The USPS Is A Poster Child For Destruction Of The Commons

Article 1, Section 8 of the US Constitution vests Congress with the power to “establish Post Offices and Post Roads”, now known as the Postal Clause. Post Offices and Post Roads were a legacy of the British royal post system, which was not originally designed for public use but was instead a state-run monopoly designed to allow secure communication among government officials while monitoring and restricting the flow of both information and people as well as being an important source of revenue. It wasn’t until the late 1700s that postal service even began to be considered as an aid to commerce and a public service.

The Postal Service Act of 1792 radically changed the mission of the Post Office, imbuing it with a civic mandate. The Act guaranteed privacy of the mail, established regular postal routes and more consistent delivery, and expanded on freedom of the press by including newspaper delivery. It provided for a national postal system as the country expanded and became more populous. The Act lay the groundwork for the expansion of literacy, commerce, and democracy itself throughout the country over the next two centuries. Alexis de Tocqueville described the US Postal Service as the “great link between minds”, while the German-born philosopher Francis Lieber called it an “element of civilization”.

As a result of that civic mandate, the Postal Service has been a remarkably progressive and, yes, innovative institution. In the 1800s, it was one of the few places where women could actually work, acting as small-town postmasters. After the Civil War, it employed significant numbers of African Americans. During that war, using the savings from not having to support services in the Confederacy, it instituted City Free Delivery that brought the mail directly to urban households as well as the postal money order that allowed Union soldiers to send their pay back home. Air Mail delivery helped develop the fledgling aviation industry in the post-World War I period. In the early 1900s, Rural Free Delivery and parcel post were introduced as was the radical concept of postal banking, providing banking services to the underserved communities in the South and the West as well as to the burgeoning numbers of urban immigrants.

From its inception, postal banking was limited, restricting the size of deposits and balances in addition to offering lower interest rates, conditions demanded by private commercial banks. But the widespread bank failures associated with the Great Depression resulted in postal banks holding 10% of all US deposits. FDR used the postal banks to sell Treasury bonds to help pay for the New Deal and “Defense Savings Stamps” to help pay for World War II. Postal banks thrived during World War II as the innovation of banking by mail allowed GIs to bank from abroad.

Ironically, it was FDR’s initiative to create the FDIC that eventually killed the postal bank. With private banks now government insured, they not only could provide the same safety of postal banks but do so while offering higher interest rates. In 1966, postal banking was quietly phased out as part of LBJ’s attempts at government reform and, as Mehrsa Baradaran writes, “America’s most successful experiment in financial inclusion” ended.

The postal banking experiment may have ended but innovation didn’t, with the Post Office becoming a pioneer in the development of optical character recognition in the mid-1960s. By the 1970s, check-cashing services and payday lenders had stepped into the void created by the dissolution of postal banking, charging usurious rates to those underserved by the banking system. Today, payday lending is a $90 billion industry, even after some of its worst abuses have been curtailed by the CFPB and state laws.

But the end of postal banking signaled the beginning of the effort to privatize the commons, turning the Postal Service into a self-sustaining business and abandoning the Postal Service’s subsidized civic mandate that was written into a 1958 law that clearly stated the Service was “clearly not a business enterprise conducted for profit”. In 1970, after decades of underinvestment, postal workers went on strike illegally, demanding better wages and working conditions as well as protesting Nixon’s effort to make the Service a self-sustaining enterprise. Until then, postal unions had no bargaining rights and relied solely on Congress to provide wage and benefit increases. That strike was settled later that year and resulted in the passage of the Postal Service Reorganization Act which revamped the Postal Service from being a tax subsidized cabinet department and into a supposedly self-sustaining independent agency, while giving postal workers retroactive pay increases and union bargaining power. The new law was a contradiction from the start, requiring “that no small post office shall be closed solely for operating at a deficit” even as it demanded the USPS be self-sustaining.

The next big blow for the USPS came in 2006 as the effort moved away from simply running the Service as a business and more toward privatization. Republicans rammed through the 2006 Postal Accountability and Enhancement Act, a bill that insanely required the Postal Service to pre-fund its next 50years of pension and retirement benefits by 2016. In order to do this, the Service had to set aside over $5.6 billion each year, basically an 8% tax on its revenue, all while theoretically maintaining self-sufficiency. Again, the approach was absurd, asking the Post Office to run like a business while requiring future pension and benefit funding that applied to no other public or private enterprise.

The bill appeared to be an attempt to force the USPS into insolvency, which is exactly what the Postal Service faces today. By 2011, the USPS closed over half of its mail-processing facilities, cut back on deliveries, and reduced its workforce, abandoning overnight delivery of first-class mail. Even back in 2006, the GOP was grumbling about the postal rates for Amazon. That theme has, of course, been glommed onto by Trump, primarily because of Bezos and the Washington Post. But package delivery has been one area where the USPS’ profits have been climbing, whereas first-class mail has been cratering due to other technology options such as email and on-line bill paying. And the USPS is still an important element of “last-mile” delivery options for not just Amazon, but FedEx and UPS.

Currently, the larger goal for Republicans regarding the USPS is not only the desire to destroy the postal unions but also, at least for this election, to make voting by mail near impossible. In addition, they would love to privatize much of the Postal Service, selling it off to corporate behemoths on the cheap. As one conservative commentator wrote, “the U.S. government could impose a universal-service obligation on a privatized USPS and, if needed, pay the firm a small subsidy to cover the extra costs”. In other words, sell of the profitable parts of the USPS to corporate interests on the cheap and have taxpayers subsidize the unprofitable parts.

Among Democrats, postal banking is making a comeback. Back in 2014, Elizabeth Warren proposed a renewal of postal banking, allowing it to partner with banks, and effectively killing the predatory check-cashing and payday lending industry. Kirsten Gillibrand has just offered a similar plan. Other have also suggested using Post Offices as broadband hubs, another service in which large swaths of America are underserved but also where the USPS has facilities.

The USPS is still a remarkably popular institution, employing over 500,000 workers, and still offers the best deal in the world. It has a 90% approval rating and offers first-class mail rates that are cheaper than almost every other developed country in the world. If anything, the government’s response to the COVID-19 pandemic has illustrated just how badly we have been served by the laissez faire capitalism and the privatization of the commons of the last half century. With the USPS in dire financial shape, its long past time to rebuild this historic institution back into the public good it was always meant to be.

Originally published at https://thesoundings.com on April 29, 2020.

Thoughtful discussions on politics and economics with some sidelights in photography and astronomy.

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