Will Darrell Issa Be Allowed To Kill Off The U.S. Post Office This Year?
Last week when Blue America endorsed Toi Hutchison for Jesse Jackson Jr.'s old congressional seat (IL-02), she told first Nicole Sandler's listeners and then Crooks and Liars readers what a strong supporter of the post office she is.
And no on the crusade against the Post Office-- 6 day delivery! Seriously though-- I represent rural areas that depend on the post office to be open and working six days a week. I don't agree with attempts to cut that short.
...In mid-November, the postmaster general, Patrick Donahoe, reported that the post office had lost $15.9 billion for the year and was operating on just a few days' cash flow, having reached its legal debt limit. He all but begged Congress to take action. Mail was down 5 percent from the year before, and wages and benefits and other worker-related costs were an unsustainable 80 percent of the postal service's $81 billion operating expenses.
But nobody wants to hear that more than 70 percent of those losses were for extraordinary budget obligations mandated by Congress, or that the postal service posted its thirteenth-straight quarter of productivity gains. In a nation obsessed with cutting budgets and government fat, there is no better target than the federal postal worker who will have her route delivering paper mail for life, and then try to pass it on to her daughter.
Eighty-five percent of America's critical infrastructure is controlled by the private sector. We let private companies fight our wars; we have 110,000 defense contractors in Afghanistan compared with 68,000 American troops. We let private companies lock up 16 percent of our federal inmates and instruct 10 percent of our students. They provide our phone service and Internet access and air travel and hospital care. Surely, many believe, private companies can deliver our mail better and faster and cheaper than the federal government.
If you work with actual pieces of mail-- if you are a carrier, a handler, a clerk, but not an administrator-- it is said that you "touch the mail." The postal service has more than half a million full-time workers and a hundred thousand contract employees, the vast majority of which are mail touchers. ...That we're sending less mail is not debatable. Nor is it debatable that the post office as we've known it for the past forty years, one built for speed and brute force in sorting and distributing an ever-surging flood of paper documents, is outdated in our digital world.
This isn't a story about whether we could live without the post office.
It's about whether we'd want to.
...When Donahoe testifies on Capitol Hill, as he has done several times over the past two years, to describe just how dire the postal service's situation is-- losing $25 million per day!-- he talks in even, polite tones. Because there he's not telling, he's asking. Five hundred thirty-five members of Congress ultimately decide how to run the postal service: what it can charge for postage, which services it can offer, how it operates. Donahoe is the person who implements their policies, despite the postal service not being a federal agency or taking any taxpayer money; it runs solely on the postage it sells-- or lately, doesn't.
Take the most contentious issue: the seventy-five years' worth of future-retiree health benefits that in 2006 a lame-duck session of Congress legislated the postal service prepay over the following ten years as part of a broad overhaul of the way the postal service operates. No other government agency must do this, and most private companies would have spread those payments over forty years. But the postal service was flush at the time, and Congress figured out that since health-care payments are counted as general government revenue, it could use them to prop up its own books. (Five-and-a-half billion dollars a year coming in from the postal service was $5.5 billion less Congress would have to cut elsewhere to remain budget-neutral, as the Bush administration was demanding.) But then the economy crashed and with it the amount of first-class mail being sent around the country. Suddenly a law designed to keep the postal service solvent in the long term began bankrupting it. Of the $15.9 billion the postal service lost last year, 70 percent-- $11.1 billion-- was in future health-care payments.
...There's a story Donahoe tells Congress and reporters and pretty much anyone else who will listen. It's about what it was like growing up as a boy in Pittsburgh, how steel was king, the U.S. Steel Tower reaching higher than any other building in the state. There was pride in that, and in the mills, and in the middle-class jobs they produced. The steel industry built not just Pittsburgh but the entire country. The railcars and railways, the skyscrapers that made New York the capital of the world, the millions of Buicks and Pontiacs that rolled out of Detroit. Hell, with three hundred thousand men and women working twenty-four-hour shifts making ships and weapons in the 1940s, Bethlehem Steel even beat Hitler.
But there's a second half to the story-- about what it was like watching the industry crumble in the seventies and eighties. First from new, cheaper steel developed in Germany and Japan, where it took just five hours to smelt a ton of steel, half the time it took in Pennsylvania. And then from waves of retiree benefits that drowned many of the companies entirely. Even after the big steelmakers began using some of the most efficient smelting methods, it was too late. In the mid-1990s, they still had four retirees drawing benefits from every worker. Unable to shoulder the burden, Bethlehem Steel declared bankruptcy in 2001. After culling its workforce down to 11,500, it still had 95,000 dependents on the books.
Donahoe talks about steel because it's a cautionary tale. It is about what happens when management waits too long to make hard but necessary changes. It's about how industries that fail to adapt die.
"I've been the postmaster general now for almost eighteen months," he says at the end of his keynote address. "They say that you never really understand and appreciate how things work until you try to change them. I think this is true. Change is not easy. It's comfortable to keep things the way they are. It's comfortable not to make tough decisions. But our future is not in today's comfort zone... Your business depends upon a postal service that can reinvent itself. So that's what we're doing: We are reinventing the postal service."
A week earlier, in March, Donahoe presented his reorganization plan to a highly skeptical Congress. The post office of the 1990s, even of the last five years-- huge, capable of moving a piece of mail across millions of square miles in mere hours for a nominal fee, six days a week-- cannot survive, he said. He wants to get back the $49 billion the postal service has already prepaid in health benefits, wants to manage his employees' health care. But much more, his plan calls for sizing the post office for today. That means cutting 120,000 more jobs, largely through attrition; halving the number of processing centers that relay mail across the country at often breakneck speed; and drastically scaling back the hours of thirteen thousand unprofitable local post offices. He would stop nearly all Saturday mail, and ease the rate at which first-class mail races across the country, because much of the paper we do send doesn't need to get there tomorrow or on Saturday. Give me the freedom to do that, Donahoe said, and the postal service can make a profit of $6 million per day by 2016.
His plan is to shrink the post office in order to save it. ...No matter where it's headed in the U.S., first-class mail is all priced the same: forty-five cents. Germany has a modern and efficient post office that covers a territory about the size of Georgia and Florida, but it will cost you 60 percent more to send a letter. Mail a wedding invitation from Tokyo to its suburbs and it will cost you more than twice as much as sending the same item from Seattle to Boston. Yet the 2006 law prevents the postal service from raising prices for first-class or standard mail by more than the Consumer Price Index, regardless of fuel prices, regardless of what the mail actually costs to deliver. For instance, while the price of diesel used in delivery trucks has risen 60 percent since 2009, over the same period the price of sending a letter has gone up only a penny. FedEx and UPS, meanwhile, raised rates 5.9 and 4.9 percent this year alone. Some believe this pricing ceiling was added to the law after pressure from the big mailers' lobby, magazine and catalog companies, which claimed they couldn't afford to pay more. Others point to local politics: Constituents don't like it when the price of a stamp goes up.
...Ron Bloom is unequivocal in his view of the postal service.
"I've seen this movie. I saw it in the steel industry. I saw it in the car industry. Management can just decide to give up."
He's sitting at a large conference table in a large office on the eighth floor of a building near Union Station in Washington, D.C. The office belongs to Frederic Rolando, the president of the National Association of Letter Carriers, the largest postal workers' union. There are bookcases of leather-bound volumes, stuffed animals, a Godzilla action figure, and a yellow sign announcing a letter carriers' food drive. Bloom flew in this morning from Pittsburgh to testify before a House subcommittee about the bailouts that he pushed through as part of Obama's auto task force, which he eventually took over. One Republican congressman made a show of holding him after the session for extra questioning, but Bloom seems pumped up by the confrontation. A part of him, chomping on his sandwich, giving the blow-by-blow as if describing a bar fight-- shots landed, punches missed-- seems to have enjoyed it. He's tall, in his mid-fifties, with a buzz cut and an expression poised between irritable and mildly amused.
In July, the sixty-five hundred delegates in the union-- representing its 270,000 members-- unanimously passed a vote of no confidence in Donahoe. They believe he's the worst of disappointments, a company man who has lost faith in the company and the people whose job he used to share. So they hired their own man to help fix the postal service.
Like Donahoe, Ron Bloom lives in Pittsburgh and likes to draw parallels to the steel industry. But rather than framing the collapse of big steel as a lesson in management being too slow to recognize a change in the marketplace and downsize, Bloom sees what happens when management no longer has the stomach to innovate. He focuses on what happened to Bethlehem Steel after bankruptcy, because he's the guy who rebuilt it.
After an early career as an investment banker at Lazard, where he focused on mergers and acquisitions, Bloom left with a colleague to start his own boutique firm specializing in labor issues and bankruptcy restructurings. He was instrumental in an employee buyout of a Canadian steel company, and later the employee takeover of United Airlines. He became a special advisor to the United Steelworkers union in 1996, then seven years later pushed workers at Goodyear Tire to make major concessions in return for saved jobs and a reinvestment in the company's factories.
It was Bloom's reputation as a hard-nosed negotiator who starts from a principle of shared sacrifice that led President Obama to hire him as the point man for the federal bailout and restructuring of Chrysler and GM in 2009, and later as the manufacturing czar. In a failed business-- and Bloom is in the business of failed businesses-- he has a talent for getting both sides to give in far more than they expected. He's been able to persuade unions that they need to accept change, sometimes radical change, in dire situations; and he's gotten management to accept that it is not just the workers who are going to take it in the neck.
"Bethlehem Steel really believed that their job was to die slowly," he says of that company's former executives. When the company finally tanked in 2001, it was Bloom, acting on behalf of the union, who convinced financier Wilbur Ross to take on the mess and restructure it.
"They fundamentally believed you couldn't make steel in America and make money. I think the postal-service management believes, in their heart of hearts, that the day of the postal service has come and gone, and their job is to give it a decent burial. And to not hurt people more than they need to and still do a certain amount of what they do. I think they believe that. And if you believe your company is fatally broken... " he trails off.
Sitting around the table, three others nod in agreement: Jim Sauber, the union president's chief of staff; Bruce Simon, the NALC's longtime legal counsel; and Jennifer Warburton, its principal lobbyist.
At Bethlehem, Bloom pushed the unions to make extremely hard concessions in return for a massive investment into the retiree-benefit trust by the new owners. Bethlehem was rolled up with other bankrupt steel companies into International Steel Group, which just a few years later was turning a profit.
"If you watch Donahoe in public," Bloom says, "if you watch him kowtow to Darrell Issa [chairman of the House Committee on Oversight and Government Reform], it really is like he's a..." He pauses.
"Fuck you! This is a great institution and we can grow it!" Bloom says. "That's what you want someone to say to the Congress, 'Fuck you! Let me win. I will win if you just get out of my goddamn way.'"
"And that's what the employees have wanted," Sauber says. He's a large man, a steady presence behind his rimless glasses. "Someone to pound the table and say, 'You screwed us on these pension funds.' Fight for 'em. Donahoe says, 'They'll never give them to us. I know it's unfair. They'll never give it to us.'"
The NALC feels like it found that fighter in Bloom. No one disputes that first-class mail is in decline, and no one really thinks it's going to return to pre-2006 levels. But Bloom doesn't believe that the postal service is in as dire shape as Congress and the media-- and even Donahoe-- have portrayed it.
...While Congress and Donahoe have refused to consider raising postal rates across the board, which is extremely unpopular with the public and the big mailers' lobby, and which Donahoe believes would simply drive more customers away, Lazard estimates raising postage by 1.5 percent-- just a half cent per letter-- would bring in enough revenue for the postal service to break even.
Bloom doesn't offer any specific examples of concessions the unions might be willing to make, but downsizing and benefits would be likely targets of negotiations. Postal workers pay 8 percent less toward their insurance premiums than other federal workers, which typically comes out to about forty dollars less per paycheck for those on family plans. They also pay nothing for life insurance, while other government workers pay two thirds of their premiums. If carriers were to pay the same rate as other federal workers, the postal service would save more than a half billion dollars per year.
...There is no such optimism on Capitol Hill today. In April, the Senate passed a bipartisan bill that would have reduced annual health-care payments, returned $11 billion in pension overpayments, and cut Saturday delivery after a two-year waiting period. But it left in place many of the restrictions on pricing and services that have crippled the postal service's ability to compete. The House countered by holding committee meeting after committee meeting in which they discussed all the reasons why the postal service was a failure-- and then did nothing. Since presenting a plan in September 2011 that would have allowed the postal service to cut Saturday service and have more flexibility with pricing, President Obama has remained mostly silent on the issue. He had a debt crisis to manage and an election to win.
The just-ended 112th Congress had a 9 percent approval rating, the lowest of any Congress in history, largely because it passed fewer laws than any other Congress in modern history. Its members are bitterly partisan, frustrated, and seemingly overwhelmed. This is the legislative body that must decide the postal service's fate. Whether they offer Donahoe the ability to cut unprofitable services and consolidate, or bet on Bloom and the union's plan to make shared sacrifices and grow. Whether they loosen the legislative strings and allow the postal service to pursue any of Adra's dreams, or in their inaction drive it into insolvency for good. Their divided, dysfunctional cynicism is a mirror of our own. Which is perhaps the greatest argument anyone can make for the postal service.
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