When was usps privatized

But the USPS is a public good that must be protected. On Nov. This election, unlike any in the U. To date, the Trump administration has demonstrated no ability to exercise a national strategy to contain the virus, and we cannot expect it will do so by November.

Accordingly, we must provide as many safe, secure, and public vehicles to participate in democracy as possible. In , Gov. Unlike with absentee ballots, voters no longer need a reason to choose vote-by-mail.

It is a right afforded to all eligible Pennsylvanians — a right that can only be effectively exercised with a viable USPS. In Philadelphia alone, I have received numerous constituent calls reporting their mail is no longer arriving on a daily basis — in some cases down to once a week. These are not just localized trends — such stories are rising from around the nation.

Millions of Americans rely upon the Postal Service to receive life-sustaining medications. So long as lockdowns or restrictions are necessary, many other essential household items will only reach people if the Postal Service is functional. The USPS is facing an unprecedented parcel volume, and it is unreasonable to expect that volume can be met in a timely way by private carriers alone.

The ability to get your mail simply should not be a function of how much you make or where you live. Privatization would also disregard the hardworking women and men who make the mail system go. Their jobs, benefits, and the service equity they provide will all be endangered. USPS: Unhinged liberals are trying to scare people with post office conspiracy theory. There is a sadness and frustration among the long-time workers as we watch changes being implemented that will not work.

The people who actually know the work are not consulted. After Postmaster General Louis DeJoy took office in June , three or four of the sorting machines in my facility were removed.

We were told the machines were outdated, but they were still used every day. Nominees for the U. Postal Service Board of Governors seem to almost always come from the business community, without representatives of the general public such as AARP, consumer groups and nonprofits, or family farms. The USPS has a universal service obligation to deliver to every address in the country.

The USPS is not a purely private business ; it is a public service, like a library or fire department. If you try to run it otherwise, then the real needs of the general public get forgotten. How long have you had to wait for service at your retail post office station? Another challenge facing the Postal Service is its limited ability to raise postage rates in response to declining volume of paper mail. The price cap has generally been binding, though postage rates were temporarily raised above inflation in the wake of the Great Recession.

After a year review of inflation-indexing, the Commission asked for more flexibility to increase rates, but the proposed changes have yet to be approved PRC There is no reason to expect the price of postage to increase in lockstep with inflation. The CPI is a weighted average of price increases for a range of goods and services, with weights based on how much the average consumer spends on each category. Most prices rise either more slowly or more quickly than the index at any given time, with flat or declining costs in apparel and computing for example partly offsetting the rapidly rising costs of medical care and college tuition.

A service with high fixed costs and declining volume will generally have faster-than-average price increases. First-class and marketing mail volume have declined as people have switched to other forms of communication and methods of bill-paying, even while the number of mailing addresses has continued to climb.

Because of this and other factors that a postal service cannot control, most countries do not cap postage rate increases without some wiggle room USPS OIG a. Due in part to the U.

The Postal Service has partly made up for the decline in letter mail with an increase in parcel delivery. Though some of the shift from the market-dominant to the competitive category reflects reclassification—commercial lightweight parcels, for example, were switched from market-dominant to competitive Hutkins —it is largely due to electronic communication replacing some forms of paper mail as well as e-commerce replacing brick-and-mortar stores.

It is worth noting, however, that while some types of paper mail are on the decline due to electronic bill paying, for example; see USPS OIG f , marketing mail has expanded—as has the clout of the bulk mail industry. Revenue per letter or parcel handled has also fallen as the Postal Service has engaged in more outsourcing and specialization.

The Postal Service offers discounts for mail that is processed or transported closer to its destination. As a result, mail volume is not a consistent measure of the amount of work being performed in-house by the Postal Service. The size and weight of parcels, delivery time, and distance traveled are also not captured by simple volume measures.

In combination with declining mail volume, fissuring and other factors have caused Postal Service revenue to drop by a quarter since despite the rapid increase in parcel volume. Parcel delivery and other competitive services are regulated under the PAEA, though the Postal Service has more flexibility in setting rates for these services than for first-class and bulk mail.

Left to its own devices, the Postal Service might opt for lower prices to increase revenue from some competitive services if demand for these services is price sensitive. On average, however, package delivery and other competitive services contribute significantly more toward overhead costs than the minimum required.

Not surprisingly, corporations lobby to tighten or loosen constraints on the Postal Service in ways favorable to their business models. This often puts Postal Service competitors and customers at odds with each other, as competitors try to raise Postal Service costs and prices and customers try to lower them.

The two groups are also at odds in lobbying for or against changes to delivery standards, such as ending Saturday delivery. Complicating matters, alliances shift as customers such as Amazon are also increasingly competitors, and competitors such as UPS are also increasingly customers.

Special interest angles are not always self-evident. UPS and other delivery companies have long accused the Postal Service of using its mail monopoly to cross-subsidize its package delivery business, a charge that has repeatedly been found to lack merit by the Postal Regulatory Commission. Shifting interests and alliances further complicate the picture.

Postage and shipping rates are not the only prices under contention. The Postal Regulatory Commission also regulates prices and discounts for mail-processing and related industries, such as commissions paid to postage vendors and workshare discounts.

Some Postal Service leaders have actively supported these efforts. In , Postmaster General Anthony Frank established a joint worksharing task force with industry members representing mass mailers and mail service providers National Postal Museum n.

The task force led to changes that incentivized companies to do more of the work previously done by the post office—a form of back-door privatization. It is a mistake to think of privatization as an all-or-nothing proposition. Privatization of government functions can occur through divestment, contracting out of tasks, or attrition. It can occur gradually or suddenly. The German government, for example, sold its postal service to the private sector in stages, an example that served as a model for a Trump administration task force Task Force Bush sought to divert a portion of Social Security contributions into privately managed investment accounts.

While overt attempts to privatize popular programs such as the U. Postal Service and Social Security have met with fierce resistance, back-door privatization achieved by hobbling government services and encouraging outsourcing to the private sector has occurred with less public awareness and often with bipartisan support. Outsourcing sometimes takes the form of direct contracting out of Postal Service tasks, despite strong resistance from postal unions.

Unions have won important battles in this ongoing war, blocking attempts to expand the use of contracted delivery service carriers on specified routes and an effort by office supply store Staples to open postal counters Kosar ; Vail Often, however, outsourcing takes the less visible form of discounts that incentivize companies to perform tasks that would otherwise be performed by the Postal Service.

Companies receiving these workshare discounts may perform the work themselves or hire third-party contractors to do it. From a purely economic standpoint, it matters little whether the Postal Service is directly paying contractors to transport mail, say, or offering discounts for mail that has been transported closer to its destination. However, there are legal and other implications of outsourcing that takes the form of customer discounts. Outsourcing has grown rapidly since worksharing discounts were first introduced in the late s.

Many of these corporations are military contractors and others adept at using past employment experience and contacts at government agencies to profit from government outsourcing. Safeguards against conflicts of interest have proven ineffective. The Postal Service Board has long been dominated by corporate executives. However, its members are not supposed to have a direct financial interest in the mailing industry a rule the current postmaster general appeared to be violating before belatedly selling his interest in his former employer; see Cohen and Durkee Postal Service unions have tried to make industry-dominated advisory bodies more inclusive and transparent, with little success.

Even if it does not benefit the Postal Service, is outsourcing efficient from a societal point of view? Some division of labor in the mailing industry, such as the Postal Service offering last-mile delivery to other shippers, takes advantage of underused capacity and economies of scale.

This is efficient and clearly benefits consumers, though regulatory oversight is required to ensure that large companies such as Amazon do not unduly benefit. Similarly, presorting and bar-coding addresses before mail is printed and dropped off is more efficient than doing it after the fact.

Much outsourcing, however, is driven by differences in hourly labor costs rather than productivity. Low-wage companies engaged in mail processing, transportation, and related tasks generally have lower labor productivity than the Postal Service and other unionized employers because they rely on a less skilled and more transient workforce and have less incentive to invest in training or technology. Outsourcing creates administrative and other headaches for the Postal Service.

The inspector general and others have noted that even if cost savings are rebated on average to companies, discounts are difficult to price correctly and are often more or less than savings achieved, distorting incentives. Quality control is also an issue. Outsourcing incentivizes what economists call rent-seeking behavior by corporations—effort expended on gaming the system rather than engaging in productive activities. If the Postal Service does not directly benefit from outsourcing tasks, who does?

Outsourcing to low-wage companies means corporate shareholders benefit at the expense of workers. And whether bulk mailers perform the work themselves or use mail service providers, they benefit from lower costs. The extent to which these cost savings are passed on to consumers, however, depends on the competitiveness of the industry and the sensitivity of consumer demand to price changes. Since the mailing industry is increasingly concentrated, much of the benefit accrues to corporate shareholders, not consumers, especially if these companies negotiate preferential rates at the expense of other mail customers Ryan In any case, the benefit to consumers of marketing mail is indirect, since much of it is designed to capture market share without necessarily leading to price or quality improvements.

Competitive pressure that normally leads to lower consumer prices is also blunted by the structure of outsourcing discounts. As a result, work may be profitably performed by any company with lower costs than the Postal Service, not necessarily the most efficient company.

The apportionment of fixed costs is another contested area, with UPS and others arguing that the Postal Service is engaging in unfair competition by subsidizing parcel delivery and other competitive services. While the hollowing out of the Postal Service through workshare discounts has happened under the radar, there has been a heated public debate around the pricing of competitive services. Following the passage of the PAEA, which distinguished between market-dominant and competitive services, the Postal Regulatory Commission required that the price of competitive services include at least 5.

In practice, the institutional cost contribution requirement sets a price floor for competitive products, but prices are often significantly above this floor. The Postal Service sets rates above the floor when this helps its bottom line—that is, when the negative effect of reduced demand is more than offset by the positive effect of a higher price. The issue worth debating is not whether low Postal Service shipping rates hurt industry profits, but whether high shipping rates serve the public interest.

In and again in , Trump accused Amazon publicly of having a sweetheart deal with the Postal Service DePillis ; Trump , He also reportedly lobbied the postmaster general privately Paletta and Dawsey According to USPS financial disclosures, Amazon and two other unnamed customers one of them presumed to be eBay accounted for 8.

As Amazon expands its own delivery network, its arrangements with the Postal Service may matter less to UPS and FedEx than the fact that the company that already dominates e-commerce is trying to do the same for delivery Cheng Not satisfied by the recent increase in the institutional cost contribution requirement, Trump demanded that the Postal Service quadruple what it charges Amazon for last-mile delivery as a condition of receiving pandemic relief.

According to Barro, the Citigroup brief also relies on UPS-funded research that includes legacy costs associated with past employment in measures that should only include current costs Neels Postal Regulatory Commission. The Postal Service makes money on this mutually beneficial service since it delivers to all homes and businesses regardless and the cost of delivering an extra package is less than the Postal Service charges for these deliveries.

Meanwhile, it would cost UPS, FedEx, and Amazon more to do last-mile delivery of a package if they had to make a special trip to do so. The challenge in determining a fair price for Amazon and other large e-commerce, shipping, and processing companies is that there is not a textbook competitive market on either side of the transaction. There are network fixed costs in delivery services that give established actors an advantage against would-be competitors, which is why Amazon, UPS, and FedEx should be regulated as quasi-monopolies and why we should take with a grain of salt suggestions that the Postal Service, a monopoly that is heavily regulated, is not nimble enough to be competitive Slentz and McCann Economists model situations like this using game theory, as opposed to pinpointing a single competitive price at the intersection of supply and demand curves USPS OIG b.

For example, shippers like Amazon can build out their own delivery networks. In such circumstances, raising rates could benefit the Postal Service in the short run but hurt it in the long run by incentivizing Amazon to expand its delivery network, especially in high-density areas Premack Companies that stand to gain by hobbling or shrinking the Postal Service support pro-privatization think tanks.

Think tank veterans active in these efforts have served in, or acted as outside advisors to, Republican administrations. The Cato Institute, the Heritage Foundation, and the Reason Foundation are among the libertarian and conservative think tanks that have pushed to privatize the post office and other government entities.

Smith served on the board of the Cato Institute, which has spent decades pushing for Postal Service privatization Smith ; Hudgins ; Edwards Ferrara and Stuart M. Butler, were also architects of a high-profile effort to privatize Social Security Ferrara , ; Butler ; Butler and Germanis Another proponent, Robert Poole of the libertarian Reason Foundation, encouraged President Reagan to pursue privatization of the post office and other federal agencies, which led to the appointment of a privatization commission Poole Centrist think tanks have also weighed in.

Robert J. Shapiro, a Clinton administration veteran and author of a UPS-funded report claiming that the Postal Service had an unfair advantage over competitors Shapiro , participated in a panel discussion at the Brookings Institution Brookings c , which received funding from UPS Brookings a. Pitney Bowes was an early supporter of privatization efforts. Walker, a long-standing supporter of privatization GAO ; Walker Like some earlier Republican administrations, the Trump administration flirted with overt privatization.

Currently, unlike its rivals, the Postal Service is not allowed to engage in lobbying or make political donations—but a privatized postal service could Fisch ; Jacobson It also suggested offloading accrued pension liabilities onto taxpayers to make the Postal Service a more appealing target for would-be buyers. In short, the report did little to hide the fact that privatization would lead to a massive transfer of wealth from rural residents, small customers, taxpayers, and workers to corporate shareholders.

That task force, headed by Treasury Secretary Steven Mnuchin, called for stripping postal employees of their right to collectively bargain over pay and benefits while preserving a role for a downsized public postal service Task Force Whether the task force was more politically realistic or more cagey about privatization than the authors of the OMB report is an open question.

The administration may have become aware that overt privatization faced serious opposition, even from segments of the Republican Party base. Echoing libertarian arguments long used to promote the privatization of government functions, the task force framed the historical argument for a government postal service as stemming from its resemblance to a public good—a term economists and political scientists use to describe goods or services whose benefits cannot be limited to those willing to pay for them.

Even doctrinaire libertarians accept that lighthouses and armies should be funded by taxpayers for this reason, but they allow few if any other rationales for government provision of goods and services.

The task force argued that the Postal Service once resembled a public good, but that the rise of internet communications had relegated it to a safety net role. Aside from the highly debatable claim that a delivery network operated as a public service is less important in the age of e-commerce, framing the question around whether the Postal Service is or is not a public good makes little sense since the Postal Service is not funded by taxpayers.

The Postal Service does, however, have features of a natural monopoly with positive externalities, similar to other public or regulated utilities. A natural monopoly means that an established postal network can fend off competitors due to the fixed cost of building the network and network effects that make a service more valuable and cheaper to operate the more people who use it.

In the postal context, a private service left to its own devices will reduce or stop offering services in higher-cost areas, especially rural and poor regions of the country. While the task force claimed its proposed business model would not disadvantage rural residents, it defined this narrowly as maintaining uniform postage rates, while suggesting service reductions for rural customers, including closing post offices and reducing access points by clustering mailboxes.

In short, while you can make an argument for replacing a government postal service with a regulated private monopoly, the advantage of either option depends on the relative effectiveness of a government provider or regulator.

The new postmaster general was a controversial pick. His candidacy was promoted by Robert M. The other board member who resigned, Vice Chair David C. DeJoy is no friend to workers. A Cornell University analysis of the mailing industry commissioned by the American Postal Workers Union in Hickey painted a scathing portrait of New Breed Logistics not simply as a company that actively opposed unionization efforts—hardly uncommon in the United States—but as one whose central business model was encouraging unionized companies and government agencies to outsource their supply chain management to nonunion New Breed.

The Cornell study recounts the lengths DeJoy went to in order to achieve this. When New Breed took over a contract for a container facility on an Army base in California, it refused to hire the 12 unionized employees, instead conducting a secret hiring process offsite.

Since this is illegal, the company falsely claimed that the former employees had not applied for the jobs. The National Labor Relations Board ruled that New Breed had acted with anti-union animus and pursued a rare motion for injunctive relief, which New Breed tried to challenge all the way to the Supreme Court.

More recently, a series of New York Times articles reported on unsafe working conditions and charges of unfair labor practices in warehouses managed by XPO, the company that bought New Breed in Silver-Greenberg and Kitroeff ; Kitroeff New Breed was also cited for retaliating against workers who had filed sexual harassment complaints. As the Postal Service is under pressure to save costs by degrading middle-class jobs, union-busting and health hazards in this sector are serious causes for concern.

DeJoy has wasted no time making changes that sacrifice service with directives banning late trips and extra trips to deliver late items Bogage a. These are presented as cost-saving measures but smack of sabotage, since on-time delivery is a major selling point for the Postal Service and its competitors. The Postal Service is very popular, especially with rural Americans. Republican-controlled states have been slow to expand Medicaid under the Affordable Care Act, forgoing billions in federal dollars in addition to harming the physical and financial well-being of families in these states.

With increased polarization and sorting of districts and states into Republican and Democratic strongholds, Republican incumbents often face more danger from primary challengers than from opponents in general elections, making them reluctant to provoke the ire of more ideological voters and big-money donors.

Nevertheless, the fact that 26 House Republicans recently broke ranks to support pandemic aid to the Postal Service reflects its broad popularity Fandos and Cochrane But this presents political risks, both in terms of being blamed for deteriorating public services and because state and local government cutbacks further damage an economy already suffering from insufficient demand for goods and services Tahmincioglu Big-money donors also tend to be antagonistic to public-sector unions, including the four that represent rank-and-file postal workers Pilkington In addition to resisting pay cuts, unions are often the most effective champions of public services, and this has certainly been true of postal unions.

But while some conservatives do not like government in the abstract, most voters like programs they have direct experience with, including those the ideologues are most eager to eliminate or radically transform, such as Social Security, public schools, and the Postal Service. Even the much-maligned Affordable Care Act is increasingly liked by voters, which helps explain why President Trump and other Republicans have tried to claim credit for its benefits while quietly trying to kill it in the courts Sullivan ; Rizzo This may have been the primary goal all along.

There are parallels with Social Security. While President George W. In the case of the Postal Service, overt privatization attempts have never gone beyond an exploratory phase. Nevertheless, the hollowing out of the Postal Service has proceeded apace, mostly a result of workshare discounts offered to bulk mailers and third-party service providers.

The PAEA sped up back-door privatization. Its onerous requirements spurred the Postal Service to cut post office hours, close distribution centers, and outsource more of its functions Christensen, Francis, and Hatch The Postal Service also came under increased pressure to move to five-day-a-week delivery even as e-commerce boomed and customers became accustomed to faster service Christensen Congress has left the Postal Service to wither on the vine. The following year, then—Postmaster General Megan Brennan told Congress that no amount of cost-cutting and defaulting on contributions to employee benefit plans would balance the books given the fundamental imbalance between costs fixed by law and statutory constraints on revenue-generating activities imposed by Congress Brennan The incoming Biden administration will have its hands full repairing the damage inflicted by its predecessor.

This will require new leadership. The USPS Board consists of up to nine presidential appointees, who serve seven-year terms, plus the postmaster general and the deputy postmaster general, who are selected by the board and serve indefinite terms. There are three openings, not counting the vacant deputy position and a seat held by a board member whose term expired and who is serving in a holdover capacity.

President Trump has nominated a fifth Republican, who has not been confirmed. However, DeJoy and the Trump appointees on the board may be able to maintain control long enough to inflict more damage on the Postal Service, especially if they are able to hand-pick a deputy postmaster general who would also have a seat on the board.

A change in leadership will not be enough. There are glimmers of hope. In February, the House passed a bipartisan bill, with the support of 87 Republicans and Democrats, that would eliminate retiree health prepayments and forgive the remaining balance Katz ; U. House Clerk However, the Republican-controlled Senate has yet to schedule a vote on a companion bill. For decades, many conservatives have pushed to privatize the United States Postal Service. The effort has returned in force, seemingly for three reasons.

The latter would directly hurt the interests of Jeff Bezos , owner of the Washington Post, which has been so critical of Trump. The second reason is likely a whitewash of past policies. Congressional plans have unduly hindered the financial stability of the postal system. Move it into private hands and the terrible choices, particularly the madness of how pensions are handled , would be buried. Then there is the third issue: postal workers are largely unionized with political sympathies that tend toward Democrats, not Republicans.

None of these reasons is adequate to make such a change. Privatization of government functions—whether infrastructure management, prison operation, or information technology, to name a few areas—can sometimes work, but often is a disaster. In the case of postal service, the roster of negatives far outweighs the questionable wish that somehow things would be more efficient in corporate hands.

The opposite is true. Private corporations are in no position to take on the job, nor should the public wish them to. Here are seven reasons why. In one sense, there is no legal requirement that only the government deliver the mail. The USPS does use private contractors on a regular basis. However, there is a constitutional snag for private ownership. There is no provision in the Constitution for Congress to abdicate its responsibility and leave the regulation of mail to private interests, even down to the level of deciding what facilities could process the mail.