Congress Wasn’t Going to Save the Postal Service Anytime Soon

Under current law, the federal agency has few tools for financial innovation. Enter Amazon.

National Journal
Marina Koren
Nov. 13, 2013, 9:31 a.m.

For sev­er­al years, the U.S. Postal Ser­vice, which was shed­ding bil­lions of dol­lars a year — nearly $16 bil­lion in 2012 — has pushed Con­gress for le­gis­la­tion that would cut costs and boost rev­en­ue.

Postal Ser­vice of­fi­cials put a num­ber of money-sav­ing op­tions on the table: rais­ing the price of post­age stamps, dis­con­tinu­ing mail de­liv­ery on Sat­urdays, even abandon­ing door-to-door ser­vice al­to­geth­er in fa­vor of cent­ral drop-off spots. They urged a change to the ser­vice’s biggest fin­an­cial bur­den, a 2006 law that re­quires the fed­er­al agency to pre­pay 75 years’ worth of em­ploy­ee re­tire­ment be­ne­fits, about $8 bil­lion a year, pay­ments the Postal Ser­vice de­faul­ted on last month.

Help could come only from Con­gress, which out­lines what the Postal Ser­vice can and can’t do. “There’s not a lot of people in the private sec­tor that want to get in­to our kind of busi­ness with those kinds of re­quire­ments,” U.S. Post­mas­ter Gen­er­al Patrick Do­nahoe told The Wall Street Journ­al in Septem­ber. “So we need Con­gress to act.”

But as we learned this week, that’s not the case. The Postal Ser­vice an­nounced Monday that it began de­liv­er­ing Amazon.com pack­ages to res­id­en­tial ad­dresses in Los Angeles and the New York met­ro­pol­it­an area and would even­tu­ally ex­pand the ser­vice to oth­er cit­ies. The agency already de­liv­ers some pri­or­ity mail on Sundays, as well as pack­ages dur­ing peak hol­i­day sea­son in cit­ies in Decem­ber.

So the help the agency sought to pinch pen­nies and turn a profit didn’t come from the Hill. It came from a private com­pany with a grow­ing knack for res­cuing op­er­a­tions in pre­cari­ous fin­an­cial situ­ations, one that The Wash­ing­ton Post‘s Ly­dia De­Pil­lis says may as well buy the en­tire mail ser­vice.

De­tails of the deal, in­clud­ing how much Amazon will pay the Postal Ser­vice, are not pub­lic, so we don’t know how it af­fects the agency’s budget, or if the part­ner­ship will de­liv­er as much rev­en­ue as dis­con­tinu­ing Sat­urday ser­vice or char­ging more for stamps would have.

The new part­ner­ship is an un­usu­al one. It’s an ex­ample of what Bri­an Fung of The Wash­ing­ton Post dubbed “re­verse con­tract­ing” on Monday, in which a private com­pany hires a gov­ern­ment agency to meet its needs, in­stead of the oth­er way around. The deal opens a new line of busi­ness for the Postal Ser­vice, through which it can com­pete with its biggest com­pet­it­ors, like Fe­d­Ex and UPS, which do not de­liv­er on Sundays. It also may not keep the Postal Ser­vice from play­ing fa­vor­ites, and it’s un­likely the agency would shun oth­er private-sec­tor com­pan­ies fol­low­ing Amazon’s lead, if the money is there. The re­spons­ib­il­ity of sav­ing the Postal Ser­vice may, in the fu­ture, may not rest with Con­gress.

That’s what happened this week with Amazon. The key was tap­ping an op­tion that doesn’t re­quire con­gres­sion­al ap­prov­al. “We can­not de­crease a de­liv­ery day without le­gis­la­tion,” USPS spokes­wo­man Sue Bren­nan told Na­tion­al Journ­al in an email. “We can in­crease de­liv­ery on our own.” Des­pite losses, the Postal Ser­vice con­tin­ues to see strong in­creases in pack­age de­liv­ery.

Bren­nan said the agree­ment “has noth­ing to do with the Postal Ser­vice’s need for le­gis­la­tion.” But law­makers, heed­ing the post­mas­ter gen­er­al’s call, have tried this year to push through le­gis­la­tion that would help re­solve the agency’s fin­an­cial woes.

A bill that would end Sat­urday mail ser­vice, sav­ing the agency $2 bil­lion a year, in­tro­duced by Rep. Dar­rell Issa, R-Cal­if., passed the House in late Ju­ly. The Sen­ate hasn’t touched it, likely be­cause it doesn’t in­clude pro­vi­sions for re­form­ing the 2006 be­ne­fits law. “Con­gress needs to pass the Postal Re­form Act, so postal cus­tom­ers no longer are made to sub­sid­ize un­used pa­per mail pro­cessing and de­liv­ery,” Issa said Tues­day in a state­ment to Na­tion­al Journ­al.

In the Sen­ate, Thomas Carp­er, D-Del., and Tom Coburn, R-Okla., in­tro­duced le­gis­la­tion in Au­gust that would change the re­tire­ment be­ne­fits law, cut Sat­urday de­liv­ery, and scale back ser­vice in some areas. But it re­mains in com­mit­tee. Carp­er said in a state­ment Monday that the Postal Ser­vice’s part­ner­ship with Amazon “of­fers a great deal of prom­ise.” “Ul­ti­mately, Con­gress must give the Postal Ser­vice the tools, re­sources, and flex­ib­il­ity it needs so it can right its fin­an­cial ship and con­tin­ue to im­ple­ment for­ward-think­ing ideas like this one,” he said.

Sen. Bernie Sanders, I-Vt., who has in­tro­duced le­gis­la­tion that would pre­serve Sat­urday mail ser­vice but re­peal the “oner­ous” law on re­tire­ment funds, said the part­ner­ship “makes sense to me.” “The Postal Ser­vice needs a new busi­ness mod­el which gives it more flex­ib­il­ity to raise rev­en­ue,” Sanders told Na­tion­al Journ­al. “And, in many ways, the postal ser­vice is hav­ing their hands tied be­hind their backs in their abil­ity to com­pete in the mar­ket­place.” The sen­at­or wants Con­gress to re­peal the 2006 law. When asked about the Postal Ser­vice’s un­usu­al de­cision to cir­cum­vent Con­gress in the search for new busi­ness, the sen­at­or simply said, “That is a good point.”

Bren­nan said she did not know who ap­proached whom about ne­go­ti­at­ing the Amazon-USPS part­ner­ship, which “began months ago” and was “col­lab­or­at­ive.” The U.S. Postal Reg­u­lat­ory Com­mis­sion filed the agree­ment in early Oc­to­ber.

The Postal Ser­vice said Monday it con­sidered the new part­ner­ship a win-win. Con­gress, it seems, isn’t even in the game.

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