The US Postal Service is more efficient than you think. Privatizing it could cause problems for many

By Chris Isidore, CNN

New York (CNN) — President Donald Trump is once again talking about privatizing the US Postal Service. It’s an idea that has employees and major users of the mail very nervous.

The 250-year old service is an independent government organization that is older than the country itself. With billions in annual losses — a $9.5 billion loss in the most recent fiscal year — coming up with a way to make it more efficient and stem the red ink would seem to be a no brainer.

At a time when the use of first class letters continues to slide due to emails, online bill paying and other electronic communications, the USPS would seem to be less important than ever. But it’s actually as important as ever, crucial for delivery of prescription drugs, mail-in election ballots and online purchases. And privatizing it could mean the end of guaranteed mail service to every American address, leaving many rural customers without the deliveries they have come to depend upon.

Even those who are critical of the level of service and the cost of postage charged to major business customers say privatizing the service is not the answer.

“People are used to what they have. Six days a week, every address served,” said Michael Plunkett, CEO of the Association for Postal Commerce, which represents companies in the mailing and shipping industry, including pharmacies, banks, catalog publishers and online retailers. “Anything that severely disrupts that will be extremely unpopular. People are generally happy with the kind of service they get from the postal service. Certainly the quality in the last year or so has been subpar, but overall the public likes what they get.”

He points to USPS performance statistics. That data shows, among other things, first class mail that was delivered within two days 99% of the time as recently as 2013 now gets there that quickly less than 94% of the time.

But on Friday, Trump said he wants to see changes at the agency, as well as an oversight role for Commerce Secretary Howard Lutnick, even though the service is an independent agency that is overseen by a board of governors, not any cabinet secretary.

“Well, we want to have a post office that works well and doesn’t lose massive amounts of money, and we’re thinking about doing that, and it will be a form of a merger,” Trump said when asked at Lutnick’s swearing-in ceremony if he wanted to make the USPS part of the Commerce Department. “It’ll remain the Postal Service, and I think it’ll operate a lot better than it has been over the years.”

In December, then President-elect Trump said privatizing the USPS is “not the worst idea I’ve ever heard.”

“It’s an idea that a lot of people have liked for a long time,” Trump said at a news conference at his Mar-a-Lago estate in Florida. “We’re looking at it.” But Trump had to drop previous plans to try to privatize the service in 2018 during his first term in the face of Congressional opposition.

Some critics of the idea of privatizing the service say that looking at just the bottom line misses the idea of what the Postal Service was designed to be.

“The Postal Office remains the most affordable way to ship,” Brian Renfroe, president of the National Association of Letter Carriers, told CNN. “The destruction of any part of the public service we provide is going to have one bottom line result for the customers, it’s going to cost more and take longer to get there.”

“It really comes down to the core meaning of a public service,” he said. “The Post Office is going to serve you at the same cost no matter where you are. That really should be the very definition of a public service.”

Critics say current system ‘unsustainable’

But a task force on postal reforms during the first Trump administration argued that the current system is “unsustainable” and that “a private Postal Service with independence from congressional mandates could more flexibly manage the decline of First Class mail while continuing to provided needed services to American communities.”

While the report predicted that a “private operation would be incentivized to innovate and improve services to Americans in every community,” it seemed to signal that the current requirement for universal service to every American address could be lost.

“Major changes are needed in how the Postal Service is financed and the level of service Americans should expect from their universal service operator,” the report argued. “A private postal operator that delivers mail fewer days per week and to more central locations (not door delivery) would operate at substantially lower costs.”

While Plunkett and the businesses that make up his group that send out bulk mailings have complained about the rising cost of postage, he believes that would soar much faster for rural parts of the country if the USPS were privatized. Many rural customers aren’t even served by private companies such as UPS or FedEx because it doesn’t make sense for them to provide service in such expensive to serve areas.

“Places like metropolitan New York and Washington, DC, and other major cities, you could probably find an operator,” said Plunkett. “But not in Wyoming. Who’s going to deliver mail to rural folks in Wyoming? The cost of doing so would be exorbitant. Anyone who chose to try to operate there would be charging rates that would boggle the mind.”

And even in many suburban and urban markets, many of the “last mile” delivery of goods moved most of the way by private services such as UPS or shippers like Amazon are handled by the postal service, a sign that it is more efficient than widely believed. Some of the reported losses are actually accounting losses more than actual cash losses, related to employee retirement plans.

The USPS has a plan that is supposed to make it profitable within the next decade, although it has regularly missed the profit targets in the first two years of its 10-year effort. Still, while first class mail has been falling steadily, package shipments have been growing as Americans do more and more of their shopping online.

‘Illegal hostile takeover’

The unions that represent 91% of the 640,000 USPS employees are vowing to fight any steps towards privatization.

“This is an attempt of an illegal hostile takeover of a government institution,” said Mark Dimondstein, president of the American Postal Workers Union. “The right wing think tanks have always had their sights on the public postal service. They clearly have a plan. The Post Office takes in about $82 billion a year in revenue. That’s not chump change. That’s what Wall Street wants. This is just about shifting it from the public sector to the private sector.”

There are many postal services elsewhere in the world, including the United Kingdom, Germany, Japan and the Netherlands that have privatized their services. Many have survived by getting into other lines of business, such as banking. But the results have been mixed at best. The UK just agreed to sell its service that had been public for nearly 500 years to a Czech billionaire, sparking an outcry.

Some who have argued for privatization have said they aren’t necessarily looking to get rid of the universal delivery service or to close post offices or some of the other steps looked at in the first Trump administration. They say they just want to see more behind-the-scenes work now being done by the Postal Service outsourced to the private sector. Even some of those who oppose privatization see value in that.

“There are large parts of what the postal service does that would benefit from more use of public-private partnerships,” said Plunkett. “Transportation, logistics and sorting, could all be done within existing workshare rules in a way that would do a lot to promote efficiency and better service.”

“But it’s not clear that’s what the White House is thinking,” he added.

The unions say there would be problems both for the public and postal workers from additional outsourcing, arguing that would be a “slippery slope” towards complete privatization.

“Initially it’ll be more subcontracting, that means fewer living wage jobs for the working class. It means less service to the people of the country. But eventually that is going to roll down to everything,” said Dimondstein.

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