USPS could privatize as early as next year

December 27, 2019, 8:00 PM UTC

The right to an inexpensive, public postal system in the United States has roots that go back further than most amendments recorded in the Bill of Rights.

In 1775, Benjamin Franklin ran the post office and used it to sustain communications between a small group of revolutionaries who would soon wage a winning war against the largest empire in the world. In 1792, George Washington and James Madison created legislation to allow newspaper companies to send their products through the mail at very low rates and to protect correspondence from any prying eyes. That act is credited with cementing Americans’ rights to free information and privacy.

In 1831, Alexis de Tocqueville came to the U.S. from France to study American democracy. He wrote that the Postal Service was a “great link between minds,” and credited it with aiding in a stable democracy.

But the Postal Service as a public, government-run entity is not guaranteed, and advocates in Congress, President Donald Trump’s administration, and consulting firms like McKinsey & Co. have called for privatization of the agency for some time.

Those changes could come as early as next month.

The United States Postal Service shipped more than 13 billion pieces of mail and packages this holiday season. But now that gift-giving has abated, the agency, which falls under President Trump’s jurisdiction, is facing another deadline: find a new Postmaster General by January 2020. 

The new leadership will be handpicked and approved by the Postal Service’s Board of Governors: a group of five men (mostly with investment banking and private banking experience), three of whom were appointed by Trump, along with the current Postmaster General and her deputy.

Once the new leadership is in place, the board will also be tasked by the Trump administration with creating a package of large, structural changes intended to help the ailing Postal Service. Those changes will likely include privatizing and selling pieces of the public service off, according to the American Postal Workers Union (APWU), which represents more than 200,000 current and retired postal employees.

In 2018, Trump issued an executive order to create a postal task force, led by Treasury Secretary Steven Mnuchin. The group was charged with figuring out how to make the postal service a more profitable entity. They recommended that the agency roll back collective bargaining rights for postal workers and sell off pieces of the service to private industry.

“The USPS’s current business model has become outdated due to changes in technology, markets, and customer needs and preferences,” the report stated. “It is unsustainable and must be fundamentally changed if the USPS is to avoid a financial collapse and a taxpayer-funded bailout.”

At the time, current Postmaster General Megan Brennan said she would consider the findings but would not act directly upon them. “The recommendations contained in the report should be evaluated together with legislative and regulatory reforms to address our urgent financial challenges,” she said in a statement.

Around the same time in 2018, the White House Office of Management and Budget also proposed privatizing parts of the USPS and ending package delivery—something that alarmed the APWU.

“The OMB report suggests that the U.S. Postal Service should be sold off to private interests and perhaps shouldn’t even be allowed to ship packages. Most Americans oppose the OMB’s recommendations,” said APWU president Mark Dimondstein, in a statement. “We need to send a clear message to the next Postmaster General that the U.S. Mail is not for sale.”

Dimondstein, in his defense of the USPS, pointed to a recent poll by the Pew Research Center which found that the Postal Service was the most popular government agency in America. About 90% of respondents held a favorable view of the agency.

The union also launched a TV and social media ad campaign over the holidays in an attempt to pressure the next Postmaster General to keep the agency public.

“The next Postmaster General should protect universal home delivery and keep public ownership of the U.S. mail,” the ad says, ending with the tagline “The people’s postal service. Keep it, it’s yours.”

The changes come as FedEx, Amazon, and UPS eat up a larger portion of delivery in the U.S. But these companies tend to focus their services more on urban and suburban areas and not rural parts of the country that don’t provide a large profit margin. A study by the Institute for Policy Studies found that 70 million more Americans would have to pay hefty surcharges for deliveries without the USPS. 

The impact could also raise prices of the goods being shipped. 

“Businesses, from the online retail shops to manufacturers shipping parts to customers in need, could face sharply higher shipping costs, leading to higher prices for their customers or lower profits for their businesses,” the Institute for Policy Studies report found. “Small businesses would be hit especially hard, since they don’t have the clout to negotiate the same level of shipping discounts as big corporations.”

Still, something must give. The search for new leadership comes as the Postal Service marks its 13th straight year of losses (the USPS had a net loss of $8.8 billion in fiscal year 2019 despite a $514 million increase in operating revenue) and is on track to run out of cash by 2024. 

That’s because unlike almost every other federal agency, the USPS is required to pre-fund health care for all of its retirees, which, Brennan told Congress, accounts for 80% of the agency’s losses. Brennan pushed for Congress to end the mandate, and key unions and labor groups have backed her in her efforts.

While the Postal Service is a federally run agency, it is considered financially independent and hasn’t received any taxpayer money for more than 30 years. The agency relies on sales of stamps, services, and other products to fund itself.

Still, Congress has ultimate control over the agency’s finances: It decides how much postage and services cost and can institute structural and financial reform or bail out the agency.

Brennan announced her imminent retirement in October after serving in the top role for five years. She had urged Congress to help fix the Postal Service’s business model and submitted a draft of a 10-year economic plan to the House Oversight and Reform Committee’s Subcommittee on Government Operations earlier this summer, but her efforts did not have much of an impact. Brennan, who was appointed during Obama’s presidency, was reportedly pressured out of the agency by Trump, though she denied those allegations. 

The issue has also made its way into the 2020 presidential election.

South Bend, Ind., mayor and Democratic hopeful Pete Buttigieg reportedly worked on plans to privatize the Postal Service during his three years at consulting firm McKinsey. His team denied that he worked on such efforts, stating that he was “part of a team tasked with generating ideas to increase revenue, like selling greeting cards and increasing the use of flat rate boxes” and “never worked on cost cutting or anything involving staff reorganization or the privatization of essential post office services.”

Later, during a campaign event in Marshalltown, Iowa Buttigieg told a supporter that he did not want to privatize the postal service. “Not everything’s a business,” he said. “And for those other carriers that are competing that think they can make a buck by doing things different — FedEx and UPS — fine. But the Postal Service is public for a reason and I will keep it that way.”

Dimondstein, however, contended that Buttigieg’s work led to the closing of “many processing centers.” 

“I will say generally, shame on anybody that was part of facilitating these McKinsey reports. This is the opposite of what the people of this country need,” he said in an interview with the Associated Press.

Correction: This story has been updated to clarify that Megan Brennan was appointed by the U.S. Postal Service’s Board of Governors during Obama’s presidency.

More must-read stories from Fortune:

—How the UN’s climate efforts could change the business world
—Why thousands of foreign nationals receive military training on U.S. bases each year
What is election hacking—and can it change who wins?
—Remember Hawaii’s false missile alert? This bill aims to prevent it from happening again
2020 Crystal Ball: Predictions for the economy, politics, technology, etc.
Get up to speed on your morning commute with Fortune’s
CEO Daily newsletter.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.

Read More

Biden AdministrationUkraine InvasionInflationEnergyCybersecurity