To hear President Trump speak at times, it’s difficult to believe he’s ever been involved in running a business. Take his latest salvo against the U.S. Postal Service, which he described as “a joke,” while threatening to withhold a $10 billion emergency loan recently approved by Congress as part of one of its recent COVID-19 funding packages.
Trump said he’s told Treasury Secretary Steve Mnuchin to withhold the loan funding until the Post Office agrees to increase the fees it charges for package delivery. Trump says their rates should be “quadrupled.”
Trump’s advice to the Postal Service is on par with his recommendation last week that the nation’s healthcare professionals should explore injecting chemical disinfectants, like bleach, into the veins of COVID-19 patients, since such disinfectants work so well on your kitchen counters. His suggestion to the Post Office would be just as fatal if anyone took it seriously.
While the Post Office has long generated most of its profits on its first-class mail delivery, with the mail volume steadily declining in recent years, and down sharply since the outbreak of COVID-19 in the U.S., its mail revenues have fallen significantly. That’s left the Post Office increasingly dependent on its package delivery business to generate the cash flow the service needs to operate.
Sharply increasing, much less quadrupling, the fees that the Post Office charges for packages won’t generate more revenue, or profits. While the Post Office essentially has a monopoly on first-class mail delivery, it operates in an incredibly competitive environment when it comes to package delivery. Companies like UPS, FedEx, and a long list of other package delivery services would eat the Post Office’s lunch if the service is forced to jack up its delivery fees just to please a president who is virtually clueless on the subject.
And that could spell the end of the U.S. Postal Service, an outcome that would be particularly devastating to elderly and rural residents, who still rely on the Post Office for their mail communications. It would be devastating as well to many small businesses, including newspapers, that serve rural areas and rely on the Post Office for delivery of products and invoices. Perhaps most of all it would be devastating for the 600,000 Postal Service employees who keep the mail flowing.
While President Trump, bizarrely, blames Amazon for the woes of the Post Office, the biggest threat to its future operations is the 2007 decision by Congress to force the Post Office to prefund all of its retirees’ health benefits, something that is not required of private sector companies. Private companies are only required to prefund defined pension obligations, although few companies maintain such pension programs anymore.
The Post Office actually still makes money on its operations— but it’s been forced to divert billions of dollars a year to its future health care obligations. It looks fine on a balance sheet, but it’s stripped the Post Office of operating funds and forced them to take cost-saving measures (like closing its Duluth sorting facility, sending all mail from this region to Minneapolis) that have had a negative impact on mail service. The cash drain has also prevented the Post Office from making investments to modernize its operations for greater efficiency and competitiveness.
And maybe that’s part of the plan. Conservatives have long disliked the Post Office, preferring such a service be provided by the private sector. The founding fathers had no problem with a government-run Post Office, which is why they expressly authorized Congress to create post offices and post roads. And, by the way, good luck finding a private company to deliver a letter to any mailbox, no matter how rural, for 49 cents. Without the Post Office, we’d be paying far more for that service.
While times and methods of communication have changed, the Post Office still provides an invaluable service to the elderly, rural residents, and the millions of small and large businesses alike that rely on the Post Office for billing or for product delivery. Congress created the biggest problem currently facing the Post Office, but at least Congress was willing to free up funds to help the service during the current economic downturn. President Trump shouldn’t stand in the way.