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Post Apocalypse

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In November 2020, George White sent his mother a birthday card from where he lives in Ohio to her home in Virginia. The typical United States Postal Service (USPS) promise is to get first-class mail to most destinations within three days.

White—as the president of an Ohio-based greeting card company, Up With Paper, that makes heavy use of the postal service—suspected that an on-time delivery wasn’t in the cards.

To be on the safe side, he mailed his mom’s birthday card a week early. It got there a week late.

“That was a bummer for me,” says White, who serves as the president of the Greeting Card Association, a trade group. It was also a bummer for his industry. The value of greeting cards rests on timely delivery of products commemorating particular dates, be they birthdays, graduations, or holidays. Late delivery, White says, “can lead to less greeting cards being purchased and mailed. Because if they’re not going to get it in time, what’s the point?”

White was far from the only one to experience late arriving mail in 2020. In the final months of that year, with tens of millions of people quarantining at home, Americans sent and ordered an unprecedented number of holiday packages. E-commerce, which relies on shipping services to deliver goods to customers, had been growing rapidly even before the pandemic, but COVID-19 moved retail online at an even faster pace.

Complaining about the post office has long been a national pastime. Years of declining paper mail volumes, persistent fiscal deficits, and a logistics network not optimized for package delivery were all challenges that predated COVID-19. The pandemic made them much worse.

At the same time, a record number of Americans voted by mail in what would become one of the most hotly contested presidential elections in U.S. history. Critics wondered if the troubled agency would be able to handle the added volume created by the additional mailed ballots, while some Democrats worried that then–President Donald Trump might use the government-run post to steal the election.

The combination of preexisting retail trends, increased package volume spurred by stay-at-home workers, and high-stakes political gamesmanship surrounding mail-in voting pushed the postal service nearly to the point of collapse. By late December, only about a third of first-class mail was getting to its destination on time in major East Coast metros such as New York, Philadelphia, and Baltimore. Libertarians and other critics who have long warned about the inefficiencies of a government-run postal monopoly could at least feel some vindication when they found their mailboxes empty.

“In my experience of 18 years following the postal service, we had the most high-salience, bizarrest postal politics moment ever,” says Kevin Kosar, a resident scholar at the American Enterprise Institute.

The dual crises of the election and the pandemic are now fading, but this affords the troubled agency little breathing room. With short-term fires extinguished, the USPS now must ask itself some existential long-term questions. Is the post office’s traditional business model finally falling apart?

‘Every Day Is Christmas’

March 2020 sparked a big change in Kate Murray’s business, Quick Brown Fox, a one-woman Brooklyn-based greeting card company. The retail stores she normally sold bulk orders of cards to were all shut down. Meanwhile, customers were stuck inside with little to do but shop online.

“Suddenly people were home and people were buying,” says Murray. So she pivoted. Instead of larger shipments to businesses, she started filling individual, direct-to-consumer orders. To make up for the drop-off in wholesale cards, she started to push higher-price-point candles and wrapping paper.

Her changing business model meant changes in how she interacted with the USPS. Concerns about going to a physical post office meant she had more packages picked up at her front door. Suppliers, too, ended up shipping more directly to her. More candles and fewer cards meant more packages, less first-class mail.

For Murray, these shifts in her business all proved manageable. She says she was pleased with the postal service during the pandemic. It was likely much less pleased with her.

The postal service’s massive logistics network is made up of 644,000 people staffing around 34,000 post offices, plus a few hundred annexes, hubs, and processing and distribution centers. It was primarily designed to get high-margin “flat mail” to 161 million addresses across the country.

“For most of the U.S. Postal Service’s history, letters, cards, and magazines were its bread and butter,” notes a USPS Office of the Inspector General (OIG) report from September 2020. “Its delivery infrastructure was primarily designed with mail in mind—from the vehicles to the facilities to the mailboxes.”

That business model has been in steady decline for over a decade, with paper mail volumes falling 45 percent between 2007 and today. In fiscal year 2020 alone, they fell 11 percent. In an age of near-universal email access and paperless billing for every imaginable service, mail you can fit in an envelope has become increasingly irrelevant.

Thanks to the rising popularity of e-commerce, however, packages are in greater demand than ever. An October customer survey by the USPS OIG found that the number of respondents who ordered a product online at least once per month rose to 81 percent in 2020, up from 57 percent in 2019. The number of packages handled by the service rose from 6 billion in fiscal year 2019 to a little over 7 billion in fiscal year 2020, a 19 percent increase. This is causing serious problems for the USPS.

“Paper mail and boxes are not the same thing,” Kosar says. He pointed to congressional testimony from Louis DeJoy in March, in which the postmaster general said that your average USPS tractor-trailer could carry 500,000 pieces of first-class mail…or about 5,000 packages.

It’s also a crowded field given the existence of private parcel rivals like FedEx and UPS.

Meanwhile, people’s reticence to visit physical post offices during the last year meant more mail had to be collected and dropped off at individual residential addresses, often in dense urban areas—where constrained space makes pick-ups and deliveries more difficult—or rural locations that private shippers don’t serve.

The sheer space all these packages took up put an incredible amount of strain on the system that needed to collect, sort, and ship them. One common utterance among USPS employees during the first few months of the pandemic was “every day is Christmas.” It wasn’t meant to be a happy saying.

During the actual 2020 Christmas rush, a surge of 1.1 billion holiday packages enveloped USPS, producing scenes of logistical horror across the country.

At one post office in Cleveland, drivers waited upward of 12 hours to pick up or drop off packages, according to News5, the local ABC affiliate. “Don’t be using the post office right now,” a USPS employee told the Philadelphia Inquirer, “because we can’t deliver the mail.” According to CNN, one processing facility was receiving 250,000 packages a day in December—so many that it had to open a fourth annex just to store them all.

The flood of bulky holiday packages was always going to prove a challenge for an agency designed to sort and deliver envelopes. But that challenge was made substantially more difficult by the fact that the agency had also been tasked with facilitating a high-stakes presidential election.

The Myth of the Missing Blue Boxes

In August 2020, Twitter user Thomas Kennedy posted a picture of a number of blue USPS mail collection boxes wrapped in plastic and piled up on their sides behind a fence in what looked like a dump. “This is happening right before our eyes. They are sabotaging USPS to sabotage vote by mail,” he wrote.

In fact, the soon-to-go-viral image didn’t show discarded mailboxes, and it wasn’t taken at a dump. It showed mailboxes at a facility waiting to be refurbished. It nevertheless came at the perfect time to fuel paranoia that Trump, through his stooge DeJoy, was plotting to use the post office to steal the election.

In the days and weeks prior to that picture going viral, local news stories and social media had been filled with mostly accurate accounts of mailboxes being taken off the streets and sorting machines being decommissioned. These moves were part of cost-cutting operational changes being made by DeJoy, who took over as postmaster general in June 2020. They also reflected a long-running trend of USPS consolidating its mailboxes and facilities to reflect falling volumes of paper mail.

These run-of-the-mill changes, however, were happening at an unusual time: the 2020 election season, when partisan attitudes were running high and the country as a whole was gearing up—for the first time, thanks to the pandemic—for mass voting by mail. Adding fuel to the fire, both USPS officials and Trump made statements that gave the impression that the agency was either not up to the task of handling ballot mail or, alternatively, being deliberately sabotaged.

On the same day of Kennedy’s misleading viral tweet, for example, The Washington Post revealed that the Postal Service had in July sent 46 states letters warning that it couldn’t guarantee that all mail-in ballots requested or cast by state-set election deadlines could be delivered by USPS in time to be counted. During his daily pandemic press briefing two days prior, Trump had said that he would continue to oppose $25 billion in emergency funding for the USPS, without which the agency likely would not be able to ensure universal mail-in voting.

Days after Trump’s comments, the Postal Service announced it would stop removing mailboxes—an apparent attempt to tamp down the controversy. It didn’t work. House Speaker Nancy Pelosi (D–Calif.) and then–Senate Minority Leader Chuck Schumer (D–N.Y.) publicly demanded that Trump “immediately cease his assault on the Postal Service.” Reps. Ted Lieu (D–Calif.) and Hakeem Jeffries (D–N.Y.) asked the FBI to investigate whether the postmaster general had committed any actual crimes. And several Democratic state attorneys general filed a lawsuit to stop DeJoy’s operational changes.

An injunction granted in that suit by a U.S. district judge in Washington state restricted the Postal Service’s ability to make further changes in the run-up to the election. It also required that the USPS treat all election mail by first-class delivery standards.

In the end, worries that Trump would sabotage the election via the mail proved overblown. The movement of ballots and voter registration forms was one of the bright spots in the USPS’ performance during the pandemic: The agency managed to deliver 93.8 percent of election mail on time.

That was a better record than all other types of first-class mail, for which on-time delivery rates ranged from 91 percent for overnight mail to 78 percent for three-to-five-day deliveries last fall and winter. It was also an 11 percentage point improvement from its delivery of election mail during the 2018 midterms.

A USPS OIG report chalks up the agency’s success to “high-cost efforts such as extra transportation and overtime to improve delivery performance.” But the prioritization of ballots meant other types of mail ended up delayed, sometimes severely.

Late Edition

One byproduct of the lawsuit against DeJoy’s overhaul of USPS’ operations was a court order requiring the agency to release granular weekly data on its record delivering first-class mail on time. That data painted a bleak picture.

The Postal Service had given itself a performance goal of delivering about 95 percent of first-class mail to its destination on time in fiscal year 2020. Beginning in July, it had started to fall short of that goal, according to The New York Times parsing of USPS data. By December, only about a third of first-class mail was arriving on time on much of the East Coast.

A USPS quarterly performance report covering October through December 2020 found that on-time rates for package service were 80 percent, well below the agency’s 90 percent on-time goal for packages in fiscal year 2020. (Yearly performance targets for fiscal year 2021 have yet to be established.)

Faring even worse were periodicals. Their on-time performance dipped to 69 percent in the first quarter of fiscal year 2021, down 16 percentage points from last fiscal year and a solid 21 percentage points below last year’s on-time goal.

These national numbers mask a lot of regional variation. The post office in Seattle was able to get 82.29 percent of periodicals to their destinations on time during the week of December 26. The Western New York District managed an on-time rate of 1.63 percent that same week.

One printer tells Reason that 30 percent of its customers reported delayed deliveries of at least 10 days, and some had their materials arrive as much as 80 days late. Barcodes that were supposed to let the printer track orders routinely went unscanned, and inquiries to the USPS about missing shipments only returned boilerplate apologies about how the postal service was “experiencing delays.”

Weekly papers, in particular, make heavy use of the mail given the difficulties of keeping a dedicated delivery team around for just one day a week, says Brett Wesner of Wesner Publications, a publisher of 12 small-circulation weekly newspapers in Oklahoma, Texas, and New Mexico. The years leading up to the pandemic had already seen service standards decline for out-of-state and out-of-county deliveries, he says. The pandemic was disastrous across the board. Papers that were supposed to arrive in November 2020 didn’t show up until April in some cases. Other times, subscribers wouldn’t receive papers for several weeks in a row and then have them all show up at once.

Murray, the greeting card maker, was able to cope with worsening delivery times by giving customers longer delivery dates for their orders. No such option exists for mailed periodicals that are supposed to reach customers on a regular date.

Delayed newspaper delivery also caused problems with advertisers, which include local governments publishing required public notices and event promoters, says Wesner, who also chairs the board of the National Newspaper Association. “In some circumstances, papers got delivered after the event that was being advertised, so obviously these advertisers were not interested in paying for advertising after the event,” he says.

His company heavily relies on rural post offices, which were even more acutely affected by USPS staffing issues than were other locations. When employees at these branches had to “quarantine, or someone got COVID,” Wesner says, “they didn’t have 50 people to rely on. At one post office, we actually had the janitor running the front desk, because she was the only one with a key to the front office.”

Reason itself saw a significant uptick in subscriber complaints about delayed or undelivered issues, with some people reporting bundles of magazines addressed to several other subscribers arriving at their doors.

Back to the Black?

The new year has eased the immediate crisis. As of early March, the weekly on-time rate for first-class mail had reached 84 percent, up from a weekly low of 62 percent during the Christmas season last year. But nothing has been done to resolve the USPS’ longer-running issues.

Those include chronic deficits, a growing number of packages entering a system financially and logistically designed to handle traditional paper mail, and mounting unfunded retiree and health care benefits.

In March, DeJoy released a 10-year plan designed to put the agency in the black by 2024 through a mix of service cuts, rate hikes, and shifting of employee compensation costs from the USPS’ balance sheet onto taxpayers. (He also wants to open more package sorting annexes and to revamp the agency’s vehicle fleet to handle more parcels.)

Under the plan, the Postal Service would have mail sent cross-country on USPS-owned trucks instead of privately owned planes. That would save the agency money but lengthen delivery times.

At the same time, the plan calls for raising postage rates. In 2006, the last year the postal service made a profit, sending a letter cost 39 cents. Prices have ticked up almost every year since, including a 10 percent jump from 50 to 55 cents in 2019 (the largest price increase since 1991).

The postmaster general has thus far declined to say exactly how much he wants to raise rates this time around. His 10-year plan says the agency can claim $24 billion more in revenue from expanded package delivery, the introduction of new products, and “price changes.” Industry officials interviewed by The Washington Post predicted rate hikes of up to 9 percent.

The USPS has about $120 billion in unfunded retiree benefit obligations, including $50 billion in unfunded pension obligations and $70 billion in retiree health care benefits. Now the postmaster general is asking Congress to end the requirement that USPS “pre-fund” its pension and health benefits (meaning it saves current revenue to cover future retirees’ costs) and to start requiring retired postal workers to enroll in Medicare. Currently, they can choose to keep the private health coverage they had while employed by the USPS.

If the USPS stops putting money down today to cover tomorrow’s retiree benefits, there are obvious risks for both postal workers, whose pensions would be less secure, and taxpayers, who could be called on to cover the costs of these unfunded obligations whenever the bill comes due.

The plan has landed with a thud for big senders of traditional flat mail. “I have not seen a business model like his, that promises worse service for higher prices, succeed,” says Wesner.

USPS’ plan to shift its emphasis to parcel service also concerns Kosar. “Do we really want the Postal Service to compete increasingly with the private sector?” he asks. “We do have private companies that deliver parcels—lots of them.”

Dreams of Laissez Faire

Falling volumes of first-class mail and a growing package delivery market that’s already well-served by the private sector might lead some to ask whether we need a government-run postal service at all. Going back at least to the 19th century, the agency’s poor execution of its core mission has provoked complaints from customers for its slow service and high prices. Libertarians, too, have been at work on this issue for as long as we’ve been around.

The individualist anarchist Lysander Spooner, one of the earliest and most loquacious critics of a publicly run postal service, sought to set things right with his 1844 founding of a private postal competitor, the American Letter Mail Co. The U.S. government, none too thrilled with the downward pressure the company put on its monopoly prices, shut him down in 1851.

The company’s spirit nevertheless lives on in private package delivery services like FedEx and UPS, whose on-time rates were head-and-shoulders above USPS during the worst of the pandemic. (Part of the reason for this is that private carriers can hand off their hardest-to-deliver parcels to the USPS, which is legally required to serve every part of the country, even when it’s nowhere close to cost-effective to do so.)

Reason has been dreaming of a laissez faire postal system since its inception. A 1988 issue of the magazine explored how, and how quickly, we could turn the bloated, subsidized agency over to the free market before the fax machine destroyed it entirely. By 2009, Reason even suggested selling the USPS to Netflix, which could use its expertise shipping DVDs to customers’ doorsteps to cut down on persistent postal delays.

The unprecedented circumstances of the last year have exacerbated many of the post office’s problems. But Kosar says there’s still a lot of traditional mail that needs to be sent, from ballots to jury summons. And some rural parts of the country, he argues, are just not going to be adequately covered by a private company that has to turn a profit.

Voters themselves aren’t in a hurry to get rid of the agency, either. A survey by the USPS OIG found that 91 percent of respondents had a positive view of the Postal Service in 2020, an increase from previous years. The explicit inclusion of mail delivery in the U.S. Constitution, meanwhile, makes complete elimination even more difficult than it would be for other federal agencies (which history suggests are also not particularly easy to eliminate).

All of which means that most any vision for reform is likely to run into serious challenges. An overhaul intended to prioritize handling more packages would risk alienating the large customers most invested in the USPS’ flat mail services. Focusing on ever-declining paper mail would make the agency both less relevant to the public and more dependent on public subsidies. A host of countries not known for radical free market experiments, including the U.K., Germany, and the Netherlands, have either privatized their postal services or opened them up to private competition. But polling suggests trying something similar in the U.S. would be politically difficult.

Kosar argues it’s time for a rethinking of what we actually want from a government-run postal service. “We need to have a public conversation to get clear on what that would be,” he says. “We have to estimate the cost, and we have to figure out how to pay for it.”

But no matter which direction the Postal Service goes from here, the vision of an agency that provides a valuable service while sustaining itself without taxpayer subsidies appears doomed.

For more on the Postal Service, see “Postal Censorship and Surveillance: A Timeline” by Jesse Walker; “The USPS’ Semi-Secret Internet Surveillance Apparatus” by Elizabeth Nolan Brown; and “The Post Office Pension Ponzi Scheme” by Eric Boehm.



Source: https://reason.com/2021/07/10/post-apocalypse/


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