The U.S. Postal Service Needs Financial Protection

Even in crisis, exacerbated by COVID-19, there’s not likely to be new postal reform bill any time soon. So here we are now: the U.S. Postal Service needs financial protection.

COVID-19 may have frozen ad budgets, including direct mail, but the financial woes of the U.S. Postal Service have pre-dated the current crisis. Calls for postal reform to facilitate all types of fiscal fixes have gone unanswered, despite bipartisan support to get the job done. Huge Congressional mandates from 2006 to pre-fund healthcare costs for future retirees – which do not exist to any such extent in the private sector – are just one example of how politicking gets in the way of running USPS more efficiently.

On paper, the U.S. Postal Service should be holding its own. And it had been through the end of last year.

A Formidable Job of Management Couldn’t Predict a Crash

Mix and match, but it’s been managed. In 2010, First-Class Mail volume was 77.6 billion pieces. In 2019, it was 54.7 billion – a nearly 30% decline. Marketing Mail also declined, but less precipitously – from 81.8 billion pieces to 75.7 billion. Meanwhile, as direct-to-consumer (DTC) shopping has taken hold, parcel volume has doubled from 3.1 billion to 6.2 billion package deliveries, making the USPS truly the Greatest Carpool on Earth. (Happy Earth Day.)

And though there is mail volume decline, the “mail moment” remains vital, and delivery points have increased from 150.9 million in 2010 to 160 million in 2019. Against this expanse, the USPS has shed 93,000 jobs in 10 years, maintaining 497,000 positions in 2019.

Throughout all this, USPS operating revenue has increased to more than $71 billion, from $67 billion in 2010. Rate hikes have been predictable and better managed. So why the carnage?

Yes, it’s COVID-19. Mail volumes reportedly have dropped by 30% since the crisis began. Add to this the hands-tied effects of the Congressional mandates – and it’s no wonder the USPS Postmaster General is seeking a “we need cash” bailout. This time, will Congress – and The White House – answer the call? According to The Washington Post, as of Friday, April 24, President Trump stated he would not approve of emergency aid for the Postal Service if it didn’t raise prices for package delivery immediately.

We Can Debate the Amount – But Let’s Recognize These Heroes at Work

The U.S. Postal Service is a quasi-governmental operation that answers by U.S. Constitution to the American people – but is called upon to run as a business. And it indeed tries. Yet it can’t just set rates on its own, as everyone gets a voice in rate-making and operations, even competitors.

Even in crisis, exacerbated by COVID-19, there’s not likely to be new postal reform bill any time soon. So here we are now: the U.S. Postal Service needs financial protection.

It’s hard to blame the USPS, but that doesn’t stop President Trump from calling out sweetheart deals that don’t exist. Add to the cacophony those who wish to privatize – answer to shareholders instead of the public – and sparks fly. Postal labor interests, for one, are powerful – and so are marketing mail and parcel customers. No one wants to upend the letter carrier.

But a virus might just do that.

So as I put on my mask and gloves, and go to the mailbox as part of my daily heightened ritual, I retrieve my personally addressed parcels, flats and letters. I spray them with Lysol. I open and read each piece, and I recycle each piece when I’m done (Happy Earth Day again). And I wish Godspeed, and a few billion tax dollars, to all these postal heroes who are keeping American commerce every day in movement. We need you. America needs you. Thank you.

USPS Exigency Becomes a Political Toss – and a Punishing Farce

With the sole exception of Sen. Tammy Baldwin (D-WI) swinging for the United States Postal Service ratepayer (you and me), January 2014 was a dismal month for those who advocate direct mail in the marketing mix … and in February, I’m definitely looking for some love. Will we find it?

With the sole exception of Sen. Tammy Baldwin (D-WI) swinging for the United States Postal Service ratepayer (you and me), January 2014 was a dismal month for those who advocate direct mail in the marketing mix … and in February, I’m definitely looking for some love. Will we find it?

First, there was January 26 … the day new postal rates took effect, full-on. “The 6.0 percent postage increase—three times the rate of inflation—will not help the Postal Service shore up its financial base,” said Peggy Hudson, senior vice president, government affairs, Direct Marketing Association, part of a coalition which filed a court appeal to halt the exigency portion of the rate hike, 4.3 percent. “It will simply drive mail from the system, which harms the financial viability of both the Postal Service and its business customers. It is a lose-lose proposition.”

Then, there is an unpalatable compromise brewing in the Senate Homeland Security and Governmental Affairs Committee. (Compromise always deals with some distaste, or else it wouldn’t be a compromise.) On our behalf, Sen. Baldwin was attempting to strip “offensive” Section 301 from the legislation, which would have abandoned the inflation consumer-price-index peg for annual postal rate increases, and replace it with a new CPI+1 percent index—adding potentially 10-percent higher rates over a decade than would happen under existing law.

Last week, one of the primary sponsors of the current postal reform bill—Committee Chairman Sen. Tom Carper (D-DE)—offered a deal: Essentially, Carper would keep the CPI index mailers crave in place but, in return, the exigency (4.3 percent hike) would be included in the baseline for future annual hikes—thereby removing the 2-year limit on the exigency imposed by the Postal Regulatory Commission in its oversight of the rate hike and making the exigency permanent. Further, the PRC’s oversight role on postal rate changes would be kept intact—something the current language of the bill is attempting to strip. Sen. Baldwin asked for a mark-up delay, no doubt to consider the offer with her constituents.

What a farce: An exigency made permanent? Now that’s a paradox—and an audacious one at that. We can see the Postal Service getting much of the would-be CPI+1 back over the next 10 years, assuming there’s no more crises forcing USPS management, the mailing community or both clamoring for another postal reform bill within 10 years’ time.

Is keeping the CPI index so important to us now that we’ll hold our noses on this compromise? A mark-up on the bill—a Committee vote—has been moved to February 6 As of January 31, DMA is still asking its members to weigh in here to get Section 301 tossed.

There is a disturbing pattern here. The Postal Service is our business partner, for sure—and there’s nearly universal support for that partnership across the board. But if it (USPS management, USPS labor, and the both of them) keeps fighting its customers with higher postal rates, and running to Congress with mock exigencies or new rate-setting formulae that undermine fiscal discipline, then the financial reality of that partnership gets sadder by the day. Lose-lose ignites a dying cycle.

Mailers have suffered through recession. Marketers deal with digital migration. They have had to endure cost-cutting, price-cutting and layoffs to make it to 2014—and they’ve relied on invention to survive and thrive. What they have not been able to do is take their customers for granted, by passing along hardships in higher prices.

“Business-like” USPS policy and operations remain marred in politics—exigency is another sadly perfect example.

Keep the CPI Postal Rate Cap Alive!

There are no guarantees when “grand” budget and funding bills make their way through Congress … there’s always a chance some horse-trading will be tacked on that undermines the interests of and harms the direct marketing community. That’s why I was more than an interested bystander when a federal budget deal was announced last week that seeks to keep the government funded without another costly shutdown

There are no guarantees when “grand” budget and funding bills make their way through Congress … there’s always a chance some horse-trading will be tacked on that undermines the interests of and harms the direct marketing community. That’s why I was more than an interested bystander when a federal budget deal was announced last week that seeks to keep the government funded without another costly shutdown.

There’s nothing in this bill (so far) that is nefarious to marketers (a vote is still needed in the Senate). In the whole of the budget bill, some fiscal conservatives are not happy—prompt spending controls have been punted, and deficit reductions have been kicked down the road, a reflection of our still-weak economy being the rationale.

But it’s also a reflection of what’s dysfunctional in Washington: A seemingly ever-present readiness and willingness to punt fiscal discipline in more matters than just the federal budget. At least the three-year pattern of budget shutdowns and debt ceilings may be diverted. At least we can hope.

Now to postal reform … which was not part of the budget bill.

We need postal reform legislation—both political parties and nearly all postal stakeholders agree on this, but there’s devil in details in a current Senate proposal to move another breakthrough piece of legislation forward.

The reason for postal reform’s urgency, however, has nothing to do with the annual rate cap on postage increases that is now part of federal law.

Yet this most precious centerpiece for ratepayers of the 2006 postal reform act—the Consumer Price Index-Urban annual rate cap on postage hikes—is dispensed in the Carper-Coburn Postal Reform Act of 2013 (S. 1486) bill now before the Senate Homeland and Governmental Affairs Committee. Crucially for us, Senator Tammy Baldwin (D-WI) is leading a bipartisan effort to remove from the bill Section 301 (a Section which would eliminate this rate cap for market-dominant classes, among them First-Class Mail and Standard Mail). If she is successful, the vital rate cap would be preserved. A markup for the bill overall in Committee is scheduled for this coming Tuesday (Dec. 18), so there is still time to voice support for Sen. Baldwin’s effort to amend the legislation and save the cap.

What is urgent, of course, is relief from 2006 Congressional mandates to pre-fund retiree health benefits at a magnitude that was (and still is) wholly unsustainable and has proven to be unrealistic. One might say how ironic it is to have a column praising fiscal discipline bemoan a pre-funding mandate, but this type of mandate is unprecedented, unwarranted and blind to financial facts. The CPI cap, on the other hand, has been an extremely useful tool to USPS and its customers and, arguably, an important driver of USPS management efforts to “right size” USPS infrastructure to today’s mail (and marketing) realities.

Fiscal discipline matters to the private sector, and to all U.S. citizens in our own households and our business affairs. It is shocking (to a layperson, if not Beltway insiders) that such discipline means little to too many policymakers. Price caps are a common-sense, and extremely demonstrable, method for assuring predictable increments in postage hikes which serves to aid businesses and nonprofit organizations in their marketing and media planning. Take these caps away, and we’re back to uncertainty, costs rising unchecked and diverted dollars from direct mail media spending.

Stay tuned to industry organization efforts to see postal reform through—but with the all-important CPI rate cap intact. I’m hopeful Sen. Baldwin has a great week, and so do we.

5 Hopes for the USPS New Year

October 1 marked the New Year—that is, the 2014 fiscal year of the U.S. Postal Service. But it’s the same old (sad) song, delivered by a dysfunctional Congress. Thanks to our elected Senators and Representatives, we not only have to endure not just another year of postponed reforms, but also an exigent rate case on top of a regular Consumer Price Index-capped rate hike slated for January.

October 1 marked the New Year—that is, the 2014 fiscal year of the U.S. Postal Service.

But it’s the same old (sad) song, delivered by a dysfunctional Congress. Thanks to our elected Senators and Representatives, we not only have to endure not just another year of postponed reforms, waiting longer still for a reprieve from mandates of Congress from years past, but also an exigent rate case on top of a regular Consumer Price Index-capped rate hike slated for January.

For Standard Mail, that means:

  • Letter Mailings CPI-capped rate increase of 1.55%
    But now with the Combined CPI and Exigency, that increase jumps to 6.09%
  • Flat Mailings CPI-Capped Impact 1.66%
    But now with the Combined CPI and Exigency, that increase rises to 6.32%

As Charley Howard of Harte-Hanks correctly surmised, the only exigency here is “continued inaction by Congress.”

What are the chances?

  1. Congress will get its act together and pass a new formula for prefunding retiree healthcare costs that are more in line with … say, sanity?
  2. Such a reform bill will pass—and leave in place the most hard-fought, cherished centerpiece of the 2006 postal reform bill—the CPI-index cap?
  3. That USPS current cost-cutting discipline—and network consolidations—will continue as management had planned, with “right sizing” the infrastructure achieving its intelligent end?
  4. That universal delivery remains intact—in six days, or five—take your pick?
  5. That certainty and predictability is restored to the Postal Service’s financial picture—providing the assurances marketers crave?

Let’s put it this way—if the “right” postal reform gets deep-sixed (again) in the coming election year, then will we pass the point of no return, with marketers taking their integrated marketing dollars elsewhere? If postal reform passes, but the most important mechanism of fiscal discipline—CPI caps—are undermined, or worse removed altogether, will we pass that same point?

By this time a year from now, will the crises be solved—or compounded? The clock keeps ticking.

Look Who’s Arguing for Higher Postage

It was a busy past week for postal reform followers, as the Senate Homeland Security and Governmental Oversight Committee convened a hearing on a bipartisan measure to implement various Postal reforms. Perhaps the most contentious part of the Senate’s current bipartisan proposal was the centerpiece of the 2006 Postal Accountability and Enhancement Act: The annual rate cap on postage increases tied to the Consumer Price Index.

Well, it was a busy past week for postal reform followers, as the Senate Homeland Security and Governmental Oversight Committee convened a hearing on a bipartisan measure to implement various reforms that would enable billions in necessary U.S. Postal Service (USPS) savings. The House Oversight and Government Reform Committee already passed a postal reform measure earlier this year—without one vote of support from Democrats. Whatever bipartisan effort the Senate can put forward matters greatly, since votes of majority Democrats are needed in the Senate (and eventually the House) for passage, and also to garner White House support.

Perhaps the most contentious part of the Senate’s current bipartisan proposal, based on comments filed and testimonies given, was not five-day delivery or relief from funding mandates of pre-retirement of health benefits (though both of these have their own list of supporters and detractors), but rather the centerpiece of the now-in-effect 2006 postal reform law (Postal Accountability and Enhancement Act): The annual rate cap on postage increases tied to the Consumer Price Index.

Marketing mailers—USPS customers—insist that such a cap remaining in place.

It is this measure of fiscal discipline that acts as the single most important indicator to mailers that the Postal Service will operate within its means, and mailers will have predictable increases in postage that can be budgeted for with a high degree of certainty.

Uncertainty, on the other hand, is the specter that advertising mailers most fear—and one that channels ad dollars most formidably to other media. The 2007 rate hike (the last rate hike ahead of the 2006 law’s implementation) clearly showed what exorbitant and unexpected increases can do, such as the case of catalogers in that year.

Now we have postal unions (predictably), USPS management and the PMG (less predictably), the USPS Inspector General, and even a Senate Republican (now that’s a surprise) arguing for an emergency rate hike (a “last resort” allowed under the current 2006 law, if and when exigency is proven) or, as the Senate bipartisan bill would allow, the removal of the CPI cap altogether as the USPS looks to $20 billion in overall relief (much of which it has achieved already in its own cost-cutting to date) to balance the books.

Well, I have my own feelings about the negative effects of exigency—which I shared recently in a post. (I’m not an economist here, just a student of history.)

Yet, to do away with the CPI price cap stricture? That would make disappear the crowning achievement of the 2006 law that USPS customers fought so hard for. Getting rid of the cap means exigency, in practice, could be a permanent fixture in postage increases—and mailer flight to digital and other channels will be the “giant sucking sound” as uncertainty reigns again (my apologies to Ross Perot). As we know from the past: USPS management goodwill, Postal Regulatory Commission oversight, and mailers’ testimonies of warning in rate case hearings are not enough to stop punishing and unpredictable rate hikes. A law that keeps cost increases in postage within CPI, however, largely has halted such malaise.

The losses that the Postal Service is experiencing today have to do with Congressional mandates, not nimble efforts of USPS management and workforce to right-size the Postal Service and its infrastructure to USPS mail volume trends.

Mailers: Stay tuned—and be prepared to mobilize.

A Possible USPS ‘Exigent’ Rate Increase – Playing Politics on the Backs of Ratepayers?

There are rumors that the USPS may request another exigent rate increase. Why are we going through this again? Advertisers, marketers and the business community love certainty—and have a strong distaste for uncertainty. When one considers the financial situation of the U.S. Postal Service during the past couple of years, it’s enough to keep mailers at bay in planning their ad budgets, and keep them from devoting much to direct mail in the overall media mix.

There are rumors that the USPS may request another exigent rate increase. Why are we going through this again?

Advertisers, marketers and the business community love certainty—and have a strong distaste for uncertainty. When one considers the financial situation of the U.S. Postal Service during the past couple of years—from uncertain prospects of postal reform legislative efforts, to what any emerging postal reform effort might contain or not contain in cost savings, to short-term financial viability and this past year’s default—it’s enough to keep mailers at bay in planning their ad budgets, and keep them from devoting much to direct mail in the overall media mix.

Tying postage increases to the consumer price index and giving USPS the latitude to implement such increases annually (as is now the law) has helped give the business community certainty about postage costs, so they can plan and budget accordingly.

Allowing an “exigent” or additional postage increase to happen when there are extraordinary circumstances (as is also now the law) was intended as a “last resort” to make Postal Service finances whole. Let’s be honest: An extraordinary circumstance happens when there is an absence of postal reform efforts moving forward, and, possibly, when there is an absence of U.S. economic growth and an exhaustion of wise cost containment initiatives inside the Postal Service. All three of these latter scenarios don’t exist—so why even consider an exigent increase?

It’s a bad idea. First, USPS customers would detest such a rate hike, as they do. It’s an uncertainty.

Recently the Direct Marketing Association (DMA) in its Direct from Washington newsletter reported:

With reason to believe that the United States Postal Service (USPS) Board of Governors may vote on a potential exigency rate increase in early September, the Affordable Mail Alliance (AMA), including the DMA, sent a letter to the Governors voicing their opposition of such an increase. The letter expressed concern about the negative effects that would come with such an increase, especially for the mailing industry and its suppliers. The letter recognized the continued financial struggles that confront USPS, but also stated that an exigent rate increase is not the solution to those struggles. With recent progress toward comprehensive postal reform in Congress, along with steady improvement in the USPS balance sheet, the letter stated that an exigency filing ‘at this point would be premature.’ The letter additionally requested a meeting with the Board to discuss the issues at hand and to ensure that USPS is fully informed before making a decision of such great magnitude.

Second, if the architects of an exigent rate hike think that such a case is what is needed to convince lawmakers that postal finances are indeed a mess, and that a reform law—now in discussion—is desperately needed to fix them, then how dare play politics on the backs of ratepayers? An exigent rate hike is unlikely to move best-case legislation forward (and may even help move a bad bill, from customers’ perspective) and will saddle mailers with even higher costs than budgeted. Thus, there would be more uncertainty and more mail dollars flowing elsewhere in advertising.

As the Affordable Mail Alliance contends, any exigency scenarios are at best premature and, might I add, most likely non-existent. So USPS, please listen to your customers and just don’t go there.

Postal Delivery: Which Will It Be—5 Days or 6 Days?

I just had a great exchange with my letter carrier while at my mailbox today. Of course, I brought up the likelihood of five-day delivery come August, to which she gave a candid response, “Well, we’ve been losing money.” That’s why it’s easy to be indignant when some members of Congress, perhaps predictably, jumped onto the current appropriations bill with mandates for six-day delivery. Yet, one has to ask, where are the means for real relief from some of the costliest demands of the 2006 postal reform law?

I just had a great exchange with my letter carrier (as I sometimes do) while at my mailbox today, and I wonder how many times a day my carrier is interrupted in her work, as I interrupted her, to politely chit-chat. Of course, I brought up the likelihood of five-day delivery come August, to which she gave a candid response, “Well, we’ve been losing money.”

Most Americans—and maybe even some carriers—don’t know the full story—or any story—about how the United States Postal Service endures pre-funding retirement benefit mandates from Congress, as well as other cost-drivers that have nothing to do with the digital age, electronic bill payments and multichannel communication trends. Nor do they know that both The White House and Congress spend these mandated monies on their own programs, even as the federal deficit spirals.

That’s why it’s easy to be indignant when some members of Congress, perhaps predictably, jumped onto the current appropriations bill (a continuing resolution to fund the government beyond March 27) with mandates for six-day delivery. Yet, one has to ask, where are the means for real relief from some of the costliest demands of the 2006 postal reform law? Making the Postal Service stick with Saturday delivery isn’t the action we need Congress to take.

Is it really enough, or correct, to just counter USPS management efforts to cut costs and right-size the network? Why not delve deeper into the ills that Congress and the Administration—both parties involved here—have heaped onto the Postal Service’s bottom line? Why not revisit real postal reform? How many more years must the Postal Service get squeezed, and default on payments, before Congress and the Obama (or next) Administration take seriously its cause, its future, its sustainability?

Late last month, National Public Radio discussed, in a piece regarding postal services around the globe, how these services are coping with lower demand of an increasingly electronic society: http://www.npr.org/templates/story/story.php?storyId=172932914

It’s funny how much of “Socialist” Europe already has privatized its posts (not that citizens or businesses are the better for it). On the other hand, it’s very serious to say our quasi-public U.S. Postal Service still runs the most efficient ship of all, universal delivery at a fair price, despite its tethers to political whims …

… and despite my “stealing” of expensive carrier street time! five-day or six-day delivery is a concern for many mailers—but it’s really not the most important postal operations issue that needs to be addressed.