Don’t Let Politics Obstruct Long-Overdue USPS Reform

Only in 2020 could the United States Postal Service get swept up in politics. Alas, more than 20 Democratic state attorneys generals have now sued USPS for allegedly changing mail procedures ahead of the 2020 election, while the House Oversight Committee subpoenaed Postmaster General Louis DeJoy over mail delays.

C’est la vie in 2020: No segment of American society is safe from bitter partisanship. However, Washington, D.C., is still home to reform-minded political leaders, and they cannot allow partisan politics to get in the way of USPS modernization.

In recent decades, no administration — Democrat or Republican — has put serious effort into reforming USPS, hence its current issues. Neither the Treasury Department’s $10 billion relief package nor the $25 billion funding bill passed by the House of Representatives will address the underlying problems at the postal service.

The most immediate problem at USPS is a lack of productivity, not uncommon for government agencies. Over the decades, service standards have simply not improved, frustrating millions of Americans who rely on USPS to send and receive “mailpieces.”

In January, the USPS Office of Investigator General conducted 18 site visits at 16 distribution and processing facilities, exposing rampant productivity lags throughout the 2019 fiscal year. About 20 percent of transportation trips left processing facilities late, while 17 percent of mail volume “was not processed on time to meet its target delivery date.” Moreover, USPS carriers were late returning from their delivery rounds 18 percent of the time.

Affecting hundreds of millions of “mailpieces,” USPS made an estimated $1.1 billion in overtime payments related to inefficiency and delays last year alone. In fact, nearly half of all USPS employees took “unauthorized overtime” in 2019, incurring over $521 million in “questioned costs.” These costs are borne, of course, by American taxpayers.

Let’s be clear: There is nothing wrong with USPS’ receiving government funds, especially during a pandemic. Just like a private company, the postal service is able to solicit and receive funds from shareholders — in this case, taxpayers. But, just like in corporate America, such capital can and should be allocated prudently with the focus on maximizing short- and long-term benefits to the taxpayers who supply it.

Other postal services around the world have managed to create value for taxpayers. The performance of the United Kingdom’s Royal Mail, for example, has historically outpaced the U.K. economy as a whole. Germany’s postal service, meanwhile, has long held a reputation for delivering 99 percent of mailpieces within two days. Why can’t USPS follow suit?

The solution to the USPS problem is a management system that rewards employees for creating value, whereby the postal service allocates capital to the areas that will provide the best returns on investment. However, this requires a change in culture, with USPS employees once again taking pride in their duties to American society.

I say “once again” because there is already a blueprint from the 1990s, when USPS was making money. (Yes, it’s possible.) Between 1995 and 1997, the postal service amassed $4.6 billion in profit, in stark contrast to the $9 billion that will be lost in 2020. The secret to the success was innovative, forward-thinking leadership that prioritized value creation, with USPS even creating an incentive system that promoted an ownership mindset among supervisors.

In 1997, Michael J. Riley — the postal service’s chief financial officer at the time — had budgeted only $55 million in annual profits. The actual result was roughly $1.3 billion. When asked for an explanation, Riley admitted that his prediction was off because he failed to account for the incentive system’s transformative impact on USPS operations. In his words: “People take great pride in how much they can save — how well they can beat the budget. People need to be winners, they need to feel like they’re winners.”

While it may sound like a cliché, USPS is in desperate need of a shift in mindset. Two decades ago, USPS executives and mail carriers shared a sense of pride in the postal service, working together to “beat the budget” and boost their productivity.

If USPS cannot return the investment of taxpayers, more drastic solutions must be taken — privatization or dissolution. In the latter case, private firms like FedEx and UPS could be subsidized to cover remote zip codes and public-service postal services. Two decades ago, Labour Prime Minister Tony Blair and Chancellor Gerhard Schröder pushed the U.K. and German postal services, respectively, to compete — and they delivered.

It is time for the next administration — Democrat or Republican — to do the same. It is time for USPS to stop being a money pit, where tax dollars go to die.

Erik Stern serves as lead executive director of Stern Value Management, where Martin Schwarz serves as executive director.

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