MIGHTY HISTORY

The rise and fall of USPS

Matthew Stuart and Clancy Morgan



Following is a transcript of the video.

Narrator: Every year, the United States Postal Service takes and delivers 142 billion mailed items. If it needs to go from point A to point B anywhere in the US, the post office can do it. It survived the Civil War, two world wars, the Great Depression, and the upheaval brought by the internet and email.

But it's currently more than $160 billion in debt, and it's telling Congress it will run out of cash by September and needs a $75 billion infusion. How did this happen?

The US Postal Service has been delivering mail since before the Declaration of Independence was even signed. In 1775, Benjamin Franklin was appointed postmaster general, and it was Franklin who handled the distribution of letters from Congress to its armies during the Revolutionary War. President George Washington signed the Postal Service Act, which authorized Congress to create the US Postal Service. This established routes and made it illegal to open anyone's mail.

Clip: What matter if it took two weeks to go from New York to Atlanta, over a month to St. Louis? If the letter from Uncle Ben arrived a day or so later, nobody fussed.

Narrator: In 1823, it started using waterways to deliver mail, then began using railroads. 1847 saw the first issued stamps. And then the famed Pony Express debuted in 1860. In 1896, it began delivering to some rural addresses, meaning residents no longer had to go to the town post office to get their mail. By 1923, all houses were required to have a mail slot. And in 1963, zip codes made their debut.

Clip: What a system! As you can plainly see, just five little numbers, quick as can be.

Narrator: But what really transformed the post office into what we know today? That happened a few years later.

Clip: The post office stands to be swamped, overwhelmed, drowned in a sea of mail. Where do we go from here?

Narrator: In 1967, the postmaster general testified before Congress that the post office was in "a race with catastrophe." There were all sorts of backlogs, and sorting-room floors were bursting with unsorted mail. Combined with a postal worker strike in March of 1970, led to the Postal Reorganization Act and established the United States Postal Service as we know it today.

Clip: The Post Office Department is leading the search for better ways to process and dispatch mail in the shortest time possible.

Narrator: The act eliminated the post office from the president's cabinet and made the post office its own federal agency. It was set up more like a corporation than a government agency and had an official monopoly on the delivery of letter mail in the US. It also set up the elimination of the post office's direct government subsidies, which were completely phased out in 1982. The post office has been operating without any taxpayer money since.

Competition from UPS and FedEx made the post office innovate on its offerings, like introducing express mail. But since its most lucrative service was first-class mail, the USPS didn't have to worry too much about competing with other companies. In fact, the post office has partnered with both companies in the past, like when it signed a deal in 2000 that contracted its air delivery of first-class, priority, and express mail to FedEx.

So, basically, the USPS was fine. First-class mail volume peaked in 2001 at 103.6 billion pieces of mail. It operated at a loss in the first couple years of the 21st century, but by 2003, it was back to operating at a profit. In fact, from 2003 through 2006, USPS recorded a total $9.3 billion profit. That all changed at the end of 2006.

Clip: HR 6407, a bill to reform the postal laws of the United States.

Narrator: Enter the Postal Accountability and Enhancement Act, which was passed by the Republican-controlled Congress and signed into law by President George W. Bush. Up until this point, the post office added to and removed from its retiree pension and healthcare accounts on an ongoing basis, putting money in as needed, based on its current retirees. This model is similar to the way many other companies and corporations fund their own healthcare pensions. This act changed all that.

It required the post office to calculate all of its retiree pension and healthcare costs for the next 75 years, including for people it hadn't even hired yet, and put away enough over the next 10 years to cover them. To put this in perspective, that'd be like you only working from age 18 to 28 and then expecting to live on that income until you were 103 years old.

The timing for this was not ideal, either. Email, texting, and online payments had begun to chip away at the post office's main business, first-class mail, which had slowly been declining since its 2001 peak. But even that decline wouldn't put the post office in the negative.

If not for the 75-year pension and healthcare obligation, the USPS would have reported operating profits for the last six years. Once the bill was enacted, USPS had to contribute about $5.6 billion a year for people who had not yet retired, in addition to the normal amount for current retirees. In 2006, prior to the new bill, this was $1.6 billion for those who were already retired. In 2007, USPS had to put away 625% more, about $10 billion, to cover both current and future retirees. This gave the post office an annual loss of more than $5 billion for the year.

Additionally, the new bill restricted the post office's ability to set prices. First-class mail, marketing mail, and other products the post office does not have a large competition for were all tied to the consumer price index, meaning it couldn't increase rates for those products above the rate of inflation. This has caused various problems, like in 2009, when prices couldn't be raised at all on those products, because there was no inflation.

The rule has created an environment where packages are the post office's only profitable area. By 2010, the post office's overall debt, which was just over $2 billion in 2006, had climbed to $12 billion. It sounded the alarm to Congress multiple times and was also the subject of a 2018 Trump administration report saying the pension obligation should be restructured. But nothing changed. In its most recent annual report, the post office said it had incurred almost $78 billion in losses from 2007 to 2019. It couldn't afford to make any payments into the fund from 2012 to 2016 and now owes about $55 billion related to its future pension and health benefit obligations.

Which brings us to today. As with many other industries, the coronavirus has taken its toll on the post office. First-class and marketing mail have plummeted, and the post office expects a $13 billion decline in revenue. The postmaster general has told Congress she expects the USPS to be completely out of cash by September. This would make it unable to pay its employees and could quickly cause disaster in mail delivery across the country, especially in rural areas not serviced by UPS and FedEx. So, can it be saved?

The post office is now asking Congress for a $50 billion cash infusion along with a $25 billion loan. The initial bailout bill Congress passed in March provided $13 billion for the post office, far less than the $25 billion the organization was seeking in the bill. However, President Trump threatened to veto any bill that bailed out the post office, so the bill was changed before signing to a $10 billion loan, 13% of the $75 billion it had originally asked for and another $10 billion to add to its debt.

And then, in early May, Trump appointed Louis DeJoy the new postmaster general, and he will take the reins of the organization on June 15. Unlike the last three postmaster generals, DeJoy is not a career employee; he is a large GOP donor and the former CEO of a logistics company. Democrats and ethics watchdogs see the appointment as purely political, not just because of Trump's desire to reshape the post office, but also because millions of Americans may be forced to vote by mail this year, which means the future of the post office is likely to become a political issue this spring and summer, especially if its cash flow starts running dry.

And those at risk? The 497,000 Americans who rely on the USPS for their jobs, and the 329 million Americans who rely on it for paying bills, medication, and everything else the USPS delivers through rain, sleet, snow, and even pandemics.

This article originally appeared on Business Insider. Follow @BusinessInsider on Twitter.