The Covid-19 pandemic is a very real threat to the liquidity of U.S. Postal Service/ USPS but also reveals the value of regular delivery to every American address.
During the COVID-19 shutdown, USPS Americans supplied essentials including food and prescription drugs. What separates the USPS from private carriers is the USPS literally serves every home in the US.
USPS favourable support of Voters but not some leading politicians
The USPS is a political punching bag for President Trump as it seems to have helped his Washington Post owning nemesis, Jeff Bezos - the founder of Amazon.
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But, while the President is insisting the USPS raise their rates, he also recently tweeted:
“I will never let our Post Office fail. It has been mismanaged for years, especially since the advent of the internet and modern-day technology. The people that work there are great, and we’re going to keep them happy, healthy, and well!”
The USPS can be viewed as both a competitor to private carriers with an unfair advantage AND a public utility that provides low cost connections to every address in the US. In fact, the USPS is an essential lifeline to countless e-commerce merchants.
USPS: A Communications Carrier
In times of crisis, mail delivery is recognized as an important communications tool.
State and Federal governments send notices to millions of Americans including, for example, millions of postcards from the Centres for Disease Control / CDC. Many of the relief payments will be in the form IRS checks to be delivered by the USPS.
The USPS is essentially a government supported communications platform with the ability to delivers "mail with a message" to every American household. Mail provides a work around for cyber-crime related communications issues.
Mail: Critical -Declining Communications Tool
The USPS still depends on mail revenue for the majority of its revenue. The Covid crisis has caused a drastic drop in mailing by businesses. The exact numbers are not yet available but reliable estimates predict a decline of at least 30%.
The drop in mail volumes is a very real threat to the liquidity of the postal service and there are projections the USPS will run out of money this year. The years of losses have left the balance sheet bare and the need for cash is very real.
The Coronavirus Aid, Relief and Economic Security Act (CARES Act): Without strong a consensus to assist the USPS to overcome the President's objections, the CARES act included a $10 billion line of credit. The USPS results continue to be impacted heavily by the $130 billion in unfunded employee benefits.
$10 Billion out of $75 billion needed?
There have been report that the USPS leadership has asked for $75 billion to continue operations. Democrats are generally more sympathetic - with the President being clear in his opposition to any assistance - but the USPS seems to have the broad support of the American public.
CRISIS
USPS employees have served valiantly during this pandemic and provide a lifeline for both government communications, potentially an invaluable social distancing voting tool, and a lifeline for online businesses. With the exception of a $10 billion line of credit, there is no provision for support the public service function of the USPS in times of crisis.
Public Service Obligation Appropriation
In the 1970's, Congress approved an annual appropriation to help the USPS deliver to every American household. This is critical in times of crisis to enable the delivery of communications, medicines and emergency supplies. The USPS beneficiaries, including USPS employees, mailers, shippers and the US government but come to the table to find a workable solution.
Price Increases are Inevitable
Opponents of the USPS think the agency under charges. While the argument is not so simple, there is validity in this position. The USPS should be authorized to raise its prices beyond the consumer price index set by law for mail. The postal regulator has granted "exigent rate increases" in the past and will likely have to do so again in the very near future. There will also likely be some service reductions in the frequency of mail delivery.
USPS Price increases are likely for both parcels and letters but have to be weighed against the potential of lower volume.
Public Postal Service
The USPS is a valued agency for the services it performs and trust it has earned from Americans. The postal service financial struggles have impacted most American's who take the service for granted. We feel the USPS serves a vital role in final mile delivery to all America and on-line merchants depend on their low costs with fewer surcharges.
International online order are increasingly connecting directly with USPS via Global Direct Entry and other programs permitting greater choice for American consumers.
We believe the American public's overall - and overwhelming - support of the USPS will result in a resolution to the financial crisis and that all stakeholders will have to accept some form of higher rates and adjusted services.