The Daily Signal - Why Bailing Out the Postal Service Isn't a Good Idea

Episode Date: May 13, 2020

The U.S. Postal Service is feeling the economic fallout of the coronavirus pandemic. It recently asked for $75 billion in taxpayer funding. President Donald Trump said that any bailout must be conditioned on reform. Romina Boccia, a fiscal and economic expert at The Heritage Foundation who focuses on government spending and the national debt, joins The Daily Signal Podcast to discuss why a bailout of the USPS isn't the way to go, what reforms the USPS should adopt, House Democrats' request for $25 billion for the USPS in their fourth coronavirus package, and more.\ We also cover these stories: House Democrats release details about their $3 trillion Coronavirus relief package, the fourth major spending proposal amid the Coronavirus pandemic. Dr. Anthony Fauci is warning of the potential dangerous consequences of reopening America too soon.  Trump tweets his support for Tesla CEO Elon Musk, who opened his factory again this week against local lockdown orders.  Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Daily Signal podcast for Wednesday, May 13th. I'm Virginia Allen. And I'm Rachel Del Judas. Like many other entities, the U.S. Postal Service is feeling the economic strain of the coronavirus pandemic. It recently asked for $75 billion in taxpayer funding, and President Trump recently said that any bailout must be conditioned on reform. Ramina Bacha, the leading fiscal and economic expert at the Heritage Foundation, who focuses on government spending and the national debt, joins me, on the Daily Signal podcast to discuss why a bailout of the USPS isn't the way to go. Don't forget, if you're enjoying this podcast, please be sure to leave a review or a five-star

rating on Apple Podcasts and encourage others to subscribe. Now onto our top news. House Democrats have put out details for their three trillion coronavirus relief package, the fourth major spending proposal amid the coronavirus pandemic. A group of heritage researchers write in the Daily Signal that the bill includes over one trillion in aid to state and local governments, with a vast majority being unrestricted aid that does not directly respond to costs incurred in the fight against COVID-19. It would also lead to a long-term increase of the federal unemployment bonus, the Heritage Researchers write. The bill would extend the misguided and harmful $600 unemployment bonus through January 2021,

with an additional extension possible through March of next year. It is one thing to provide short-term in targeted unemployment benefits during forced shutdowns, but providing a year's worth of unprecedented additional unemployment benefits up to an extra 30,000 or more per worker, would be devastating to our economy, potentially even threatening our ability to combat COVID-19 and America's supply of essential goods and services. It also includes a provision for voting by proxy, according to Minority Leader Kevin McCarthy of California. Here's what he had to say about it, via Fox News. This is a Pelosi-led pipe dream written in private.

They even want to change the process, how you vote for it, by proxy. You know, they're trying to make a pandemic political. And the one thing we have found is we have passed $3 trillion already. On top of what the Fed is doing, another $4 trillion, there's $7 trillion going into the economy. I think it would be appropriate that we make sure that money gets out into the businesses. Every time we move to pass a bill, Nancy Pelosi has held it up. And every time she held it up, more people were laid off. And now she wants to write a bill privately, not allow Congress back into the Capitol.

You go to Starbucks and get a tea. You go over to the Senate and see them working. But not the Capitol, not the House. Why? Because Nancy wants to write this in private and try to put it on the floor and change 200 years of history on how people vote for the bill, just so she could have 200 votes in her public. pocket by a proxy and passed something that never had one hearing, never had any input, and has no accountability. I think the founders would be appalled at what they're seeing today in

Congress. Dr. Fauci is warning of the potential dangerous consequences of reopening America too soon. During a video hearing on Tuesday with the Senate Health Committee, Fauci was questioned by Washington Democratic Senator Patty Murray on what the consequences might be. be if communities in America open up too quickly and don't follow the recommended phase reopening guidelines. Here's what Fauci had to say in response via NBC News. The consequences could be really serious, particularly, and this is something that I think we also should pay attention to, that states, even if they're doing it at an appropriate pace, which many of them are and will, namely a pace that's commensurate,

with the dynamics of the outbreak, that they have in place already the capability that when there will be cases, there is no doubt, even under the best of circumstances, when you pull back on mitigation, you will see some cases appear. It's the ability and the capability of responding to those cases with good identification, isolation, and contact tracing will determine whether you can continue to go forward as you try to reopen America. So it's not only doing it at the appropriate time with the appropriate constraints, but having in place the capability of responding when the inevitable return of infections occur. Senator Rand Paul of Kentucky had some blunt words for Dr. Fauci during the Task Force member Senate testimony on Tuesday. Here's what Paul had to say

via C-SPAN. And I think the one size fits all that we're going to have a national strategy, and nobody's going to go to school. It's kind of ridiculous. We really ought to be doing it, school district by school district, and the power needs to be dispersed because people make wrong predictions. And really the history of this when we look back will be of wrong prediction after wrong prediction after wrong predictions, starting with Ferguson and England. So I think we ought to have a little bit of humility in our belief that we know what's best for the economy.

And as much as I respect to you, Dr. Fauci, I don't think you're the end hall. I don't think you're the one person that gets to make. a decision. We can listen to your advice, but there are people on the other side saying there's not going to be a surge and that we can safely open the economy. And the facts will bear this out. But if we keep kids out of school for another year, what's going to happen is the poor and unproligeed kids who don't have a parent that's able to teach them at home are not going to learn for a full year. The Supreme Court spent nearly three and a half hours in debate on Tuesday over the potential release of President Trump's financial records, three different majority

Democratic House committees have issued a subpoena for eight years of President Trump's financial records. The House members calling for the release of the documents say that the records are necessary for making legislative decisions on issues such as bank loan practices, campaign finance rules, and efforts to prevent foreign influence in elections. Trump's lawyer, Patrick Strawbridge, warned that these subpoenas are overreaching. They are an obvious distraction. They are going to multiply if this court accepts the path that the House is attempting to lay. President Trump is speaking out in support of Alon Musk, the CEO of auto company Tesla. Musk tweeted on Monday that Tesla is restarting production today against Alameda County rules.

I will be on the line with everyone else. If anyone is arrested, I ask that it only be me. On Tuesday, Trump tweeted, California should let Tesla and Alon Musk open the plant now. It can be done fast and safely. Anti-Semitic incidents hit a record high in 2019, according to a recent report by the Anti-Defamation League. Last year, there were 2,107 reported events of anti-Semitic harassment, vandalism, and assault in America. The Anti-Defamation League says this is a 12% increase from 2018's 1,879 reported. cases. The League CEO Jonathan Greenblot said in a statement, this was a year of unprecedented

anti-Semitic activity, a time when many Jewish communities across the country had direct encounter with hate. This contributed to a rising climate of anxiety and fear in our communities. We are committed to fighting back against this rising tide of hate and will double down on our work with elected leaders, schools, and communities to end the cycle of hatred. Now stay tuned for my conversation with Romina Bacha on why bailing out the United States Postal Service isn't a great idea. The Daily Signal is doing all we can to provide you and your family with the information you need on how to stay healthy through the coronavirus pandemic.

Social distancing is one of the best proven ways you can protect yourself and your loved ones. Dr. Burks, Dr. Fauci and U.S. Surgeon General Adams explain why. Take a listen. Social distancing is what we refer to when we ask people to say at least six feet apart. Staying away from people whom you might get coronavirus from or who are at high risk and whom you might spread coronavirus too. You can socially distance yourself from people in social settings by not going to bars, not going to restaurants, not going to theaters where there are a lot of people. It all just means physical separation so that you have a story. space between you and others who might actually be infected or infect you.

I'm joined today on the Daily Signal podcast by Romina Basha. She's the leading fiscal and economic expert at the Heritage Foundation, and she focuses on government spending in the national debt. Ramina, it's great to have you on the Daily Signal podcast. Thanks so much for having me, Rachel. Well, thank you for being with us. We appreciate it. So you just published a paper for Heritage.org. Congress should free the Postal Service, not bail it out.

So why shouldn't Congress bail out the post office just to start off? There's a couple of reasons. But first of all, let's think about what the post office does, the postal service. It delivers our mail. It delivers packages. It also handles many administrative tasks. Like you might go to the post office to request a passport if you're looking to travel abroad, which sadly not many of us will be able to do because of the coronavirus.

But in the past, that was something people did there. The Postal Service is intended to be a self-funded entity. It is supposed to run like a business, but Congress has tied it down with regulations and laws that have made it impossible for the Postal Service to run as a competitive and profitable business, especially in the 21st century where so much of our communication occurs digitally. So to the extent that the Postal Service is not able to be profitable because it is being restricted by congressional laws and by regulation, if Congress simply freed the post office, the postal service, they wouldn't need to bail them out because they have a good business model.

They just need to make certain adjustments so that their business model can work and be sustainable. Right now they're losing tens of billions of dollars, and they've had 13 years of consecutive losses to the tune of $80 billion. dollars, it's time to set the postal service free so they can operate sustainably and profitably without taxpayer bailout. Well, speaking of this situation of potential post office bailout, Politico is reporting that House Democrats' $3 trillion coronavirus relief package, which is the fourth relief package for the coronavirus pandemic, it includes $25 billion for the Postal Service. What are your initial thoughts on this development? Yeah, that's completely unnecessary. The Postal Service, first of all, doesn't need a bailout right now.

They're not actually running out of money. They have told lawmakers that they were, but last week we saw the financial reports from the Postal Service and it showed that they have enough cash flow to keep them going until at least May of 2021. They also received a $10 billion loan from the Treasury as part of the CARES Act that they haven't tapped yet. And if you look at the Democrats bill,

They actually, in addition to the $25 billion bailout, would also allow the Postal Service to use that $10 billion loan that they've already received to pay down existing debts instead of using it for current operational expenses. So this is clearly a handout for the postal workers unions and not so much about making the Postal Service actually operate sustainably and with the American consumer in mind. We shouldn't bail out the Postal Service. That should be a non-starter. And President Trump has rightfully said that he would not sign anything that provides aid to the Postal Service without reforms. And that's really critical. There's so many ways that the Postal Service could be operating better. And a bailout is just going to lead to more bailouts if we don't make those reforms. So if Congress does not free the United States Postal Service from the government, what sort of secondary reform should happen. Ideally, in the long run, the best solution is for Congress to set the postal service free so they can operate like any other business. But short of that, if Congress is not willing to give up control over the postal service for political reasons, they should at least clarify what the universal service obligation actually entails instead of using it as a way to block

otherwise sensible and good reforms that would allow the Postal Service to reduce costs and operate more sustainably. And a lot of that comes down to allowing the Postal Service to streamline some of its services. Because of the decline in letter, mail delivery, a majority of Postal Service letters delivered these days are actually junk mail, their advertisement. And it doesn't make sense. to require the Postal Service to deliver to just about every address in the entire country, including in rural areas, at least six days per week. In many other countries, it is common to deliver the mail three times a week. The Postal Service has even just asked to be allowed to only deliver the mail five days a week. That should be a reasonable proposal that could save

them roughly a billion and a half annually. But in addition to reforms that have to do with delivery, how they deliver mail and packages, how often they do it. There's also lots of reforms that could be made to their facilities. There are a large number of post offices that see very little foot traffic where it doesn't make sense to keep them open. These should be closed, especially if there are other options and post offices nearby. Also, the post office could innovate and put its services within existing structures, like, like in a mall, or they could offer services inside of a grocery store. It's not necessary for them to maintain all this separate infrastructure having their own buildings.

To the extent that they have buildings in very nice areas, like in urban areas, they should leverage those assets more fully by, for example, allowing the building of commercial and residential spaces, say, above a ground-level post office so that that real estate can be put to fuller use. But all of these reforms are really tinkering around the edges because the big elephant in the room is that the postal services compensation costs, especially retirement and retiree health benefits, are making up a disproportionate share of the post offices' costs.

Their compensation costs alone are about 90, 90% of their revenues this year. That is huge and it has to do with postal workers benefiting from similar retirement systems as other federal workers, but they also are allowed to collectively bargain, which means they're represented by unions. And compensation costs are heavily inflated. And especially when it comes to benefits, the Postal Service is facing more than $130 billion in unisonable. unfunded obligations, and they failed to make pension contributions for several years now, which could potentially leave taxpayers and other federal workers holding the bag,

paying for those benefits that have been promised to postal workers, but for which the postal service hasn't made provision to pay for. Well, Romina, that was actually one of my next questions. In your report, you talk about how compensation costs for 2019 was about 97,000 per postal worker and private sector compensation in 2019 was around 69,000. How would you suggest reforming these salaries and pensions, as you mentioned, just diving into this a little bit more, how would you suggest reform so that compensation is more worthwhile? Yeah, so first of all, if the postal service were operating like an actual business, they would have control over

their compensation costs and they could decide what they could afford and compensation costs should reflect the postal services ability to pay for those costs. There's no such relationship today. And Congress actually needs to make changes in law to change postal workers' compensation because, again, they've retained control over most of the postal services operations. So short of Congress, again, setting the Postal Service free, which would be ideal so they could determine their own compensation costs and benefits to attract a qualified workforce, Congress should consider making reforms to the Postal Service that align its compensation more with that of the private sector and also reflect some of the positive good changes that have already been made in other

aspects of the federal employee retirement system. And that comes down to shift more of the pension benefits from defined benefit pensions towards defined contribution benefits, like a 401K or the Thrift Savings Plan that federal workers enjoy. That means that those benefits are directly funded because they're based on contributions. For the retiree health benefit, this is one that the Postal Service has to pre-fund, and they've fallen far short, but they are only allowed to pre-funded by buying treasury bonds, and those bring really, really small returns,

which means that the Postal Service has to set more money aside to be able to pay for those benefits than they would need to if they were able to invest the money into, say, an index fund that would bring about greater returns that align more with a mixed stock market, and bond portfolio. So they should be allowed to invest those retiree contributions in a more diversified mix of assets so they can bring about greater returns. But we really also need to ask more broadly if it makes sense to have a retiree health benefit and if the Postal Service can afford to continue

to provide it, that we should also think about asking those postal workers that want to receive this benefit to pay some of their own premiums and make contributions towards that fund, because as it's currently structured, it is not affordable. And lastly, looking at paid time off and how that's handled, the Postal Service workers enjoy much more generous pay time off than most Americans and other federal workers. Again, here, we should be bringing benefits in line with the private sector and also, potentially shifting to a more flexible paid time off system that's not separating out sickly from family leave from vacation time but just flexible paid time off that that will be attractive

to postal workers and will be able to so they can recruit and also retain a qualified workforce for their operations for me know when it comes to these operational reforms that you're mentioning are there any other ideas that you'd like to highlight when it comes to these reforms that can be made to just really improve operations. Yes, I think one of the greatest opportunities is to expose the Postal Service to competition, not just in package delivery, but also in letter mail delivery. The United States Postal Service benefits from a monopoly, both in the letter delivery space, but also over the use and access to Americans mailboxes.

and that has prevented innovation. If you think about how many of us receive packages and that UPS say or other delivery services like FedEx have to drop them at the front door, why don't we have larger mailboxes, if you will, package boxes that can hold those things? And to some degree, it's because of the monopoly that USPS retains over our mailboxes. through competition and if Congress gave USPS the operational flexibility to manage itself profitably and sustainably, I think competition has great potential to provide a quality service that is affordable, but that's also sustainable and that doesn't have to rely on taxpayers in order to survive. That's where the Postal Service is right now. They're being tied down by

congressional regulations. They've been politicized. They suffer from excessive compensation costs and unaffordable benefits, and only Congress can set them free or short of that, give them the flexibility so they can manage their own operations in line with their revenues and continue to provide a valuable service to Americans all across this country without having to ask for bailouts repeatedly. Well, towards the end of your report, and I think you might have hit on a few of them already, but you outline about five different points on what Congress can do to save the USPS. So if there's like one or two points from that that you haven't highlighted that you would like to, what are one of those? I think most importantly, we should reconsider the universal service

obligation, which Congress has used as a reason to block otherwise sensible operational reforms, like reducing the number of post offices, reducing the number of delivery days, and also pursuing other innovations like delivering mail and packages to a collection site rather than to every household. But the big savings will truly come from compensation and benefit reforms.

And I think it's good to see that there are some bipartisan proposals, including allowing USPS to invest some of the pre-funding that's required for the retiree health program in index funds so they can reap high returns. We should build off of those bipartisan reforms to ultimately move closer to privatization where USPS can operate itself sustainably and profitably, which shouldn't be scary at all because many other countries have already privatized, their postal services, Germany and the UK come to mind, for example. And those privatizations have been a real boon to consumers and to those operations. If people are receiving their mail and packages,

there's been innovation in the space. I think there's great potential for the postal service if Congress will just set it free. So, Ramina, big picture, what might happen if the United States Postal Service isn't reformed? Yeah, the danger is that because they cannot afford their benefit plans that taxpayers and other federal workers may have to pay those costs because the benefits continue to accrue for postal workers, even if the postal service is not making the required payments. This is according to law. So that puts taxpayers and other federal workers in those retirement systems at risk of having to bail out. postal workers' benefits. But in a more immediate term, if the Postal Service actually runs out of money, there is a risk that they might go bankrupt and then they wouldn't be able to continue operations.

It's unlikely that Congress and the administration would simply allow the Postal Service to go bankrupt. But I think the longer we wait to make reforms, the more likely it is that the Postal Service will require a large bailout in order to avoid bankruptcy. So it would be much better to make reforms now, move in a direction where the Postal Service can better manage itself, make these operational reforms, reform the compensation systems, so that the service can be long-lasting and sustainable

and operate profitably. One of the recommendations that President Trump has made, he believes that the Postal Service isn't charging enough for its package services. Say, for example, when it delivers packages for Amazon, the president has called on the postal service to increase its rates, he said, by four or five times. There might be a real issue here.

So one of the things that Congress could do now is to audit the postal shipping rates to clarify whether the package costs that USPS is charging actually reflects those operational costs. Because the issue is if you have a monopoly service, which they have when it comes to letter delivery, and then you also have to compete in the packaging market, if USPS using its monopoly over letter delivery to cross-subsidize its operational costs when it comes to packages. If that's the case, that would be very problematic because they're required by law to operate competitively with FedEx and UPS. the other providers in the packaging space. So that's something where the administration has pointed

out a potential problem that could lead to broader reforms, not just when it comes to how much USPS charges for its services, but importantly, we need to reduce its costs, especially compensation and benefits. Well, if you would all like to read more, you can find Romina's report. Congress should free the postal service, not bail it out, on heritage.org. Ramina, thank you so much for joining us. today on The Daily Signal Podcast. Thanks for having me. And that'll do it for today's episode. Thank you for listening to the Daily Signal podcast.

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