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Fake News, Flawed Analysis, and Bogus Tweets

From time to time, Angry Bear has featured Steve Hutkins, (Save The Post Office Blog) and Mark Jamison’s (retired NC Postmaster) commentary on the efforts of various political and commercial interests to close down the United States Postal Service and give it over to the likes of UPS, FedX, and other commercial enterprises. Most recently, President Trump’s inane Twitter comments have again gained undeserving national coverage about Amazon having a hypothetical cost advantage over the USPS by using the USPS to deliver Amazon orders 7 days a week. Steve takes issue with the President Twitter comments and a CitiGroup analysis of the Amazon – USPS relationship. Read on . . .

“Steve Hutkins; Talk about Fake News. How a flawed Citigroup analysis led to Trump’s bogus tweets about Amazon and the Postal Service.” President Trump is continuing his Twitter attack on Amazon over its deal with the Postal Service. Yesterday Trump tweeted,

“Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed. Also, our fully tax paying retailers are closing stores all over the country… not a level playing field!”

A couple of days ago, his tweets were more specific:

“While we are on the subject, it is reported that the U.S. Post Office will lose $1.50 on average for each package it delivers for Amazon. That amounts to Billions of Dollars…. If the P.O. ‘increased its parcel rates, Amazon’s shipping costs would rise by $2.6 Billion.’ This Post Office scam must stop.”

The attacks were in the same vein as his earlier tweets back in December. They are apparently based on an op-ed in the Wall Street Journal by Josh Sandbulte and published last July. Sandbulte claimed each Amazon parcel was getting a $1.46 subsidy;

“It’s like a gift card from Uncle Sam.”

As Jen Kirby at Vox noted, Sandbulte is a money manager who works for a firm owning FedEx stock, but it may or not be relevant, as anyone invested in mutual funds probably owns some FedEx. In any case, he didn’t invent the subsidy idea. It came from an analysis done by Citigroup in April 2017.

The thesis of the Citigroup report is that taxpayers are essentially paying for the free shipping offered by Amazon. As the Citi analysts write, “In this note, we examine the true profitability of the Post Office and show that by charging below market rates on parcel volume (mainly eCommerce) the Post Office has essentially turned free shipping into a future tax payers’ burden.”

It should be noted, the Citigroup report is intended to give advice to investors in the stock market. It claims, “a day of reckoning” is coming when the Postal Service will have to implement a significant increase in shipping rates, and this will provide a large “revenue opportunity” for the Postal Service’s competitors, FedEx and UPS — something on the order of $15 to $19 billion a year in additional revenue. This, they say, “supports upside for both stocks.”

The Citigroup report is somewhat less bullish on Amazon because it will have to bear the brunt of rate increases by the Postal Service and also FedEx and UPS, who will be in a better position to raise rates themselves. According to the analysts’ “worst case scenario,” Amazon will have to pay $2.6 billion a year in additional shipping costs.

As a closer look at the Citigroup report reveals, the case for a huge Postal Service rate hike on parcels is seriously flawed, and the report provides no evidence for Trump’s tweets that the Post Office is losing a fortune on the Amazon deal.

Before we get to the Citigroup report, it will be helpful to lay out a few basic facts about the types of U.S. mail, the way postal accounting works, and the particular service Amazon is using. If you’re familiar with all this, you can cut to the chase and go to the section (Part 2) on the Citigroup analysis.

A Postal Primer

In 2006, the Postal Accountability and Enhancement Act (PAEA) divided postal products and services into two categories, Market Dominant and Competitive.

Market Dominant products and services are those in which the Postal Service “dominates the marketplace” as a result of its two monopolies — the letter monopoly, which gives the Postal Service a monopoly on non-urgent First Class mail, and the mailbox monopoly, which gives the Postal Service exclusive right to put mail in mailboxes. Market Dominant includes First Class, Standard (mostly ad mail), and Periodicals, as well as certain types of international mail. According to the USPS 2017 10-K report, Market Dominant accounts for about 70 percent ($50 billion) of total revenues ($70 billion) and about 95 percent of total volumes (150 billion pieces)

Competitive mail includes shipping services like Priority Mail, parcels, and some other types of international mail. Its name derives from the fact that there are competitors in the private sector for these types of products. Competitive products account for 29 percent ($20 billion) of total USPS revenues and about 5 percent of volumes.

The rates for Market Dominant mail are constrained by “price cap” regulation, which limits rate increases in a class of mail to the Consumer Price Index. The rates on Competitive products are essentially constrained by the marketplace, but the Postal Service is free to set prices as it sees fit, subject to approval by the Postal Regulatory Commission, so long as the products cover their costs, aren’t cross-subsidized by Market Dominant products, and make an appropriate contribution to institutional costs. In other words, the rates can’t be too low.

The phrases “covering their costs” and “contribution to institutional costs” refer to the way the Postal Service analyzes the costs of each product and service. As in every business, for every product there are two types of costs, variable and fixed.

The variable costs are those associated directly and indirectly with a specific product or service, and they change relative to volume. The Postal Service calls these attributable costs.

The fixed costs include wages, rent on leased post offices, and all the other overhead expenses that stay the same regardless of how much volume the Postal Service is handling. The Postal Service calls these institutional costs.

For each product and service, the Postal Service figures out the variable costs that can be attributed to that product; whatever revenue is brought in beyond that is considered contribution to the institutional costs.

The cost coverage for a product or service is determined by dividing the unit’s revenue by the attributable cost. A cost coverage of 100 percent means that the product has covered of all its attributable costs but contributed nothing to institutional costs. Ideally, a product will therefore have a cost coverage greater than 100 percent, so it can contribute something to the Postal Service’s fixed overhead costs.

Finally, there are the Negotiated Service Agreements, i.e., contracts between the Postal Service and individual mailers that provide customized pricing and other arrangements. For business reasons, the details of these deals are withheld from the public, but each NSA must be approved by the PRC before it goes into effect, and then again annually as part of a review to ensure that the deal is still in compliance with the law.

There are several hundred NSAs in effect right now, including 846 Competitive domestic agreements, ranging widely in size and scope. At least one, perhaps several of them, cover the deals between Amazon and the Postal Service.

The PRC’s Annual Compliance Review

The PRC conducts an Annual Compliance Determination Review (ACDR) to ensure sure all the products and services provided by the Postal Service are in compliance with the laws governing postal matters. Generally speaking, the review determines if the costs incurred by each product and service are covered by the revenue generated by that product or service.

The compliance review thus looks at how each type of mail — including each NSA — is doing with respect to cost coverage, i.e., the extent to which it is covering attributable costs and how much it is contributing (or failing to contribute) to institutional costs.

The Commission also examines how much Competitive mail as a whole is contributing to institutional costs to ensure that the Postal Service isn’t using the products which it has a monopoly to unfairly subsidize products for which there’s competition from the private sector.

As it happens, last week the PRC issued the 2017 Annual Compliance Determination Report. The law requires “each Competitive domestic NSA product to cover its attributable cost. The Commission noted “all but four Competitive domestic NSAs covered their attributable costs and complied with this statutory requirement” (p. 84). Three of these NSAs expired or were terminated, and the fourth (a Priority Mail Contract that is almost definitely not the Amazon NSA) is being monitored pending reevaluation.

The PRC’s compliance report means that the PRC has reviewed the Amazon contract or contracts and determined that they are indeed covering their attributable costs. They are not losing money for the Postal Service.

The Amazon NSAs and Parcel Select

While we know very little about the details of Amazon’s contract or contracts with the Postal Service, we do know that most of the parcels delivered by the Postal Service for Amazon fall under the category called Parcel Select.

Back in 2013, when the Postal Service announced that it was doing Sunday delivery for Amazon Prime, we were able to locate the NSA in PRC docket CP2014-1 and confirm that it was a Parcel Select product. You can see the agreement here, but it’s almost entirely redacted.

According to the USPS description, “Parcel Select ser¬vice provides very competitive pricing. It is often used by other private parcel companies to complete delivery of the ‘last mile’ for their shipments — particularly for deliveries in non-metropolitan or rural areas because the Postal Service is the only carrier that offers delivery to every door 6 days a week.”

The biggest users of Parcel Select are Amazon, FedEx, and UPS. They’ve determined that using the Postal Service for the “last mile” (from the post office to the home or business) is much more cost-effective than trying to deliver to millions of addresses themselves.

In fiscal year 2016, according to an article in DC Velocity, about 2.5 billion packages moved under Parcel Select. Amazon was responsible for about 1 billion packages; FedEx (through its “SmartPost” product) used USPS for 600 million pieces, and UPS (through “SurePost”) had USPS deliver about 275 million pieces of Parcel Select. The balance came from several parcel consolidators that aggregate packages from multiple smaller shippers.

Parcel Select generally takes two to nine days, but the big mailers, consolidators, and private shippers prepare and presort the parcels and deliver them to the Destination Delivery Unit (DDU) — usually your local post office — or a regional processing facility, thus saving a lot of time and expense.

If the shippers get the parcels to the DDU by a certain time — Early Bird DDU — the Postal Service can often provide same-day delivery. Regular DDU — dropping off the parcels after the carriers have left the facility — usually means next working day delivery.

The Postal Service’s ability to deliver packages in two days or less has been an important factor in growing its parcel business, and it points to the synergy between the Postal Service and its larger customers who help shuffle packages to the right place in the network, labeled and sorted in the right way.

Because the users of Parcel Select do some of the work themselves, they’re entitled to “workshare” discounts based on the costs the Postal Service is avoiding. These discounts are arranged through the nonpublic NSAs, so we don’t know how much Amazon is paying, but the public pricing for Parcel Select is shown here. As you can see, the prices start at $2.85 for a parcel weighing a pound or less, dropped off at a DDU. Prices go up from there, depending on the weight and how close to the destination it’s dropped off.

Due to its volume discount, Amazon is paying much less than that, however. According to a Bloomberg article, David Vernon, an analyst at Bernstein Research who tracks the shipping industry, estimates that Amazon is probably paying, on average, about $2 per parcel. That estimate can also be derived from this USPS financial report. It shows that in 2017 Parcel Select brought in $5.66 billion on 2.8 billion pieces, an average of $2 per piece. Amazon’s deal is probably comparable to the agreement the Postal Service has with UPS and FedEx to deliver the last mile for them.

As the chart for Parcel Select prices shows, there’s a big range in pricing, and the pricing on Amazon packages probably varies significantly, depending on geography, time of year (holidays), and who’s doing the delivery (e.g., union workers or lesser-paid non-union workers like City Carrier Assistants).

If Amazon is now sending about a billion parcels through the Postal Service, and if the average is about $2 per piece, the relationship is bringing the Postal Service about $2 billion a year. That strictly a ballpark guess — the Citigroup report puts the estimate at $3 billion a year — but it shows that Amazon has become a big part of the Postal Service’s business.

By the way, to put the numbers in context, Amazon reportedly shipped about 5 billion parcels via Prime worldwide in 2017, and it spends about $20 billion a year on shipping.

Talk about Fake News: How a flawed Citigroup analysis led to Trump’s bogus tweets about Amazon and the Postal Service, Save The Post Offic blog, Steve Hutkins, April 7, 2018

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Civil Disobedience and the Mailman

Reposted from Save The Post Office edited and administered by Steve Hutkins, a literature professor who teaches “place studies” at the Gallatin School of New York University.

Ruskins Gyrocopter

run75441: Tampa Bay News notes “96 percent of people think that Something Should Be Done about reducing the influence of money in politics. Only 9 percent think that something can be done.” In turn Ruskin mail carrier Doug Hughes decided to do something about it. “He announced his intentions to the local paper, wrote an email to info@barackobama.com, talked to the Secret Service to assure them that, although he was going to fly through the no-fly zone illegally, he did not intend for anyone to be hurt and that his intention was simply to protest.” Hughes objective was to deliver 535 letters to Congress.

From the Tampa Bay News, “Ruskin gyrocopter pilot says postal officials are telling him not to talk to media,” April 20, 2015

The Ruskin mail carrier who last week flew a gyrocopter into restricted airspace over Washington D.C., to make a political statement says he has been put on paid leave with the U.S. Postal Service with orders not to discuss his story with the media.

“I was informed by the acting postmaster—and he sounded like he was reading from a script—that I was on administrative leave pending an investigation,” Hughes wrote in an email to the Tampa Bay Times.

“I am NOT allowed on postal property without advance permission and I can only enter the building through the front if I do visit with permission. (This injunction always precedes a termination.) I asked about the nature of the administrative leave—it’s with pay BUT I’m not allowed to talk to the media AT ALL.”

It is another restriction that Hughes said he intends to violate. He said the move amounted to a “gag order” that he did not respect.

A spokeswoman for the U.S. Postal Service said she could not discuss Hughes’ employment status.

“I can confirm that he is a rural mail carrier,” said Enola Rice, the USPS regional communications director for Central Florida. “We don’t discuss the status of employees. All I can do is confirm that he is an employee.”

* * * * *

From NBC News,“Gyrocopter Pilot, Doug Hughes, Frustrated His Message Isn’t Getting Through,” April 19, 2015

Hughes spent a night in jail after Capitol Police arrested him. The ultralight aircraft and its cargo—a U.S. Postal Service bin carrying the letters—were seized.

Hughes’ Russian-born wife, Alena, told the AP that her husband acted out of patriotism for the United States.

Asked Sunday if he too thinks he’s a patriot or simply crazy, Hughes said. “Everyone gets to make up their own mind about me, that’s what I’d say.”

“But do you consider yourself a patriot?” a reporter asked.

“No, I’m a mailman,” he said.

* * * * *

From his Letter to Congress, Doug Hughes, April 15, 2015

“The unending chase for money I believe threatens to steal our democracy itself. They know it. They know we know it. And yet, Nothing Happens!” —John Kerry, 2-13

In a July 2012 Gallup poll, 87% tagged corruption in the federal government as extremely important or very important, placing this issue just barely behind job creation. According to Gallup, public faith in Congress is at a 41-year record low, 7%. (June 2014)

Kerry is correct. The popular perception outside the DC beltway is that the federal government is corrupt and the US Congress is the major problem. As a voter, I’m a member of the only political body with authority over Congress. I’m demanding reform and declaring a voter’s rebellion in a manner consistent with Jefferson’s description of rights in the Declaration of Independence.

* * * * *

FromHugh Hewitt’s radio show, Interview with Senator Lindsey Graham, April 15, 2015

Hewitt: Look, today gives a whole new definition of the term going postal, and I want to start there. 61-year-old Florida mailman, Doug Hughes, landed a gyrocopter on your Capitol, your office front lawn this morning. Do you think he should have been shot out of the sky before he got that close to the Capitol?

Graham: Yes. He should have been subject to being shot out of the sky. I don’t know why he wasn’t, but our nation is under siege.

Radical Islam is a threat to our homeland. There are probably radical Islamic cells in our backyard already. And if somebody is willing to, you know, approach vital government infrastructure, they should do so at their own peril.

I don’t know if he’s mentally ill. I’m glad he’s alive in that regard, if he’s mentally ill, but we’ve got to be more serious about our national security.

* * * * *

From “Hardball,” Chris Matthews, April 16, 2015

I have an idea for Congress and the Capitol Police. Instead of charging this guy on the helicopter, gyrocopter, why don`t you give him community service? And his community service can be one hour. And his one hour should be spent addressing a joint session, a joint meeting of the Congress. He should walk in there and tell them why he did that. And that must all be there to watch it`s. That can be his community service and we can all watch. If they put this guy in jail, what a bunch of clowns that would be to do that.

* * * * *

From Civil Disobedience, Henry David Thoreau (who went to jail for refusing to pay his taxes to protest slavery and the war with Mexico), 1849

Must the citizen ever for a moment, or in the least degree, resign his conscience to the legislator? Why has every man a conscience, then? I think that we should be men first, and subjects afterward. It is not desirable to cultivate a respect for the law, so much as for the right. The only obligation which I have a right to assume is to do at any time what I think right…

Unjust laws exist; shall we be content to obey them, or shall we endeavor to amend them, and obey them until we have succeeded, or shall we transgress them at once?

Men generally, under such a government as this, think that they ought to wait until they have persuaded the majority to alter them. They think that, if they should resist, the remedy would be worse than the evil.

But it is the fault of the government itself that the remedy is worse than the evil. It makes it worse. Why is it not more apt to anticipate and provide for reform? Why does it not cherish its wise minority? Why does it cry and resist before it is hurt? Why does it not encourage its citizens to be on the alert to point out its faults, and do better than it would have them? Why does it always crucify Christ, and excommunicate Copernicus and Luther, and pronounce Washington and Franklin rebels?

* * * * *

From Court Statement, Doris “Granny D” Haddock (who walked across the country at age 90 to advocate for campaign finance reform), May 24, 2000

Your Honor, the old woman who stands before you was arrested for reading the Declaration of Independence in America’s Capitol Building. I did not raise my voice to do so and I blocked no hall….

In my 90 years, this is the first time I have been arrested. I risk my good name—for I do indeed care what my neighbors think about me. But, Your Honor, some of us do not have much power, except to put our bodies in the way of an injustice—to picket, to walk, or to just stand in the way. It will not change the world overnight, but it is all we can do.

So I am here today while others block the halls with their corruption. Twenty-five million dollars are changing hands this very evening at a fund raiser down the street. It is the corrupt sale of public policy, and everyone knows it.

I would refer those officials and those lobbyists, Your Honor, to Mr. Bob Dylan’s advice when he wrote: “Come senators, congressmen, Please heed the call. Don’t stand in the doorway, don’t block up the hall.”

* * * * *

From OpenSecrets.org

Contributions and Lobbying

* * * * *

From Christopher Shaw, Preserving the People’s Post Office, 2006

UPS and FedEx are heavy hitters in Washington, D.C. The Center for Responsive Politics reports that FedEx has been the largest single corporate political donor over the last fifteen years. It has handed out a total of $21,409,229 in political contributions since 1989, and in the 2004 election cycle it shelled out $1,819,669.

“For years,” says Charles Lewis, founder of the Center for Public Integrity, “Federal Express has had a reputation for being one of the most aggressive special interests in Washington.”

The Center for Public Integrity reports that FedEx has spent $20,740,000 on lobbying the federal government from 1998-2004, and is second only to UPS when it comes to postal issue lobbying.

When it was time to pay for President George W. Bush’s 2005 inaugural, “FedEx was good for $250,000. But so was UPS.”

“This inauguration is bought and paid for by corporate America,” said Joan Claybrook, president of Public Citizen. “These businesses consider such gifts to be investments, with payback expected.”

The Wall Street Journal has called FedEx “a major lobbying force in Washington.”

“I was stunned by the breadth and depth of their clout up here,” said campaign finance reformer Senator Russell Feingold (D-Wisconsin).

* * * * *

From Title 39, CFR 447.21, “Prohibited conduct”

(d) No employee shall engage in criminal, dishonest, notoriously disgraceful or immoral conduct, or other conduct prejudicial to the Postal Service. Conviction of a violation of any criminal statute may be grounds for disciplinary action by the Postal Service in addition to any other penalty imposed by or pursuant to statute.

* * * * *

From 5 U.S. Code § 7324, “Political activities on duty; prohibition”

(a) An employee may not engage in political activity—

(1) while the employee is on duty;

(2) in any room or building occupied in the discharge of official duties by an individual employed or holding office in the Government of the United States or any agency or instrumentality thereof;

(3) while wearing a uniform or official insignia identifying the office or position of the employee; or

(4) using any vehicle owned or leased by the Government of the United States or any agency or instrumentality thereof.

* * * * *

From Postal Service Standards of Conduct, 665.16

Employees are expected to conduct themselves during and outside of working hours in a manner that reflects favorably upon the Postal Service. Although it is not the policy of the Postal Service to interfere with the private lives of employees, it does require that postal employees be honest, reliable, trustworthy, courteous, and of good character and reputation. The Federal Standards of Ethical Conduct referenced in 662.1 also contain regulations governing the off–duty behavior of postal employees. Employees must not engage in criminal, dishonest, notoriously disgraceful, immoral, or other conduct prejudicial to the Postal Service.

Conviction for a violation of any criminal statute may be grounds for disciplinary action against an employee, including removal of the employee, in addition to any other penalty imposed pursuant to statute. Employees are expected to maintain harmonious working relationships and not to do anything that would contribute to an unpleasant working environment.

* * * * *

From Theodore Roosevelt, “Address at the Pilgrim Memorial Monument, Provincetown, Mass.,” August 20, 1907

It may well be that the determination of the government (in which, gentlemen, it will not waver) to punish certain malefactors of great wealth, has been responsible for something of the trouble; at least to the extent of having caused these men to combine to bring about as much financial stress as possible, in order to discredit the policy of the government and thereby secure a reversal of that policy, so that they may enjoy unmolested the fruits of their own evil-doing. . . .

I regard this contest as one to determine who shall rule this free country—the people through their governmental agents, or a few ruthless and domineering men whose wealth makes them peculiarly formidable because they hide behind the breastworks of corporate organization.”

* * * * *

From Franklin D. Roosevelt, “Address Announcing the Second New Deal,” October 31, 1936

For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. We will keep our sleeves rolled up.

We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.

* * * * *

From Paul Blumenthal, “The Chamber Of Commerce Is Fighting Fiercely To Stop The Scourge Of Corporate Transparency,” Huffington Post, April 22, 2015

This spring, shareholders in more than 100 companies will introduce resolutions calling for greater disclosure of corporations’ political and lobbying activity. Six major companies—Dean Foods, Eastman Chemical, H&R Block, Marathon Oil, U.S. Steel and Valero Energy—have already reached agreement with New York state Comptroller Thomas DiNapoli, who oversees the third largest pension fund in the nation, to adopt political spending disclosure policies in exchange for the comptroller’s office withdrawing its resolutions.

But don’t consider that a sign that corporate America is learning to live with transparency. Over the past two years, three of the usual suspects—the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers—have joined together to try to discredit the purpose of disclosure policies and the advocates calling for them.

Aided by the editorial page of The Wall Street Journal, the three big business groups have sought to undercut activist investors and pro-disclosure groups through public campaigns and private meetings with corporate executives.

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Invisible Hands: The Businessmen’s Campaign to Dismantle the Post Office

Guest Post by Steve Hutkins a literature professor who teaches “place studies” at the Gallatin School of New York University.

This is Part 1 in a series of 3 articles as written by Steve Hutkins in 2012. These articles originally appeared on the “Save The Post Office Blog”. Steve lives in a small town in New York’s Hudson Valley. He has no affiliation with the U.S. Postal Service—he doesn’t work for it, nor does anyone in his family. Like millions of Americans, he just likes his local post office, and he doesn’t want to see post offices being closed.

invisible hand The leaders of the Postal Service have made no secret of their plans for reforming the postal system. They have issued white papers, given speeches, presented “optimization” programs, and appeared before Congressional committees. The plans are clear: eliminate the layoff protections in union contracts; cut the career workforce by nearly half while tripling the number of non-career workers; reduce service standards for first-class mail; do away with Saturday delivery; give management control of workers’ benefit plans; consolidate over 250 processing plants; and close 15,000 post offices.

What we don’t see very often are the players making this all happen. We assume the Postmaster General is making the decisions, but he is merely the front man. Behind him are the USPS Board of Governors, the mail industry stakeholders, and the corporate class as a whole. These businessmen (and women) prefer to keep a low profile, so we rarely hear from them in public. They leave it their surrogates — journalists and academics, politicians and pundits — to speak for them. But it’s the businessmen who fund the think tanks, endow universities, make campaign contributions, pay lobbyists, and run the news media. Yet for the most part, they are not to be seen.

In her excellent book Invisible Hands: The Businessmen’s Crusade Against the New Deal, historian Kim Phillips-Fein paints a very revealing picture of how the corporate class operates. Her theme is the way conservative businessmen worked behind the scenes to undo the New Deal. Believing all would be right if government stayed out of the economy and left everything, in Adam’s Smith famous expression, to the “invisible hand” of the market, these businessmen have spent decades working to weaken unions, eliminate social welfare programs, minimize government regulation of their companies, and diminish public services.

attack While the U.S. Postal Service is obviously not a product of the New Deal, that same conservative agenda is behind the attack on the Postal Service we’re witnessing today. Cutting the workforce, closing post offices and plants, and moving toward privatization through outsourcing and divestiture of assets — these are all part of an effort to shape the postal system in ways that serve the interests of an elite business class rather than the good of the country as a whole. The free-market ideology and greed for profits that drove efforts to undo the New Deal are basically what’s driving the “postal reform” movement today.

Power in numbers: The stakeholder associations

As Phillips-Fein explains, one of the most common methods for the businessmen to advocate for their agenda was to bond together. Recognizing the power in numbers, they formed associations like the American Liberty League (organized by the du Ponts) and the Foundation for Economic Education (founded with help from B. F. Goodrich), as well as giving new energy to existing organizations, like the National Association of Manufacturers and other industry trade groups.

In the same way, the mail industry stakeholders — the big direct marketing firms, the pre-sort companies, the periodical publishers, and so on — have formed their own organizations to advocate for their interests.

One of the most important of these groups is one operated by the Postal Service itself. The Postmaster General’s Mailers’ Technical Advisory Committee (MTAC) consists of mailer associations and other organizations related to the mailing industry. Its goal is “to assist the USPS in determining the best course of action to improve service and postal operating efficiency.” The MTAC has a page on the USPS website (it’s part of the National Customer Support Center), and its meeting minutes are published there, albeit in a rather cursory form. But much about the MTAC is cloaked in secrecy.

The MTAC charter says, “A current list of member associations/organizations and corresponding representatives will be published at least quarterly.” Apparently there are 58 member organizations, but good luck trying to find a list of the MTAC members on the Internet. A few years ago, when the APWU asked to join the MTAC, it was denied membership and it took a lawsuit and a year and a half before the MTAC finally relented. A few months ago, word came out that attendance at its meetings would be restricted.

The Direct Marketing Association (DMA) is, according to its website, “the leading global trade association of businesses and nonprofit organizations using and supporting multichannel direct marketing tools and techniques.” It’s an international organization representing dozens of industries in almost 50 countries, including nearly half of the Fortune 100 companies. If you want to know who’s in the DMA you will find that the membership directory is off limits — you have to be a member to see the member list.

Floor The National Association of Presort Mailers (NAPM) is, according to its website, “a trade association composed of firms concerned with the present and future of postal work sharing.” Its primary purpose is to represent the interest of presort mailers and to develop work share programs with USPS “to produce cost saving and service benefits to presort mailers and the USPS.” As with the DMA, if you’d like to see the membership list, you’ll need to become a member.

There are many other industry associations that are influencing the policies of the Postal Service, such as the National Alliance of Standard Mailers (NASM); DFW Mailers Association; Alliance of Non-profit mailers; Association of Priority Mail Users (APMU); Mail Systems Management Association (MSMA); Mail Order Association of America (MOAA); Parcel Shippers Association (PSA); National Newspaper Association (NNA); and Magazine Publishers of America (MPA).

The corporate stakeholders represented by these organizations are not monolithic in their views, and there’s a considerable degree of diversity and even conflict. The periodicals industry, for example, is usually more concerned about the timely delivery of their publications than the direct marketers are. And one wouldn’t want to lump the junk mail business together with newspapers and news magazines — delivering the news is one of the most important functions of the mail system.

But most big mailers are primarily interested in keeping postal rates as low as possible. They have generally supported the cost-cutting measures proposed by the Postal Service because they believe the cuts will keep rates down and their profits up. Back in August, for example, the DMA “applauded” the proposed cuts, and in the RAOI Advisory Opinion process, the direct marketing giant Val-Pak made a forceful argument for closing post offices because they lose money and consequently drive up postage rates.

Most of these stakeholders don’t care about post offices because big mailers present their mail at Bulk Mail Entry Units, and Saturday delivery is not a major concern either because ad mail would do fine with even three-day delivery (which the Postmaster General says is coming within fifteen years). The industry doesn’t care about having a blue collection box on every corner — over the past twenty years, half of them have disappeared, even as the FedEx boxes have become ubiquitous — and they don’t care how often the mail is picked up at those boxes. Their interests, in other words, are not those of the average citizen and small business. But they are one of the strongest forces shaping the future of the Postal Service.

Think tanks do the talking

One of the main themes of Phillips-Fein’s Invisible Hands is that the anti-New-Deal businessmen wanted to keep their activities hidden from the general public. Otherwise, it might look like their attack on unions and public services had selfish motives. They also wanted to give their views intellectual respectability. So they founded and funded think tanks and enlisted journalists and academics to write articles and produce studies extolling the virtues of the free market.

In 1943, Lewis H. Brown, president of the Johns-Manville manufacturing company, got several of his allies in the business community together and formed the American Enterprise Association to provide congressmen with legislative analyses that would promote private enterprise. Most of the money came from major corporations like GM, Ford, Con Edison, and du Pont, and the AEA ended up being investigated by Congress, which questioned how it could provide disinterested research with such sponsors.

The AEA eventually morphed into the American Enterprise Institute (AEI), one of the country’s leading right-wing think tanks. The AEI now publishes works like Saving the Mail: How to Solve the Problems of the U.S. Postal Service by R. Richard Geddes. Geddes advocates privatizing the Postal Service, and he shows up frequently in news articles about the plight of the Postal Service. The AEI is responsible for many other publications about the desirability of moving the Postal Service toward a more corporate model, such as this one by AEI senior fellow Kevin Hassett, encouraging the Tea Party to push for postal privatization as a means of fighting big government.

Another of the country’s well-known right-wing think tanks is the Heritage Foundation, founded in 1973 by conservative businessman Joseph Coors of brewery fame, with the help of contributions from Dow Chemical, GM, Mobile, Pfizer, Sears Roebuck, and Chase Manhattan bank. More recently, the Heritage Foundation has received generous support from the Lynde and Harry Bradley Foundation and the billionaires Koch brothers. (Harry Bradley and the Koch brothers’ father were charter members of the John Birch Society.) The Foundation has a long history of advocating privatization of government agencies, including the Postal Service. Check out its 1986 primer on privatizing federal services, and this long list of articles on its website.

Koch The Cato Institute, the nation’s first libertarian think tank, was launched by the Koch brothers, who continue to fund it generously. According to the Center for Public Integrity, between 1986 and 1993 the Koch family gave $11 million to the institute. The Cato Institute holds conferences and publishes books and papers advocating the privatization of the Postal Service, such as Restructuring the U.S. Postal Service, The Last Monopoly: Privatizing the Postal Service for the Information Age, Free the Mail: Ending the Postal Monopoly, and Mail at the Millennium: Will the Postal Service Go Private?

The Koch brothers also founded Citizens for a Sound Economy, and one of its senior fellows was James C. Miller III, a well-known advocate of privatizing the Postal Service. Miller is a member of the Board of Governors of the United States Postal Service.

Citizens for a Sound Economy eventually split into FreedomWorks and Americans for Prosperity. According to the New York Times, FreedomWorks is “the Washington advocacy group that has done more than any other organization to build the Tea Party movement.” It received $12 million from Koch family foundations. Like the other Koch-funded organizations, it advocates privatization of the Postal Service.

How to break a union

In one of Invisible Hands’ most disturbing chapters, “How to Break a Union,” Phillips-Fein examines the war against unions in the 1950s, particularly the efforts of General Electric to destroy the electrical workers union. (In 1954, GM enlisted the help of a failed movie actor named Ronald Reagan to promote its agenda.) From the point of view of the conservative businessmen, organized labor posed a serious threat, not just in terms of how higher wages might impact their bottom line, but also in terms of power and prestige. They also worried that at election time union workers would be mobilized to press for better Social Security benefits, more government spending, and expanded public services. Unions embodied everything the conservative businessmen were against.

The animosity toward unions fuels much of what’s going on with the Postal Service today. The leadership of the Postal Service wants to get rid of the no-layoff clause in union contracts so that it can cut hundreds of thousands of jobs. In a USPS white paper released last summer, the Postal Service stated explicitly that it wanted to reduce the career workforce from 580,000 to 300,000, and since there was no way that could happen through “attrition,” postal management wants Congress to change the law preventing layoffs. The Postal Service also wants to increase the number of non-career employees from 38,000 to 125,000 — yet another way to undermine the unions.

The leaders of the Postal Service aren’t trying to reduce their labor costs just to deal with the postal deficit or to keep the big mailers happy. The corporate class as a whole does not like the good wages that unions make happen. Postal clerks average $25 an hour, while the sales associates and cashiers at Walmart average $8.50 an hour. Good wages at the post office help bring wages up across the economy, while poor wages at Walmart drive them down.

Since union contracts have made it difficult for the leaders of the Postal Service to reduce the size of the workforce as drastically and rapidly as it would like, they have used other tactics. Outsourcing, for example, is a great way to shift work from postal employees to non-union workers in private industry. The Postal Service now contracts out $12 billion annually.

Koch At the top of the list of corporations enjoying a profitable relationship with the Postal Service — with $1.37 billion of business in 2010 — is FedEx, whose founder and CEO, Fred Smith, testified before Congress “closing down the USPS . . . is an option that ought to be considered seriously.” FedEx has also campaigned against legislation making it easier for its workers to unionize.

Work-share arrangements with pre-sort companies are another way to give work to private companies that could be done by postal workers. The huge discounts that these companies are given are often far in excess of what the Postal Service saves by receiving mail pre-sorted, and they end up costing the Postal Service huge amounts of money. The postal unions have been fighting these discounts for a long time, but to little avail. They are a valuable tool for downsizing the Postal Service, and they help move things further down the path to privatization. (For more on presort companies, see the excellent thesis Understanding Postal Privatization by labor historian Sarah Ryan.)

Follow the money

One of the main tactics the anti-New Deal businessmen used to help keep themselves invisible was to support pro-business politicians like Barry Goldwater and Ronald Reagan. These days, with PACs and other modes of funding and lobbying politicians totally out of control, there are very few politicians who are not being overly influenced by the corporate elite. In postal matters, the two most prominent of these politicians are Darrell Issa and Dennis Ross.

Issa is the Congressman for California’s 49th congressional district and chairman of the House Committee on Oversight and Government Reform. In 2011, his committee held hearings (videos here) and called as witnesses various individuals to testify that the Postal Service was heading toward catastrophe if radical reforms weren’t made. Issa’s Postal Reform Act would create an Authority empowered to restructure the postal system and a Commission that would recommend post office closures and consolidations to Congress. These measures would do essentially what the leaders of the Postal Service have been advocating, but the Act would put Issa and his allies in charge, effectively sidelining postal headquarters.

Koch Dennis A. Ross is the Congressman for Florida’s 12th congressional district and a member of the Tea Party Caucus. As chair of the Committee on Oversight & Government Reform, he held several hearings last year on the Postal Service, during which his witnesses attacked the postal unions, argued that the Postal Service needs to reduce “excess capacity” (i.e., post offices and plants), and called for changes in the law that will make it easier to close post offices.

Eleven of the 23 Republican representatives on Issa’s committee received financial help from Koch Industries in the last election. Issa himself was the largest recipient, with $12,500 since 2008. Not that Issa really needs the money. His net worth is about $450 million, making him the richest man in Congress. Ross received $12,000 from the Koch brothers.

It’s not just the Koch brothers who are contributing to the postal legislators. Pitney Bowes is $5.6 billion-a-year business employing 33,000 workers around the world, selling mail equipment and providing marketing through mail. It’s based in Stamford, Connecticut, so no surprise that it has contributed generously to the campaign of Connecticut Senator Joe Lieberman, chair of the Homeland Security Committee, which deals with postal legislation. In 2011, Pitney Bowes also contributed $10,000 to Darrell Issa and $10,000 to Senator Susan Collins of Maine, another key player in postal legislation. (If you’re interested in doing some detective work, Influence Explorer and Open Secrets are useful sites.)

Privatization, the Holy Grail

Phillips-Fein’s book culminates with the election of Ronald Reagan, who represented everything the conservative businessmen had worked for since the New Deal. Reagan made a stand against unions when he fired the striking air-traffic controllers, he made the tax code less progressive (remember Reaganomics?), he cut social programs like Medicaid and food stamps, and he slashed the budget of regulatory agencies like the Environmental Protection Agency.

Reagan also created a presidential Commission on Privatization. Its 1988 report Privatization: Toward More Effective Government recommended that the private express statutes, which mandate the postal monopoly, be repealed to allow competition in the provision postal services. That recommendation has not yet come to fruition, but the Commission also recommended that the Postal Service more actively pursue contracting out. Fulfilling that recommendation was facilitated by changes to the USPS Procurement Manual (also in 1988), which made it easier for management to outsource without worrying about “full and open competition.” Outsourcing has become one of the most useful tools for privatizing the postal system without an act of Congress.

Koch Reagan, however, can’t get the credit for initiating the push toward postal privatization. That goes way back, at least until the 1960s, when a Democratic president, LBJ, charged the Kappel Commission to come up with ideas for reforming the Department of the Post Office. The Commission consisted almost exclusively of corporate executives, with retired AT&T Chairman Frederick R. Kappel as its chair. Its recommendations led to the 1970 Postal Reorganization Act, which “corporatized” the Post Office into the U.S. Postal Service.

It was no secret that turning a cabinet-level department into a government corporation would be a big first step toward the ultimate goal, privatization. In testimony before Congress, Kappel testified, “If I could, I’d make [the Post Office] a private enterprise and I would create a private corporation to run the postal service and the country would be better off financially. But I can’t get from here to there.”

For the past four decades, getting from “here” to “there” has remained the Holy Grail for the conservative business elite. All the books and articles put out by the think tanks and their scholars, all the lobbying and campaign contributions, all the organizing and behind-the-scenes networking— the goal has remained constant. The free market ideologues will be satisfied with nothing less than the privatization of the postal system.

In the meantime, the mantra is the same: The Postal Service needs to act more “like a business.” If it can’t be turned into a private corporation, it should at least act like one. If a post office isn’t bringing in a profit (80 to 90 percent of them don’t, at least the way the Postal Service runs the numbers), then close it. If career employees can be replaced by part-time casuals or contract workers, replace them. If there’s “excess capacity” in the system, get rid of it. If there’s a way to undermine the unions, drive down wages, degrade benefits, do it.

As for average citizens, they just don’t seem to be very important to postal management. They are not big customers. The services they might like to see offered at the post office — like an Internet connection or low-cost banking services — aren’t very profitable. Sometimes one even gets the impression that the Postal Service is intentionally alienating its regular customers — causing long lines by reducing the staffing at the windows, not being responsive to complaints, demoralizing postal workers so it’s difficult for them to be courteous. Perhaps management thinks it’s not so bad if people are dissatisfied with the Postal Service. Maybe it will make them happy to hear about plans to privatize.

Dismantling the legacy

In 1970, when the U.S. population was about 200 million and first-class mail volumes were not quite 50 billions pieces, there were around 43,000 post offices (including contract postal units). Today the U.S. has over 300 million people, first-class mail volumes are about 78 billion pieces, and there are around 35,000 post offices. While population and mail volumes have increased by more than 50%, the number of post offices has declined by almost 20%. Yet somehow we are expected to believe that there are too many post offices.

Almost every one of the country’s post offices is a valued part of the community it serves. If you have any doubt about that, just read a few hundred of the thousands of news articles that have come out over the past few months, describing the frustration, anger, and sadness people express when they hear their post office may close.

While the focus has been on the 3,600 post offices on the Retail Access Optimization Initiative (RAOI) list, the Postal Service wants to close half the country’s post offices. The retail end of the business will continue to be moved to the “alternate retail outlets” the Postal Service claims that customers prefer — Wal-Mart, CVS, Office Depot, Costco, your local supermarket. There are already 50,000 alternative places to buy stamps — more locations than there are post offices. Though the Postal Service never labels it as such, this is yet another form of outsourcing and privatization.

The leaders of the Postal Service are committed to dismantling what they call — with considerable disdain — the “legacy” of “brick-and-mortar” post offices. The legacy hangs around their neck like an albatross, weighing them down and holding them back from progressing into a light and fluid post-office-less future. They say “brick and mortar” to make the post office seem old fashioned, passé, a nostalgic icon of a bygone era.

These leaders want the Postal Service be fashionably chic — like those European countries that are closing their village post offices as part of their privatization programs. Headquarters doesn’t like the way people get attached to their post office, or the way the workers in the post office give a face to the postal system and the government. The bonding to a place and the human connection make people care too much about what happens with the postal system as a whole, and that just gets in the way of what postal leaders are trying to do.

During the Great Depression, the federal government built over a thousand post offices, as well as many schools, libraries, and federal buildings. These buildings are usually an important place in a town, and many are on the National Register of Historic Places. Constructing these buildings put hundreds of thousands of people to work; but, they had another purpose.

Koch The New Deal wanted people to feel connected to their federal government, to have faith in its permanence, to see that it was a part of their community. Considerable attention was also given to the architectural design of the New Deal post offices, and most are adorned with beautiful murals depicting scenes from local history. They bring an element of culture to the community, and they remind people of their past.

Now the country is being told that we cannot afford to keep these post offices. Historic New Deal post offices are being closed and sold off, right and left. Recently the Postal Service has closed and/or sold the historic post offices in Westport, Connecticut; Palm Beach, Florida; Ukiah, California; and Pinehurst, North Carolina. Over the coming months, the same will happen to the post offices in Venice and La Jolla, California. The historic post offices in Northfield, Minnesota; Athens, Pennsylvania; and Camas, Washington are also threatened. Many are closed without even a public meeting because the Postal Service is relocating postal services to another location and not actually “closing” the post office.

The Postal Service says these historic post offices are too big — the mail handlers and carriers were probably moved to an annex years ago, thus creating “excess capacity” — so now it does not make any sense to hold on to them, and selling them would bring in much needed revenue. Maybe so, but, there is something else going on.

These post offices are a proud reminder of the great things our government and our postal system can do. These are indeed icons, symbolic of everything the conservative anti-government businessmen have been crusading against since the New Deal. Closing these post offices and selling them to private businesses, to be turned into real estate offices and restaurants and clothing stores, is yet another mode of privatization and sad proof the attack on the New Deal continues to this day.

The whole thing is sad, really. Depriving workers of a decent salary, job security, and the promise of a secure retirement; treating communities as insignificant and undeserving of a post office, transferring historic public buildings to private hands for private profits, putting the interests of the wealthy corporate elite above those of the country as a whole — it’s more than sad, it’s a crime. It will not be good if the nation’s lawmakers continue to permit it to happen.

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