. But the fact that a government sanctioned monopoly is using its monopoly profits to subsidize competition with other legitimate businesses is even more troubling. Imagine if the government set up a monopoly with guaranteed profits and then unleashed that monopoly to compete with you and used its monopoly subsidies to undercut your line of work. They could afford to lose a ton of money, but still harm your business, reduce your salary and profits, and get the taxpayer to cover their massive losses. Does that sound fair? Is that a good use of government power and taxpayer funds?
While the Postal Service claims that its package delivery service is profitable, that simply cannot be true. If it were true, as their package business grew, they would stop hemorrhaging so much money. But they haven’t stopped losing money. Every quarter, when they release their financial reports, it’s just more bad news. If you drill down in their financial information, it is clear that the Postal Service is delivering packages at a loss. But the USPS uses its profits from First Class Mail to subsidize those losses. And when their losses overwhelm their monopoly profits, they call upon the taxpayer to bail out their failed business model.
It is time for real reform at the Postal Service. It is time to stop the perpetual taxpayer bailouts. If nothing is done, next year even after COVID-19 has passed, the Postal Service will concoct another excuse to get more taxpayer bailouts. The Administration should impose meaningful reform because it is in the taxpayer’s interests for the Postal Service to get its business model and financial house in order. COVID-19 shouldn’t be used as a phony excuse to bailout failed monopolists.
America is – and for some time will be — a long way from what any of us would describe as normal. The COVID-19 pandemic, which has us living in near isolation, has disrupted every aspect of our lives. Which, it should go without saying, includes the way we supply and resupply our homes and functioning businesses.
The public health experts advising the president and the governors of the states say self-quarantine is vital to flattening the curve. They say it’s the only way to ensure the number of new cases — when added to those already diagnosed and under treatment — don’t overwhelm the healthcare system.
That means a lot of things. President Donald J. Trump and the Coronavirus task force have been hard at work trying to procure and distribute essential hospital supplies, create more bed space in over-burdened cities like New York, and prevent a public panic. And, despite what the critics say, they’ve done an exceptional job considering the way this all came about and how unprepared the nation was.
Who’s at fault, well, that’s a conversation for another day. What matters now is to make sure people get the care they need and those sheltered inside their homes get the food and supplies and medicines they need to survive so they can venture out as little as possible.
Thanks to the Internet, that’s happening. People can order everything from prescriptions to crackers to toilet paper (when they can find it) – from online retailers who, most of the time, can ship it right to their front door. Eventually, those shipments may also include test kits and vaccines.
The American supply chain is an amazing, resilient thing. What most don’t know, however, is how dependent they are on the United States Postal Service for all that. There are other shippers, but only the USPS is required to provide delivery to every front door in America. For many, especially those living in remote and rural areas, it’s a lifeline.
It’s axiomatic that the USPS has been ill-managed for years. It’s short of money, deeply in debt, and has resisted pressure to reform for some time. Things need to change. Efficiencies need to be found. Accommodations need to be made. But now is not the time to force the issue. The pandemic has sent USPS costs up and revenues down. COVID-19 isn’t rain, snow, sleet, or gloom of night: it is even more unpleasant. Yet every day, six days a week, your friendly letter carrier continues to come to your door to deliver the things you need to survive this crisis – and will continue to do so until it runs out of money to operate.
Recognizing this, Congress, in the last COVID stimulus bill, granted the Postal Service new borrowing authority but it can only access those funds if it agrees to terms imposed by the Treasury Department. Unfortunately, the Treasury is reportedly using that as a lever to force policy changes that would force the Postal Service to increase prices and cut back on service.
That’s a mistake. Forcing these changes now will put further strain on the pocketbooks of the American people and financial security of American business at a time when far too many people are already in need of relief.
Reforms are needed but now is not the time to wield the carrot and the stick. The USPS can no more be allowed to shut down or curtail service during this pandemic than a hospital can be allowed to close. Its continuing function is vital to the economic and personal security of every American – especially those living in rural areas who have no affordable alternatives.
The postal service needs to be more efficient. There’s a lot that can be done, much of which USPS management, its labor unions, and its employees probably won’t like. Hopefully, they’ll be willing to give a little once the current crisis is over and, if they’re not, then the politicians in Washington need to bring the hammer down. But that’s for later, not now. This is an extraordinary time and the circumstances are unique. We need to focus on keeping the lifeblood of the nation flowing which means keeping the mail going. Treasury Secretary Steve Mnuchin needs to reverse course and approve the borrowing of the funds needed to tide it over without any strings.
By Michelle L. Price • Boston Globe
LAS VEGAS (AP) — A stamp that mistakenly featured the image of a Statue of Liberty replica in Las Vegas instead of the original New York Statue will cost the U.S. Postal Service $3.5 million in a copyright infringement lawsuit.
Las Vegas sculptor Robert Davidson, who created the replica Lady Liberty in the facade at the New-York-New York casino-resort on the Las Vegas Strip, sued the Postal Service five years ago over its 2011 ‘‘forever’’ stamp design.
The stamp featured the face of his Lady Liberty, which his attorneys argued in court filings was unmistakably different from the original and was more ‘‘fresh-faced,’’ “sultry’’ and even ‘‘sexier.’’
Washington D.C. – This week, the U.S. Postal Service released its financial report for the midway point of the 2018 fiscal year, which detailed yet another distressing loss of $1.3 billion. After monitoring the Postal Service’s financial mismanagement for years, Frontiers of Freedom expressed its continued concern about the agency’s direction.
“The latest losses posted by the USPS offer yet another indicator that the organization and its governing bodies have neglected to offer meaningful solutions to avert a likely taxpayer bailout of the Postal Service,” said George Landrith, president of Frontiers of Freedom.
Landrith further discussed the Trump Administration’s work to address the beleaguered agency: “The new Postal Task Force to be led by Secretary Mnuchin offers a promising step towards implementing structural changes that the USPS needs. It is imperative that the Task Force identify the right path forward. Any serious proposal will ensure that the Postal Service fixes its deteriorating letter mail service for all Americans and becomes a sustainable operation well into the future. But making minor course corrections at this point will not get the job done. The problems at the USPS are serious enough that real and bold reforms are required. There is no time to waste.”
As Frontiers of Freedom notes, the Postal Service’s ability to provide reliable and efficient mail service to all, and especially for those in rural communities, is a significant point of concern. A recent report by the USPS’ regulator found that the Postal Service failed to meet its performance objectives for every single service included within First-Class Mail.
Previous policymaking and management practices have proven insufficient for correcting the Postal Service’s course and the Administration must now seek new drastic changes to ensure a genuinely accountable and sustainable operation.
By Daily Caller•
With tax reform now in the rear view mirror on President Donald Trump’s list of priorities, it is clear now that he has another mishandled federal issue in his sights – the U.S. Postal Service. In a tweet posted just before the New Year, the President asks why the USPS is, “charging Amazon and others so little to deliver packages, making Amazon richer and Post Office dumber and poorer?”
This consternation refers to an analysis conducted by CitiGroup, which found that Amazon deliveries received an astounding average subsidy of $1.46 per package. Multiply this giveaway by hundreds of millions of packages that are captured by the secretive deal (known as a Negotiated Service Agreement) and it appears that USPS’ package losses surely are tremendous.
Even worse, Amazon may also be causing the integrity of USPS to deteriorate. In fact, reports from California, Utah and Georgia indicate that the Postal Service has been falsifying Amazon package deliveries. Continue reading
As President Trump takes aim at some of his key campaign promises, the discussions around the potential renegotiation of the North American Free Trade Agreement (NAFTA) have further emerged. From the president’s view, concerns persist about the nation’s propensity to import more goods that we export to a number of large economies – thus creating trade deficits.
On this subject, many economists have theorized that trade deficits are not a measure of what the United States owes another country, and that there can be numerous benefits to running them. However, in actuality, it would be worthwhile for the administration to address a different type of trade deficit that has long plagued American consumers and taxpayers.
Specifically, it is the deficit that the U.S. Postal Service has amassed as result of delivering packages and mail from abroad. Continue reading
Frontiers of Freedom reacted with continued frustration today in response to the U.S. Postal Service’s latest financial statement detailing a loss of $2.1 billion in the third quarter of the 2017 fiscal year.
“The latest poor financial results from the U.S. Postal Service this week only reinforces the fact that without changes, the USPS’ debt just continues to grow,” said Frontiers of Freedom President, George Landrith. “Losing billions of dollars each year is simply inexcusable and leaders of the U.S. Postal Service should be making dramatic improvements to ensure the agency’s financial sustainability.”
The latest losses this week ominously point to a high probability of the USPS ending the year in the red, which will mark the 11th consecutive year with a multi-billion loss. Year after year, data provided by the USPS details the financial strength of letter mail products, which often earn twice as much revenue compared to their costs. However, the Postal Service is lobbying its regulator, the PRC, to soon grant extensive authority to raise letter mail prices as part of its 10-year review that is due next month.
A wiser course for the PRC would involve closer scrutiny of competitive products and new ill-advised ventures, like grocery delivery, same-day services, and expanded parcels products – all items that USPS fails to fully detail the associated costs and evades proper analyses regarding their long-term financial viability.
By making sound management decisions and focusing on its core mail products, the U.S. Postal Service can best serve its largest base of customers and limit its potential exposure to taxpayers.
As many large-scale federal government reforms continue to be considered, there’s hope that our elected leaders can advance new laws that reflect principles of limited government and traditional American values to help the nation succeed. In the case of the latest Postal Reform, however, Republicans are regrettably ushering in a bill that is lacking far too many conservative ideals.
Last month, we wrote about the Postal Reform Act of 2017, and highlighted how the bill fails to solve the agency’s fiscal woes that have led to multi-billion dollar losses year after year, and further neglects the USPS’ most prominent customers that it was founded to serve. The proposal also disregards conservative ideals by creating a taxpayer-funded bailout of the Postal Service by absolving their unfunded liabilities and shifting Postal retirees to Medicare. Continue reading
On February 2, 2017, Frontiers of Freedom President, George Landrith made the following statement on Postal Reform:
“With a nationwide decline in the service performance standards of the U.S. Postal service, members of the House Oversight and Government Reform Committee have introduced a bill that is ill-equipped to handle the real problem at hand. For two consecutive years USPS has failed to meet delivery goals for nearly every First-Class mail product and yet the bill fails to properly establish greatly needed mail performance requirements. This bill also ignores the rate-setting process with its regulator by calling for a price increase that further jeopardizes the Postal Service’s fundamental charge to provide quality service at reasonable cost. Instead of pulling the Postal Service out of the gutter where it currently lies, this bill regrettably keeps the structural problems that plague the federal agency and limits their ability to put customers first.”
by Peter Roff • Independent Journal Opinion
Throughout his career, Vermont’s Bernie Sanders has championed postal reform. He wants to save the United States Postal Service and its hundreds of thousands of public employee union jobs, by broadening the scope of its activities.
It’s an interesting idea, which is probably why the American Postal Workers Union was an early presidential endorser, and a bad one. Allowing the USPS to transact non-bank financial services opens the door to competition in areas private business has shown it can handle quite competently, thank you very much.
It’s inevitable a full range of banking services would eventually follow, free of the encumbrance of the onerous Dodd-Frank requirements and the overly invasive Consumer Financial Protection Board the massive new banking law spawned. The idea is already out there. More than one policy wonk has hit on it as to provide services to what folks have taken to calling the under-banked. Continue reading
By George Landrith • The Hill
When it comes to the U.S. Postal Service, the organization’s decline has been well documented for years. Last year the Postal Service lost $5.5 billion, marking the eighth consecutive year of multi-billion dollar losses. Further, for consumers, the Postal Service is still failing to meet performance targets for First-Class mail, Standard Mail, Periodicals, Package Services, and more according to a recent federal review.
As the agency seeks to regain solid footing for its balance sheet and service standards, it’s clear that improved management at the top is necessary. In the last several months the Postal Service has made ill-advised efforts to expand into offerings that are unrelated to its primary letter mail responsibility and interrupt areas where such products are already provided.
Achieving excellence in the core product offerings is also grounded in one major facet of the Postal Service’s operations – its ability to handle items in a way that prioritizes the overall security of the mail system for the safety of the public. Continue reading
Problems include services cut in rural areas but increase in big cities; processing facilities consolidated, impacting ability to meet delivery goals; new services that result in significant losses
by George Landrith • greenbaypressgazette.com
The U.S. Postal Service has served as a steady fixture in every American’s life. From the post office on Main Street to the postal worker who has delivered mail to our houses for 25 years, the U.S. Postal Service has been a dependable entity in our daily lives.
Recently, a bipartisan group of senators, including Sen. Tammy Baldwin, D-Madison, met with the Postmaster General Megan Brennan to discuss a long list of USPS service complaints. At the top of the list was lagging delivery times that are continuing to get worse. As part of the evaluation process, Baldwin and the group maintain that declining postal standards and the consolidation of mail processing facilities is negatively impacting rural communities across their states.
Now, we undoubtedly have different means for many types of information sharing through the Internet. While many may rely on email and other Internet-based communications platforms, most still use the mail to send birthday cards or pay the mortgage and myriad other purposes. Continue reading
by George Landrith • Washington Examiner
That doesn’t mean Americans should shy away from international trade. In our global economy, the shirts we wear, the phones we use and the cars we drive oftentimes are made overseas. Due to a number of factors, there are some products where American companies do not enjoy a comparative advantage compared to foreign competitors and vice versa.
It is understandable that American companies sometimes lose in competition. What is not understandable, however, is when an American entity like the United States Postal Service creates a competitive advantage for foreign producers. Continue reading