How the Biden administration can save the postal service

In November, the day networks called Joe Biden's election, cheering crowds stopped mail trucks on the streets of New York City to thank postal workers for delivering more than 135 million postal ballots on time during a pandemic. Now in Washington, DC, a coalition of lawmakers and supporters is trying to do another feat: to save the United States Postal Service.

Without the help of the federal government, the postal service might run out of money later this year. Such a financial crisis would mean laying off workers, reducing service and worsening delays – and the delays are already so bad that the Christmas cards sent out in early December will still be delivered in late January. Long-term, Congress could decide to privatize the postal service to meet one of the Trump administration's ambitions, but likely to shut down millions of Americans.

While it sounds a bit strange at first, an increasingly popular idea of ​​fixing the agency's financial troubles is to give it more jobs. In other words, in order to cope with the ongoing existential crisis, the postal service must rethink its existence.

"There has to be creativity and other things the Post can do once it has completed its mission to bind the country together," Mark Dimondstein, president of the American Postal Workers Union, told Recode. "So we're very interested in all kinds of advanced services."

The ideas include everything from how post offices function like UPS branches to converting the postal service into a broadband provider. Postmen could also expand their jurisdiction and begin delivering food and alcohol (a prohibition-era law makes USPS illegal to ship alcohol). And one more thing: post offices could become banks.

President Biden can implement some of these concepts through executive ordinances, others – namely the banking idea – would require action by Congress.

An agency with financial difficulties, perfectly capable of making money

Conservatives have long argued that the postal service should not try anything new until it resolves some of its own longstanding financial problems. Many of these can be traced back to 2006, when a Republican-led Congress passed the Mail Accountability and Improvement Act. This required USPS to pre-fund the health benefits it promises future retirees in its workforce with annual payments of approximately $ 5.5 billion. This meant that even if the agency was operating at a profit, it looked like a financial disaster on paper. Then in 2008 came the Great Recession, which caused the volume of prime mail to decline and the revenue of the postal service to decline.

Things took another ugly turn in 2020 when the Covid-19 pandemic hit. In early February, the House of Representatives had actually voted to end the pre-financing mandate that drove the postal service deep into the red, but the coronavirus took over the legislative agenda just weeks later. The bill has since stalled in the Senate. Meanwhile, then-President Trump campaigned against the postal service throughout his tenure and even threatened to veto the CARES law if it would help the postal service. Finance agreed at some point to lend the agency $ 10 billion – but only if it would share proprietary information with private-sector competitors. This loan was converted into a grant in the second coronavirus relief package.

You can't just fix the man-made accounting chores and then expect the mail to magically be fine in their previous business model

A particularly difficult development from last year was when a top Trump donor and logistics manager named Louis DeJoy took over the post of postmaster general in June. He introduced new, cost-saving policies that caused delays in the mail and many feared that one of the president's friends was trying to sabotage the elections and privatize the postal service. A judge eventually suspended DeJoy's policies until after election day. When they were reintroduced, the postal service fell to historically low levels during the holiday season. The postal service recently added 10,000 new jobs to its sorting facilities, but according to the American Postal Workers Union (APWU), up to 2,000 postal workers are still quarantined on any given day. More than 150 people have died from the pandemic.

Because of this upheaval, Americans used social media to urge their friends to buy postage stamps and USPS merchandise in an attempt to save the agency last year. However, the postal service, with more than 644,000 employees, needs a lot more help. A USPS financial planning report for 2021 shows the agency has over $ 160 billion in debt, much of which is due to pre-financing health care services for retirees. The report also calls for "major legislative reforms". And while the Postal Service initially asked for a $ 25 billion bailout, it hasn't received any additional relief beyond the Treasury Department's $ 10 billion grant.

"When you envision the post office going forward, you can't just fix the man-made accounting duties and then expect the post office to be magically fine in its previous business model," said Porter McConnell of the Save the Postal Office Coalition. "I think the ability to innovate has to be given to really become a powerhouse."

In other words, even if Congress gets away with a bailout and ends the pre-funding mandate, the postal service needs to evolve to survive. The Save the Postal Office Coalition, which includes 475 groups including APWU, MoveOn, and Color for Change, met not long after DeJoy joined the agency and asks President Biden for emergency aid of US $ 89 billion in the first 100 days Dollars for the agency. It is also pushing for Biden to appoint a "post-tsar" who prefers post-banking and reform-minded leaders to fill the four open seats on the USPS board of governors that Trump left empty in the final months of his presidency. If Biden filled all the seats, the Democratic-appointed governors would form a majority on the board, giving them the power to remove DeJoy and reshape the role of the postal service in American life.

Postmaster General Louis DeJoy, a top Trump donor, testified before the House Oversight Committee after imposing service cuts ahead of the 2020 election. Tom Williams / CQ Appeal / Bloomberg via Getty Images

Some ideas of how the USPS could make more money are pretty simple: Post offices could expand partnerships with other government services and offer things like driver license renewals in addition to passport services. Or they can stay open later so people have more time to ship packages at competitive prices (some UPS and FedEx stores are open 24/7, while post offices are typically 9 to 5 stores). After all, parcel deliveries are actually a rare ray of hope on the postal service's balance sheet. In November, the postal service saw revenue jump $ 2 billion year over year thanks to a nearly 20 percent increase in parcel volume. The parcel volume during the holidays rose by around 100 percent.

Other ideas are more ambitious, but you can check abroad to see if they are feasible. The postal service has some of the internet infrastructure required to build a nationwide network, Anderson explained, so in theory a low-cost internet service could be built in the US like the UK post office does (for about $ 20 a month). Postmen are already stopping at most addresses across the country every day so they can help, like Japan Post, provide basic care services to older adults. And USPS needs new vehicles. If the fleet of box-shaped, gas-powered mail vans is replaced by electric vehicles, this can help build the charging infrastructure for electric vehicles by setting up charging stations for public use in post offices across the country. This would cost money in the short term, but the charging stations could generate revenue for USPS while the more efficient trucks should save money in the future.

However, the really big idea of ​​how to save the USPS – to build a postal banking system – is easier to imagine, if only because the postal service is already performing several basic banking functions, such as money orders. Proponents of the post banking system argue that expanding this range of services will bring nothing but advantages.

The plan for post banking

One of the biggest perks: USPS banking could help the 7 or more million American households with no bank accounts – meaning they don't have access to checking accounts or basic financial services – according to the latest FDIC Economic Inclusion Survey. That number skyrockets when you include those who have accounts but use financial services like check cashing and payday loans to get through. Not only would the postbanking plan provide a solution for these millions of Americans, it would provide a financial lifeline to USPS.

"I would envision every post office having to include the future proposal (post banking)," McConnell told Recode. "It is just too logical to serve one in four households in America that are bankrupt and bankless while providing a source of income for the postal service to forego forward-looking suggestions."

The long list of financial services post offices could offer include checking and savings accounts, check cashing, low-cost ATMs, money transfers, bill payment, and refillable USPS debit cards. Providing such services could generate approximately $ 9 billion in annual postal service revenue, according to a 2014 report by the USPS Inspector General. Some calculations on the back of the napkin suggest that this alone could cover the pre-financing mandate.

With Biden in the White House and Democrats in control of Congress, lawmakers have an opportunity to rethink existing Postbank laws. Last September, Sens. Kirsten Gillibrand (D-NY) and Bernie Sanders (I-VT) reintroduced the Postbank Act, which aims not only to bring basic financial services such as low-cost savings and checking accounts to post offices, but also to target predatory practices – payday loans, prepaid -Debit cards with high fees, overdraft fees – that Americans have taken advantage of with no bank details and no bank details. In addition, the law would allow the postal service to offer small loans that could eliminate the payday loan market.

"Postbanking is an elegant and sensible solution to problems that exist across the country in urban and rural states – problems that Congress has highlighted," Senator Gillibrand told Recode.

A US post office in Garfield, Washington.

The law states that the postal service is universal service, which means that even the remotest corners of the United States are served. Don & Melinda Crawford / Education Images / Universal Images Group via Getty Images

Think of it as a public option for banking. And this is not the only approach to serve the non-banks. A task force set up by Biden and Sanders earlier this year called for the creation of so-called Fed accounts, which are free bank accounts for every American established by the Federal Reserve who is kept through post offices. This is not to be confused with the Public Banks Act by MPs Rashida Tlaib and Alexandria Ocasio Cortez, which would allow the Federal Reserve to encourage the establishment of public banks that could interact with the Postbank infrastructure.

In some form, the postal service could play a role in all of these plans. Right now, however, the USPS leadership doesn't seem to like adding banking to the offering, although they're not entirely against it.

“Our core function is delivery, not banking. To the extent that our research concludes that we can legally provide additional services at a profit and without distracting from our core business, we would consider it, "USPS spokeswoman Martha Johnson told Recode in November. In January she added that recent talks with Congress did not include post banking.

Learn from the largely forgotten history of post banking

If the idea of ​​the postal service offering bank accounts sounds familiar, it is because the United States had postal banking for most of the 20th century. We've done it before, some say, so we can do it again.

After the panic of 1907 that resulted in bankruptcy and a series of bank failures, Americans developed widespread distrust of the US financial systems. Theodore Roosevelt warned of the “predatory man of wealth” and advocated post banking when the financial crisis hit. His Republican compatriot William Taft sold the land on this idea when he ran for president in 1908. Taft won the White House and the United States The state postal savings system was established in 1910. It offered savings accounts with a low interest rate of 2.5 percent and a total savings cap of $ 500 (now $ 14,000), which was raised to $ 2,500 in 1918 (around $ 44,000 today).

In the 1930s, the postal savings system was worth over $ 1 billion, making it around 10 percent of the total commercial banking industry. However, the success was short-lived. Private banks successfully campaigned for the closure of the postal savings system in the 1960s, and deregulation in the decades that followed left downtown and rural areas bankless, leading to the rise of the $ 90 billion payday loan industry . The predatory man of wealth made a comeback.

"The bankers never liked the idea," Christopher W. Shaw, author of Money, Power and the People: The American Struggle to Make Banking Democratic, told me about the postal savings system. "You have always been against it and have been against it from the start."

Senator Gillibrand has her own opinion on the matter. "It was a good idea then," she said, "and now it's an even better idea."

Many financial transactions already take place in post offices. Billions of dollars worth of money orders go through the postal service every year. So apparently when the postal service is looking for more money it shouldn't have to look that far.

Obviously, asking postal workers to do more, such as city clerks, caretakers, or broadband vendors, could be a challenge. With world-class mail volumes down 30 percent over the past decade, the Postal Service's 600,000+ employees remain well-positioned to fulfill the agency's mission to bind the nation together.

Sandy Laemmel, president of the National Letter Carriers Union's Detroit, Michigan branch, started working for the Post 45 years ago the day after graduating from high school. When we spoke on the phone about a week ago, she sounded upbeat about new ideas, although the banking idea sounded particularly familiar to her, as she said that a lot of people do their banking at the post office, mostly through money orders, so as not to pay high fees elsewhere.

“Do I think the idea of ​​banking within the postal service is feasible? Yes I do. Do I think it's something that needs more research? Yes, I do, ”said Laemmel. “The people who handle what goes into the mail stream are the same people who would run the operations of post banking. Do i think it's out there? Yes. Do i think we will get there? I think we will. "

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