Fixing USPS in the Time of COVID

Welcome to the E Street Partners Blog! This is the first in an occasional series of discussions on issues vital to large segments of the country and business, in particular. Our goal in this blog is to provide you, the reader, with accessible, useful information and guidance on the policy challenges facing specific sectors and what can and should be done about them -- including what you or your company or association can do to confront these challenges.

This inaugural post addresses the urgent issues in the postal sector. As you likely recall, America received a reminder of how indispensable the Postal Service remains during the pandemic. Not only was there an explosion of packages from an isolating population turning increasingly to e-commerce, but the Postal Service became even more of a lifeline than it has always been in providing medications, PPE, masks and disinfectants, household staples and groceries and more, while continuing to provide essential traditional mail services. Our hats are off to the men and women who braved the coronavirus to keep this invaluable service running.

Plus, there was a great deal of controversy last summer and fall over operational changes ordered by the new Postmaster General, Louis DeJoy, and resulting delivery delays that many worried would either intentionally or inadvertently affect mail-in ballots during the 2020 election. Severe delivery delays came back during the Christmas season as the explosion in packages peaked at an unprecedented level.

All of this obscures the fact that the Postal Service is the beating heart of an extremely large commerce and communications business sector. Pre-pandemic, postal-reliant businesses produced $1.6 trillion in sales, and employed about 7.3 million workers. Generating more than 90% of postal revenues, this sector has kept the postal system afloat and self-sustaining – that is, USPS conventionally receives no funds from Congress beyond support for mail for the blind and similar applications. All USPS operations are funded by the purchase of postage.

All of the above is good news. The bad news is that the Postal Service was and continues to be in trouble from a financial standpoint. Losing more than $85 billion since the last time Congress reformed the postal system in 2006, legislation to fix the problems has been pursued for more than 10 years, to no avail. Meanwhile, the problems have grown worse.

As a result of this, USPS has released a 10-year strategic plan, called “Delivering for America” that seeks to make up anticipated losses of $160 billion over the next 10 years by raising prices dramatically on mail, growing its package market share, saving greatly through service downgrades, stepped up efficiencies and cost reductions, and legislative change. The plan is long on aspiration, and short on information. And, the most recent numbers from USPS show it’s doing far better than projected for 2021, raising questions about whether a $160 billion bogey is correct.

This plan is threatening to both businesses and consumers on both rates and service. The plan means businesses, and consumers, will be paying much more for postage. That may ding consumers twice: where businesses can, they will pass the added postage costs on to consumers. For businesses where postage already is by far the largest cost in preparing a statement or invoice, promotion or catalog, and much more, the increases and service reductions envisioned will prompt a serious squeeze with ramifications for business and jobs.

What can you do about this? First, contact your Member of Congress and ask for help in preventing a mail slowdown and tempering price increases, especially in combination with much higher prices. There are rational legislative options circulating that would help USPS, yet not tap into taxpayer funds.

If you would like guidance and support beyond that, please contact E St Partners. Our combined expertises can meet the needs of any potential client.

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