The Daily - Can the Postal Service Survive the Pandemic?

Episode Date: May 27, 2020

The U.S. Postal Service has survived the telegraph, the fax machine and the dawn of the internet. But will it survive coronavirus? Guests: Nicholas Fandos, who covers Congress for The New York Times and Derek Harpe, a Postal Service worker with a mail route in Mocksville, N.C. For more information on today’s episode, visit nytimes.com/thedaily Background reading: With the coronavirus threatening the Postal Service’s financial viability, a rescue for the organization has become a political battle.

Hey, is this Derek Harp? Hey, how are you? I'm good. Derek, I want to start by asking you if you could tell me about your first ever memory of the Postal Service. When I was growing up in rural Davie County, of course, then there wasn't all the video games and computers and everything. We were in the yard with balls and bats. And the summers when we would be home from school, you know, we would be out the mail carrier that came through, you know,

we were always right there to see him. And he'd give me a little piece of candy or a piece of bubble gum or something that we don't do now. But my parents knew him. I got to know him. He was an all-around good guy. And then as I grew up, seeing him, same guy all through my teen years. He wasn't family, but he was close.

You know what I mean? And what was his name? Vernon. Vernon. As a child, he was what I knew to be the Postal Service. The rural carriers in a lot of areas, they are the picture of the Postal Service. Right.

In a place like where you grew up, that is the Postal Service, one man. That was pretty much what I knew growing up, yes. And then when I went to technical school and decided that wasn't what I wanted to do, I told a guy at the post office, I said, look, to do. I told a guy at the post office, I said, look, it seems like I'd like to do what y'all do and talked to him about it and ended up on the route that my parents lived on when I was growing up as a boy. I delivered to that house and I fell in love with it once I started. And I fell in love with it once I started. I wonder if you can tell me about a typical day on your route in Advance, North Carolina. I live in Advance.

I work out of Moxville. And I go into the office each morning. I gather up my mail and gather my packages. And I go to the street with it and start my route. And we do the last mile for some of our competitors because I am in rural America. And when you say last mile, what do you mean? We're constitutionally bound to go to every house every day. In the United States Constitution?

Yes. And the private companies, the Walmarts and the Amazons, and of course UPS and FedEx, they bring their parcels to us to deliver what we call the last mile. So even though we think of those companies as doing their own delivery from wherever a package originates to a person's home, you're saying that in many cases, it's the United States Postal Service, it's you who ends up literally taking it the last couple of miles to the destination. Yes. I feel like that's something a lot of people don't quite understand.

Oh, yes. A lot of people don't quite understand. Oh, yes. A lot of folks don't realize it. Right. A guy asked me at church. He said he was following this package by one of our competitive delivery companies. He was following it to each one of their hubs and their facilities. And then all of a sudden it said, it's at the post office. And then it said, it's out for delivery at the post office.

They said, then the mailman brings it to my door. What's the deal? And I said, well, we carry the last mile for some of the companies to get it out there. Right. And if you weren't there, what would happen to those packages? Where would they go? The private companies would have to deliver them if the post office wasn't there. And if it's a long ways away from town, out in rural America, it's not profitable for them to go. So since the pandemic started, I have to imagine there have been significant changes to your routine, right? I mean, how is delivering the mail different now?

Well, now, of course, we have PPE, social distancing, post offices supplying the mask, the gloves, or I was carrying a paint stick some days ringing the doorbell. A paint stick? Yeah. They didn't have to worry about me touching their doorbell or me worry about their doorbell. And I'm carrying a lot more essential needs. I think we're always essential. I think we're always essential. But now, with folks not being able to get out or getting out, we've stepped it up, especially the ones that have underlying health issues. There's a lot of essential needs there that we're meeting now. And I sense that from a lot of them in the past few weeks, I would depart from their porch and they would step out and call my name and say, Derek, we appreciate you. And that means a lot. And what's your sense of how the Postal Service is doing in this moment? Well, what I read and hear, it's not good that it's crippled us to a degree,

but I just hope that it can continue on. It's the number one loved entity of the government. And I just don't understand how we could not be there for the American citizens. From the New York Times, I'm Michael Barbaro. This is The Daily. Today, America's most beloved government agency has never been more vital. And yet, as thousands of companies receive federal bailouts, the United States Postal Service finds itself at the back of the line. My colleague, Nick Fandos, on why that is.

It's Wednesday, May 27th. Nick, tell me about the history of the U.S. Postal Service. The Postal Service traces its roots back basically as far or farther than the country itself. In the 1770s, Benjamin Franklin, everybody's favorite founding father, was actually appointed to be the first Postmaster general of the new United States. Postal business is transacted through some 47,000 post offices, contract stations, and branches in 42,000 U.S. communities. And over the years, it becomes what the founding fathers wanted it to be then,

which is something that could connect the country, allow Americans to correspond with each other, to business with each other, you know, basically bring these disparate colonies and communities together. Biggest retail business in the world today is the United States Post Office, devoted exclusively to the service of its owners, the American public. It has grown into basically the most trusted government service, this kind of ubiquitous and beloved face of the federal government that is massive in its own right. Today, postal employees must cope with an ever-increasing avalanche of mail, which in the past decade has quadrupled in volume.

It's a big, complex business that employs over 600,000 people. You know, if it was a private company, it'd be easily on the Fortune 500 list. Though 90% of its income is derived from the sale of stamps, the post office is also the largest savings bank in the country and the largest agency for a kind of money-making engine for the government, it did for much of its modern life either break even or make modest profits based on the sale of postage. So when does that all start to change so starting in the early to mid 2000s there is a relatively quick succession of major changes in the kind of environment for the postal service some of which are foreseen and some of which are not that begin to dramatically erode its finances. The first one is this large change that we're all familiar with in consumer habits and the way that people communicate and spend money.

And that's just the advent of the kind of like everyday world wide web. You can now glimpse the future with nothing more than a modem, a phone line, and a few dollars a month. And then there's email. Email? I heard that's really neat. My cousin has a pen pal in Sweden and they write back and forth and it transmits right away and doesn't cost anything. Yeah, you can even talk with people all over the world on chat lines. These things directly replace a lot of the postal services bottom line. Personal correspondence, billing, business solicitations and things like that. And so you start in kind of the early years of the new millennium and the

trend picks up to see a decline in overall mail volume. The house will be in order. And then a few years into this trend, Congress makes another consequential decision. This legislation mandates transparency in the services, finances, costs, and operations, creates a modern system of rate regulation, establishes fair competition rules, and a powerful new regulator to oversee operations. I urge my colleagues to adopt. The Postal Service is financing itself. It's self-sustainable. But Congress sees on the horizon an issue with this very large, relatively well-paid federal workforce hitting retirement age.

Those in favor, say aye. Aye. Those opposed, no. The bill is passed, and without objection, the motion to reconsider is laid upon the table. And it decides that the Postal Service ought to set aside money in advance to fund the health care benefits of all of its retirees. This is, in actuality, billions of dollars a year on top of its normal operating costs that the Postal Service needs to start setting aside, basically. And that proposition makes a lot of sense in the world where the Postal Service has

a healthy business model, is in the black and bringing in revenue. What they can't foresee is the financial crisis. The U.S. Postal Service says it will be insolvent next month and wants to lay off 120,000 people. By the end of September, the Postal Service will be on the brink of defaulting on all its employee pension obligations, unable to borrow any more money, and only have enough cash to cover one week of operations. So businesses are spending less money on mail. Individuals are spending less money. And the Postal Service saddled with this new obligation to fund its retirees' health care well into the future and battling a recession that any business was struggling with at that time finds itself very quickly moving further and

further into the red. The Postal Service adapting to this economy right now surely won't be easy. Postal Service adapting to this economy right now surely won't be easy. So, Nick, I have to imagine if that financial crisis hurts the Postal Service, that this one that's now underway has just clobbered them. Absolutely. I mean, the agency never really fully recovered or regained its footing. And here, basically the whole, you know, the whole world and the economy, you know, shuts down overnight and there's a precipitous decline, 5% at first, 10%, 15, 20, 30% of overall mail volume. Wow. So it may seem like you're getting more packages than ever and that the postal service, you know, your mailman is the one person that keeps coming to your building and your door. And there's kind of a greater awareness about it. And package volume is up overall, which has self-offset some losses.

But for the postal service, you know, where they really make their money, and it's helpful to think about the mail you get at home, are the kind of solicitations, the bills, the flyers, the things that form the bulk of that stack if you bring letters into your house from the mailbox. And that's what has contracted at an alarming rate. And those losses have not, at least to this point, been able to be offset. And so the Postal Service begins to put together projections that say, And so the Postal Service begins to put together projections that say if these trends continue, we could be looking at a volume in mail decline by half by the middle of the summer. look, if you don't come and bail us out right now, if you can't help us get a infusion of billions and billions of dollars, we could be out of cash by the fall, and that will threaten service and threaten the very viability of this thing that Americans seem to be more cognizant of

and more reliant on than they have been in a really long time. We'll be right back. So I have to imagine that this pretty beloved institution is at the front of the line for any kind of bailout at a moment when Congress is handing out money to a lot of businesses across the country. I think that's a fair assumption. And so we saw in March when Congress is racing to put together the CARES Act, its big $2 trillion relief bill to try and prop up the economy. Democrats and Republicans get kind of a handshake deal to send it $13 billion in direct funding that will help it keep operating through the summer and the fall and hopefully weather the worst of the crisis. But in the middle of these high stakes negotiations, the White House comes and out of trillions of dollars of spending, points to the United States Postal Service and says, uh-uh, we're not going to support a bailout. We're not interested in including that in this bill.

And you better not put it in our way because we don't want to have a problem. And why is that? Why won't the White House bail out the Postal Service? So it actually starts with the Washington Post, the newspaper that the president feels has covered him too critically, too unfairly. He perceives as kind of one of his biggest enemies in Washington. That paper happens to be owned by Jeff Bezos, the founder and chief executive of Amazon. And Amazon, as we know, is heavily reliant on the United States Postal Service to deliver many of its packages all across the country. The details of its contracts are kept

private, but the Postal Service does quite a bit of business with Amazon. What's Amazon done that bugs you, sir? Well, you take a look at the post office. And this, as much as anything else, is what has informed Trump's view of the postal service. And the post office is losing billions of dollars and the taxpayers are paying for that money because it delivers packages for Amazon at a very below cost. And that's not fair. He's of the opinion that Amazon is basically ripping off the Postal Service. And Amazon has the money to pay the fair rate at the post office, which would be much more than they're paying right now. That it's getting its packages delivered far too cheaply and that Bezos is being enriched off of, you know, this government service.

Amazon is going to have to pay much more money to the post office. There's no doubt about that. And so he's basically put down a line in the sand and said, unless the postal service agrees to jack up prices 400 or even 500 percent on Amazon packages, that's quite a lot of money. I'm not going to give them a cent. I'm not going to bail them out. I won't give them a loan. I'm not going to do anything for them because they're being such suckers. Wow. So the president has specifically linked his reluctance to assist the Postal Service financially with his frustrations with Amazon and Jeff Bezos. Absolutely. There is, though, a second thing going on here. And this is kind of this other interest is maybe better represented by Steve Mnuchin, who's the Treasury Secretary.

So what Mnuchin and some of these others want are basically to change the Postal Service in ways that will cut its costs, that will increase its prices, and kind of shrink its footprint, both so that it can meet its own financial obligations and start to address this big debt that it's racked up, but also in ways that will allow its private competitors like FedEx and UPS to get a little bit more of an upper hand in the market. I mean, they would say that this is about competition and that the Postal Service has been given some unfair monopolies in certain

areas or, you know, has been allowed to keep its rates too low in a way that harmed these private businesses and needs to be changed in a way that will make the whole field more competitive. So this is all in the White House's mind when Congress comes to it a few weeks ago and says, we want this money to bail out the ailing Postal Service. And all of a sudden, they realize that they're presented with a real new opportunity to put a mark on the Postal Service in this moment of flux that could effectuate a lot of both what President Trump and what Mnuchin and his allies want to see. And how? How could this be an opportunity for the White House? So Mnuchin recognizes that the Postal Service is in a bad way, that it has a real financial need.

And if instead of giving it a no-strings-attached bailout, the Treasury Department instead gets authority to give it a loan, then he as Treasury Secretary could essentially dictate terms, changes that the Postal Service would have to adopt if it wants to get this loan money from the Treasury Department. And so it gives him significant new leverage to try and put in place some of these long-held ambitions that he has for the Postal Service. Most explicitly, this question of rates. Mnuchin wants more, not only rate increases, but increases where Amazon would essentially have to pay more. But he wants to be able to look at those contracts himself and make sure that they

are meeting, I suppose, his standard for what that ought to look like. Nick, is it possible that that's exactly what the Postal Service should be doing? I mean, I'm mindful of the fact that Amazon, for example, is the country's most profitable business, it could probably stand to pay higher rates. And would that be better for the Postal Service? It's a very good question, and that's very possible. At a time when the volume of packages, because of the pandemic, is increasing significantly at the Postal Service, I mean, this could be an area to really close some of the revenue gap. But there's a couple of things to keep in mind. One, there's a big difference between modest changes and reevaluating a contract to increase prices,

maybe 10 or 15%, I don't know, and what President Trump is talking about, which is a wholesale increase of four or five fold so that if a package today costs eight bucks to ship, it's going to be 32 bucks or higher. And that kind of thing, you know, independent business analysts will quickly tell you is kind of ludicrous. Like it just won't work and it would probably backfire on the postal service because Amazon could easily find a way to deliver that package cheaper. It's just, it's too drastic an increase all at once. And the other thing to keep in mind that, you know, the president's comments often obscure is that these contracts with companies like Amazon, while they are secretive, while we the public haven't seen them, they are certified to be profitable. You know, they are making the Postal Service money. So the idea that the Postal Service is just being

totally ripped off by Amazon isn't exactly right either. Nick, how does this approach from the White House sit with congressional Republicans who presumably represent a lot of Americans who like the Postal Service? who presumably represent a lot of Americans who like the Postal Service? So this is the biggest question for the Postal Service right now, because if you have the White House on one side and Democrats on the other, it's really congressional Republicans that could tip the outcome here one way or another. And, you know, they seem to be split in their own way.

Traditionally, Republicans, particularly those that represent rural states or districts, places like Maine or Alaska or just congressional districts that are outside of big cities all over the country, have been big supporters of the Postal Service because their constituents are heavily reliant on it. And so, you know, they have generally been on the side of giving the Postal Service what it asked for. I mean, take the case of Dan Sullivan, who is a Republican senator from the state of Alaska, a very rural state, heavily reliant on the Postal Service, who's up for reelection this fall. Sullivan was not too long ago actually at the White House. The Postal Service is a joke. When President Trump went off on a riff against the Postal Service and about how they were being ripped off by Amazon.

The Post Office, if they raise the price of a package by approximately four times, it'll be a whole new ballgame. He stood there silently watching it and then hearing the view of the president of his party. If they don't raise the price, I'm not signing anything. A short time later, speaking with constituents back in Alaska in a town hall. I'm concerned about the post office and what's going on with the post office. And I'm basically expressed the view that many Republicans have that other states might be like, oh, wait, why can't you just drive there?

Well, you guys all know why we can't just drive there, because so many of our communities don't even have roads. So, you know, I recognize how important the Postal Service is to my state, and I'm not going to let anything happen to it that would jeopardize the ability of the mail to reach all of you. We are defenders of all of these programs because you can't be treated differently just because you're an American and you live in a village without a road. On the other hand, you know, there are Republicans in Congress that I think

are sympathetic to that point of view, but feel like, you know, the Postal Service has been losing money for quite a long time, that its business model wasn't working even before the pandemic, and that if they're going to be giving them a bunch of money, if they're going to be asking taxpayers that don't normally fund the Postal Service to be chipping in billions of dollars, they want to see some changes from it, maybe changes that look like what the White House wants along the way. So where does this all leave the post office, Nick? I mean, the White House is saying, take this loan. Sounds like the post office is not thrilled about the conditions that would be attached to it.

I suppose it could just not take the money, or maybe it could wait and see whether the election changes the composition of Congress or even the White House. I think all of those things are possible. But another interesting thing has happened as this whole dynamic has played out, which is that there have been some pretty significant personnel changes at the top of the Postal Service. President Trump, as is his prerogative, named in recent weeks a new Postmaster General, not somebody that comes from within the agency, but is a Republican donor who comes from private business.

During the pandemic. During the pandemic, who is believed to be much more sympathetic to the president's views and Secretary Mnuchin's views. And so there's a possibility that the Postal Service could ultimately decide either that they take the loan or maybe financial conditions improve enough that they don't need to take the loan, but they still make some of the kind of changes that the White House is asking for, regardless of whether or not Democrats want them to take them or their own workforce wants them to take them. It may well be that what the president has finally succeeded in doing is putting a kind of It may well be that what the president has finally succeeded in doing is putting a kind of like-minded or sympathetic leadership team in place, and that's what it takes. And if the Postal Service doesn't take this money, how much longer can it operate as it currently does?

So obviously in the context of the pandemic, a lot of things are subject to change. But by the Postal Service's own projections, it could run into serious cash flow problems as early as September this fall. And without a major infusion, either in the form of bailout from Congress or a loan coming from the Treasury Department, it would struggle to meet its obligations and put even delivering the mail in jeopardy. Nick, thank you very much. Thank you, Michael. Derek, why do you think it is that the federal government is offering financial assistance to many private companies across the U.S. economy and not to the Postal Service? What do you think that the rationale is? I know I've read some things about us not charging enough for some of the package business, but the Postal Service is not a for-profit private company like some of the others.

The Founding Fathers, I don't think, ever meant for it to be that, according to what I've read. The post office surviving, I hope that it survives at a uniformity that every American deserves. Well, Derek, we really appreciate you spending time with us and wish you the best of luck on your routes and good health.

I certainly appreciate that. Good talking to you. Thank you very much for the opportunity. We'll be right back. We'll be right back. Here's what else you need to know today. The disease can jump up at any time. We cannot make assumptions that just because the disease is on the way down now that it's going to keep going down

and that we're going to get a number of months to get ready for a second wave. It's going to keep going down and we're going to get a number of months to get ready for a second wave. The World Health Organization is warning that even before a second wave of infections may arrive in the fall, there could be a surge of infections in the coming weeks as measures to contain the virus are lifted in places like the U.S. The WHO described such a surge as a second peak. We may get a second peak in this wave. This happened during pandemics in the past. It certainly happened in the pandemic of 1919 and the Spanish flu.

We got a second peak, not necessarily a second wave. And encouraged countries to take whatever public health steps are necessary to avoid it. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.