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.
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.”