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This is Planet Money from NPR. A couple of months ago, the 600000 plus employees of the United States Postal Service were sent a video introducing them to their new boss.
Hello and thank you for watching today.
I am honored to begin my service as our nation's seventy fifth postmaster general.
That voice belongs to the new postmaster general, Lewis Dejoy. You might have heard of him by now. He was a big donor to President Trump and the Republican Party, and he was appointed by the Postal Service Board of Governors, all of whom were themselves appointed by Donald Trump.
In that introductory video to all the mail carriers, Dejoy makes it clear that he thinks the Postal Service is facing all these problems. The pandemic has been bad for business, for the post office, and even before that, people just don't send as many letters as they used to.
And finally, we have an expensive and inflexible business model that has largely been imposed on us and that we cannot easily change. But I did not accept this position in spite of these challenges. I accepted this position because of them.
Since taking over in June, Dejoy has fired or reassigned a bunch of post office executives, cut overtime way back and maybe most controversially, called for the removal of hundreds of mail sorting machines.
And all of this is happening against the backdrop of a presidential election in three months, where there's going to be an unprecedented number of ballots cast by mail. Democrats are worried that all of the joys moves are going to delay the mail in a way that hurts people's chances to vote.
Hi. I'm sorry. We're trying to find a place in the House that's quiet this week.
We called one of those Democrats, Congresswoman Carolyn Maloney, at her home in New York.
We're running an office out of my home now since we're all quarantined anyway. I'm sorry. Anyway, I'm ready to go. What's up?
The past couple of weeks, Maloney has been peppering Dejoy with this series of official letters demanding answers about the changes he's made, which can I just say is 100 percent the right way to have a fight about the post office?
You don't make these drastic changes in the middle of a pandemic. This is not the time to come in with actions that are disruptive to the post office that's delaying mail.
Representative Maloney and other Democrats are really worried about what to Joyce up to. They're so worried that they cut their August recess short and came back to D.C. for an emergency session. Maloney has introduced a bill that would require the post office to keep services at the same level they were at on January 1st of this year. And on Monday, she's calling Postmaster General Dejoy to a hearing of the House Oversight Committee, which she chairs. We're hearing reports they're decommissioning machines that help process mail more quickly.
They have taken mailboxes out. They are not allowing over time. They've taken several steps that disrupt, basically disrupt, sabotage the ability of the department to process the mail.
And as we record this podcast, the Senate Homeland Security and Government Affairs Committee is questioning Dejoy themselves here will come to order.
I want to start by thanking postmaster general to join us as a country.
We're all suddenly paying attention to the Postal Service in a way we haven't in years, which is probably long overdue because the United States Postal Service has been in this kind of slow motion crisis for decades.
Hello and welcome to Planet Money, I'm Alexi Horowitz. And I'm Keith Romer. The fight over the U.S. Postal Service is a lot bigger and goes back a lot further than the appointment of Lewis Dejoy. It is a 50 year old battle between public service and private enterprise. Today on the show, we try to figure out what's gone wrong with the post office and if there's any way to fix it. Economics is about more than just charts and graphs, mainly it's about people.
If you ever see Lincoln squinting on a penny is because I squeezed the crap out of it.
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The idea that the United States government would have a hand in delivering the mail goes back at least as far as the Constitution of the United States post office since it was founded one hundred and seventy three years ago, has helped to make America great.
It's right there. Article one, Section eight. The Congress shall have power to lay and collect taxes, duties, yadda, yadda, yadda. And to establish post offices and post roads.
And yes, people have to pay to send their letters from Philadelphia to Charleston. But there is a recognition that mail delivery is this useful service and that taxpayers should subsidize that service.
The mail is going to bind the country together. It's going to keep people informed about issues of national importance. It's going to let us all communicate with each other. And for the first 150 years or so, the system works pretty well. It's a service worth paying for. And whenever the post office ends up in the red, Congress throws them the money to cover.
But by the 1960s, the postal system is kind of a mess. Rates are super low. There's a huge surge of mail and the post office is less and less able to deal with it. At one point, there's a backlog of more than 10 million pieces of mail in the Chicago Post Office. Management seriously discussed just burning it all.
That is one way to get to mailbox zero.
In the end, they did not, in fact, burn the mail.
On top of all this, postal workers are increasingly unhappy with their wages. Their unions keep asking Congress for a raise, not really getting anywhere, but there's only so much the workers can do, because if you're a federal employee, it's actually against the law to go on strike.
And then in 1970, they go on strike anyway.
We want to work. This is the only means we have of letting Congress know that we cannot take it any longer either. They give us what we should have or we will stay out on strike until hell freezes over. For a few days, Richard Nixon actually sends in the National Guard to replace some of these striking workers. I have just now directed the activation of the men of the various military organizations to begin in New York City, the restoration of essential male services.
Now, Nixon and frankly, Democrats before him really wanted to reform the post office to do something to fix all the backlogs and the delays for the past year, almost since the day we took office, both the postmaster general and I have been working to alleviate not only the legitimate grievances of postal workers, but the move to eliminate the source of those grievances. That is the obsolete postal system itself.
And the strike kind of gives Nixon and Congress the chance they're looking for. In 1970, President Nixon signs the Postal Reorganization Act into law. The unions get the raise they want and the right to collective bargaining. And in exchange, they agree to go along with this other change, one that fundamentally transforms the post office from a pure public service to something more like a business.
To try to understand why this transformation was such a big deal, we called David Trimble from the Government Accountability Office, the GAO, and you guys are sort of explicitly, militantly nonpartisan, is that right?
Absolutely. Our core values are, you know, sort of violently protected within the building.
Where are you going to vote for for president?
Yeah, yeah. That that I will not say.
A couple of months ago, the GAO put out a report that tried to make sense of how we arrived at this current moment and postal service history. Trimble says that 1970 law changed a lot more than just how much postal workers got paid.
Until that point, the post office was a department of the federal government.
That old version of the post office made some of its money from stamps, but the rest of it came out of the federal budget.
They received about 25 percent of their operating expenses in the form of an appropriation under the new law.
That money went away and that is where the the the mandate for them to be a self-sustaining business, a business like entity that I think is the phrase was introduced.
The deal that Congress gives this new business like entity goes like this U.S. Postal Service. That's what they're called.
Now, you get to keep all the stuff, the physical post offices and the mail trucks and the snazzy uniforms. And you get to keep the exclusive right to deliver stamped mail.
But Congress is going to stop giving you money because you're business. Now, Congress doesn't just give money to businesses usually.
Also, new postal service. We're going to need you to do something for us. Well, several things, actually.
You have to deliver mail to every single address in the country.
It'd be great if you could keep doing the whole six day week delivery thing.
Also, you have to get permission if you want to charge more for anything or if you want to offer any new services or like close the post office, you're going to need permission for that, too.
But otherwise you are totally a business. Go get them.
So you want them to operate in business, but you're telling them what services they have to provide and you're telling them how much they can charge. So they're sort of between a rock and a hard place for a lot of their operational decisions.
But for a while, this new business version of the post office actually works. People like mailing things and they're willing to pay for it year after year. Mail volumes just keep increasing and the Postal Service is able to increase their rates to cover new costs, which means revenue keeps going up.
But then in the early 2000s email, it's cheaper, it's faster.
You don't have to lick anything.
First class mail delivery in the United States peaks in 2001 at 103 billion letters, and it just goes downhill from there, which is bad news for the Postal Service.
The old business, the old model would, you know, really depended on a high volume of first class mail, because that's the that's the moneymaker for the post office.
That same year, 2001, the GAO puts the Postal Service on its high risk list, which is basically a warning that if mail volume doesn't start going up again, the post office is going to be in real danger.
They had poor cash flow. They're near their debt limit. Their retirement expenses were growing.
The postmaster general at the time, a man named John Potter, is like, look, you want us to make real money. You got to ease up on some of these restrictions. The number of letters keeps going down, but we could make up some of the money on packages if you just let us set our own prices.
He wanted the Postal Service to be able to make a profit. That's Ruth Goldway, who at the time was a. Missioner at the Postal Regulatory Commission, later, she was the chairwoman, side note, she was also in the movie, Dave. I played the secretary of education. I had one line. I said, thank you, Mr. President.
Also the forever stamp, the one that makes it so you don't have to keep buying one and two cents stamps to keep up with rate increases. That was her idea.
I said, gosh, you lose more money selling penny stamps to add on when you change the rates than you would if you just left at the same.
Goldway says by the early 2000s, there were signs that the new post office as business wasn't working the same way it had before. In 2000, it lost around 200 million dollars. In 2001, it lost one point seven billion.
If the post office was truly going to be self-sustaining, the shackles had to come off. So in 2006, Congress passed a new round of postal reforms. And just like the last time in 1970, it was sort of a mixed bag for the post office.
They did get to set their own rates for packages, but rate increases for first class mail now couldn't increase faster than inflation.
And there was one very big new requirement that Republicans slipped into the bill at the last minute, a requirement that the Postal Service prepay the costs for its workers retirement health benefits.
So when the final bill came out, there were many of us who were very surprised and said, what is this payment?
We have to make whatever current and former postal workers were going to get in health care benefits after they retired. The Postal Service had to pay for that.
Now, no other government agency and almost no other business. Puts money away for future health care, retiree benefits claims starting in 2007, the Postal Service had 10 years until 2017 to put together this giant pool of money to cover those costs for what would be literally millions of current and former workers.
All of a sudden, because of this last minute addition to the new law, the Postal Service is committed to putting aside five billion dollars every year for the next decade, which for an organization that was already struggling to turn a profit, is just devastating.
For a few years, the post office does pay into this fund. Then in 2011, they just stop. They can't afford to anymore. And now they owe a lot of money and not just for the weird prefunding, the retirement health care benefits thing. On top of that, they also tens of billions of dollars for pensions and for worker's compensation.
In 2019, that liability totaled one hundred and sixty one billion dollars.
That's David Trimble again from the Government Accountability Office. The scale of this is massive. The challenge facing them is massive financially.
That top line number, 161 billion, that's more than twice the money the post office brought in last year.
The current business model is no longer feasible. It's financially not sustainable and its mission is at risk unless there are significant reforms made.
It's worth pointing out that if the Postal Service was in fact a company, there would be something it could do, something that airlines and car manufacturers, these companies with giant obligations to pension funds and health care benefits, that they can't afford something that they do all the time, declare bankruptcy, reorganize its finances, renegotiate with its workers. But in this sense, at least, the Postal Service is not a company.
Bankruptcy laws would not be available for the post office to exercise. And really, it's Congress.
It's up to Congress to address this issue, the series of choices that Congress has made over the last 50 years about how the Postal Service is conceived and what kinds of requirements and limitations should be placed on it. Those choices have made the post office a sort of Frankenstein's monster.
It's kind of a business, except it has so little control over how it makes money or how it cuts costs. It's kind of a part of the federal government. But except for a few tiny allocations for overseas voting and mail services for the blind, Congress doesn't pay for anything.
The Postal Service did get a loan of 10 billion dollars as part of the Keres Act, but that's just a loan.
They're supposed to pay it back so that 10 billion doesn't resolve any of the core issues in terms of the fundamental challenges facing the post office, that may get you a year or something, but your essential costs are still going to sink that boat.
Which brings us back to the new postmaster general and his new cost cutting measures after the break.
But I like to call Dejoy of downsizing. Support for NPR and the following message come from TD Ameritrade, you can get smart with your investing, with help from knowledgeable professionals, customizable tools and education designed just for you at TD Ameritrade, where smart investors get smarter member SIPC. Hey, I'm Sam Sanders, host of It's Been a Minute on my show, we catch you up on all the things in news and culture, this space force. I totally missed this.
What is the space for stop in space? I don't know about space for you know what? I've been in my apartment for four months.
Oh, man. Crushing it. Thank you.
You're feeling good news without the despair. Listen now to the it's been a minute podcast from NPR. In June, Lewis Dejoy takes over the US Postal Service. He is ready to, in his words, put the institution on a trajectory for success.
As you will soon discover, I am direct and decisive and I don't mince words. And when I see problems, I work to solve them.
Dejoy is 63. He was born in Brooklyn, comes from the trucking and logistics industry. When he was younger, he took over his dad's dying truck company out on Long Island and turned it into this massive operation with thousands of employees. A few years ago, he cashed out, sold it for six hundred fifteen million dollars to a company called XPO Logistics.
And the joys approach to the Postal Service seems like exactly the kind of approach a hard nosed businessman might take with a failing company. Cut costs the bone. Don't mince your words.
Which is one explanation for why decommissioning sorting machines and cutting back over time might make some sense. In fact, a lot of these Cost-Cutting ideas were floating around the Postal Service long before Dejoy got there.
But at the very least, as a matter of optics, it does not look great. The President, Donald Trump, has gone on record saying that starving the post office of funding would be a good thing because it would make it harder to vote by mail, which is why when the new postmaster general committed himself to cutting costs at the post office right away despite the upcoming election, it set off alarm bells.
On Tuesday, Dejoy did back off a little.
He released a statement saying he was done with any more big changes until after the election. So that's where we are.
As we were making the show, Postmaster General Lewis Dejoy went in front of the Senate Homeland Security and Governmental Affairs Committee and answered a lot of questions, some of them friendly.
I just want to kind of go through and give you a chance to respond to some of these false narratives, some of them not so friendly.
Did you conduct any specific analysis on how your changes would impact seniors? Yes or no, sir? So, ma'am, the policy changes that I. Yes or no, sir.
On Monday, he will face even more questions when he goes before the House Oversight Committee. So that's the immediate crisis at the Postal Service.
But as we were listening, I kept thinking about the conversation I had with David Trimble from the GAO.
Trimble's basic point was that the financial problems with the Postal Service go way deeper than you could solve by just cutting back on overtime or taking out some mailboxes. Whatever the solution is, it's not going to come from the office of the postmaster general. It has to come from the same place that created the problem in the first place.
Congress, the Congress needs to step up and address the core policy questions, which is what is the mission? What are the what are the core missions we want the Postal Service to provide? And given those missions, how are we going to pay for it?
Is the post office a service the government provides? Is it a business? Those are political questions. And ultimately we're going to need political answers.
For Democrat Carolyn Maloney, the answer is clear.
The bottom line is that the post office is a service and it is an American service that the American people need.
But as a country, we're divided on this, just like we are on so many other things.
There's a special session in the House on Saturday. They will be talking about what to do about the Postal Service, but not in any permanent fix sort of way. The question at issue will be limited to whether the Postal Service should get some temporary funding to see it through the current crisis.
Is your government agency caught in a treacherous no man's land between public service and private industry? You could send us a letter, but we haven't been back to our office in six months.
E-mail us at Planet Money at UNPEG. We're on Facebook, Twitter, Tic-Tac and Instagram. We are at Planet Money. Today's show was produced by Darian Woods and Lysa Yagur.
Alex Goldmark is our supervising producer and Bryant Urse that edits the show special thanks to Ryan Ellis, author of Letters, Power Lines and Other Dangerous Things.
If you like this episode, share it with a friend. I'm Keith Romer.
And I'm Alexi Horowitz Gozi. This is NPR.
Thanks for listening.