The History of Postal Privatization [And How It Works]: The Very Real Threat Of Postal Privatization Part II

by GlennDL
For anyone returning to this post it has been updated [12:30pm, 2-8-2011] since its initial publication. See note at end of article.
This is part two in a series: The Very Real Threat Of Postal Privatization:
History: The most serious call for postal privatization came from the Republican party during the Reagan administration. Emboldened by the firing of the Air Traffic Controllers union the right-wing set their sights on the postal service. They overplayed their hand as It was overwhelmingly rejected by the public. In the years since Reagan postal privatization has remained on the republican agenda, but lacking public acceptance of the ideal it remained a long term goal that would need republican power and public discontent with the postal service before it could proceed.
Even though the republicans obtained control of Congress during the Clinton years their obsession with Clinton and the still favorable public opinion of the postal service kept privatization from advancing on the republican agenda.
The election of Bush jr., to the presidency along with the republican congress revitalized the privatization movement as was evidenced by the creation of the “President Commission on Postal Reform”. The Commission’s methodical and selective process painted a dismal picture for the postal service, but as the events of 911 diverted attention that methodical process failed to advance the agenda until the midterms of Bush’s second term.
The resulting Democratic takeover of Congress severely disrupted the legislative agenda [of the President Commission on Postal Reform] that would have severely hampered the survival of the postal service as it was. The end result was that the 2006 compromised legislation enacted [Postal Accountability and Enhancement Act of 2006] was a lot less damaging than it could have been, but as we will see it was damaging enough.
The strategy for privatizing government services [How It Works]:
The strategy is simple:

1. Advocate privatizing a government service either by trial balloon or by political position. As mentioned above this was done under Reagan politically [overtly]  and since then it has been done by trial balloon [covertly] under the guise of consolidation, cutting expenses, 5-day delivery, etc. Privatization can take many forms and the reduction of delivery from six days to five would not be an act of privatization, but the the public’s attitude towards their postal service is seen as a barometer that can be measured by the level of outcry whenever the ideal of 5-day delivery is floated. As long as the public resist the reduction in delivery days then a full blown attack on the postal service is not possible. 
   If the public accepts the ideal of reduced service days then it becomes easier to proceed towards privatization. Unfortunately for the privatizers the public has repeatedly and steadfastly rejected calls for privatization because of the publics overall satisfaction with the postal service. That is why any attempts at privatization will have to take a more indirect and covert path, at least until dissatisfaction with the postal service increases.
   
2. If the public rejects the ideal then proceed to plan ‘B’.
   
3. Plan B: run the government agency/service into the ground until the public becomes dissatisfied with it. You can do this by underfunding [budget cuts], media campaigns, subversive management, outsourcing, sub-contracting and the ever popular attack on the employee unions and their benefits.
   As plan ‘B’ unfolds service levels decline and the ability to perform efficiently is reduced by the sub-contracting of the work. The public confidence erodes and dissatisfaction increases. Eventually the postal service becomes increasingly dependent on sub-contractors. As the postal services infrastructure becomes more dependent on sub-contractors, more eroded by underfunding and the reduction of the unionized workforce it becomes easier to portray the postal service as monolithic, archaic and inefficient. The selling of privatization becomes easier and the publics acceptance becomes more rational. Not because the postal service couldn’t do the job, but because the postal service was undercut to the point of no longer being able to do the job.

Basically most government agencies/services that end up being privatized go down one of several paths to attrition which, eventually leads to a level of public dissatisfaction that makes them ripe for privatization:

1. Actual mismanagement at several levels. Usually a result of incompetence, underfunding, employee or management burnout, lack of innovation, unqualified management personnel, high turnover and a burdensome level of institutionalism and/or infrastructure.
   
2. Under-utilization by an uninformed public, lack of modernization, top heavy bureaucracies, poorly maintained budgets, outdated services, and an inability to perform the service required.
   
3. Intentional underfunding, cuts in service, relocation of service, wasteful spending, lack of promotion and advertising of services, over-pricing, outsourcing and sub-contracting at little cost savings, and over discounting services.
   
4. Media campaigns demonizing services and performance, legislation overburdening or hindering the service, and political attacks miss-representing the agency and its services.

Looking at list #1 and 2 it would be easy to dismiss the list as not contributing to the ‘Plan B’ theory since all of these are seen as natural pitfalls of government agencies. Let me point out that every one of the problems listed in 1&2 are correctable and need not occur. These are potential problems in the private sector just as much as the public and wherever they exist failure will follow.
List 3 and 4 on the other hand contains some problems that could also be seen as natural pitfalls, the result of nothing more than neglect, but all of the items could easily be identified as acts that could be intentionally used as tools to accomplish the same things as the items in list 1&2; the failure and downfall of an agency or service.

Plan B is metaphor for a strategy that is used over and over again and as far as I know exist only as a tactic. But the point of this article/series is not investigative reporting to turn up proof. That is beyond the scope of this authors abilities. The point is to get you to stop and think, to pull your head out of the sand to look around and see if that was footsteps you heard or to at least get you to scratch your head and go “Hmmmm…”

In order to at least entertain the ideal that a “Plan B” tactic is conceivable we would have to also entertain the possibility of some entities favoring privatization. In the case of the postal service who might those entities be?

• The public: In the final analysis the public would have to accept privatization for it to occur, either through their dissatisfaction or apathy. Whether that acceptance came about naturally, through the failure of the agency without outside influence or meddling, or through deceit as described in the “Plan B” tactic, the public is the most involved in the decision.
  
• Corporate America: There is little doubt that there is large scale lobbying efforts at all levels of government to encourage the privatization of government services. We could start with our competitors [FedEx, USPS, etc.] who lobby for a reduction in regulations affecting them while seeking more regulations for us, as well as trying to gain access to mail boxes, collection points and the first/last mile restrictions. There’s also our suppliers and sub-contractors who are primed for expanding their role in acquiring broader access to our work and access to our infrastructure. To our largest customers who seek more and more discounts and catered services at reduced rates.
  In addition consider this assessment from the Washington Post: 

“…Once considered among the top political appointments in Washington, the postmaster general is now selected by the Postal Board of Governors, a panel of presidentially appointed officials that currently hail mostly from the corporate world…”     The Washington Post

• Foreign Corporations: Since NAFTA most Free Trade Agreements [FTA] have included clauses that called for granting access to foreign entities into domestic markets, including penalizing the existence of and elimination of publicly run operations on the basis that they had an unfair advantage in the open market.

“This is already happening. UPS [not USPS] has filed a NAFTA Chapter 11 lawsuit against the Canadian government saying that Canada's support of its postal service, Canada Post, represents a barrier to trade. UPS is seeking $160 million in damages from Canada, claiming that the government subsidy has prevented UPS from effectively competing for the express mail market. According to The New York Times, the "complaint contend[s] that the very existence of the publicly financed Canadian postal system represents unfair competition that conflicts with Canada's obligations under NAFTA. Critics worry that if the tribunal upholds the U.P.S. claim, government participation in any service that competes with the private sector will be threatened."   The FTAA, the WTO, and the Assault on Public Interest, Services, and our Water

• Internal Forces within the USPS: One would have to go down the ‘conspiracy theory’ path to substantiate any claim to internal sabotage, but there is without a doubt plenty to make us scratch our head and say ‘Hmmmm…”:
  • “When Potter testified before a Senate Appropriations subcommittee hearing in March on the USPS’s desire to drop Saturday delivery, his comments indicated the need to privatize the U.S. Postal Service. In his testimony, Potter stated:

    “If the Postal Service were provided with the flexibilities used by businesses in the marketplace to streamline their operations and reduce costs, we would become a more efficient and effective organization. Such a change would also allow us to more quickly adapt to meet the evolving needs, demands, and activities of our customers, now and in the future.”    The Cato Institute

    Of course, Congress has shown virtually no interest in giving the USPS, which is bleeding red ink, the greater flexibility it needs.”
  • Here is the conclusion that Postmaster General William Henderson, reached following his departure from the USPS. Three short months after Henderson stepped down as postmaster general in June 2001, he penned an op-ed in the Washington Post that called for the USPS to be privatized.
    

    “But for all the ways in which the Postal Service already resembles a private company, it lacks the advantages of any other corporation, such as being able to turn on a dime when it comes to rate changes, perhaps raising prices at times of high demand and lowering prices to entice customers during traditionally slow times, which for the Postal Service means summer. Today, a price change requires the permission of the Postal Rate Commission -- a yearlong process.
    And unlike a private company, the Postal Service has a universal service obligation, meaning it must deliver everywhere, six days a week, at a regularly scheduled time, making the delivery even for a single piece of mail, which is not cost-effective. And it means delivering in the Grand Canyon and in rural Alaska and in high-risk neighborhoods and lots of other places where delivery is not cost-effective.
    The trade-off is that the Postal Service gets monopoly protection; no private company is allowed to compete with it head to head by carrying letter mail or using the mailbox. It should give up that protection for the greater benefits of privatization.”    The Cato Institute
    Is it realistic to believe that he came to this conclusion only after leaving the postal service?

  • Questionable practices that suggest self-interest at the top:
    • “The Postal Service has awarded more than 2,700 contracts to former employees since 1991 and awarded 17 no-bid deals to former executives between 2006 and 2009, according to one of the reports. Most of those executives made six-figure sums, the report said. One unnamed executive received a $260,000 no-bid deal in July 2009 to train his successor just two months after retiring.”    The Washington Post
      
    • “…postal auditors told the office of Sen. Susan Collins (R-Maine) Friday that the Postal Service pays 100 percent of health benefits for senior executives, some administrative staffers and directors of its office of inspector general.”       The Washington Post
  • Long term policies that were ill-advised and identified repeatedly as costly: 
    • “… issued Dec. 23, 2010, the USPS Inspector General’s Office (OIG) echoed what the APWU has been saying for years: Work sharing discounts for large mailers mail are too high.
      The OIG’s study (Report Number MS-AR-11-001 [PDF]) echoed the results of a March 2010 report by the Postal Regulatory Commission [PDF], which concluded that in many cases the Postal Service grants discounts to large mailers at a rate that exceeds the costs the USPS saves when it accepts pre-sorted mail.
      The OIG found that the Postal Service’s “justifications for 19 work share discounts that exceed avoided costs by approximately $104 million were not supported by detailed documentation.”     PostalReporter News Blog

      Now would be a good time to scratch your head and go “Hmmmm…”

•  Politicians: [see “History” above]  With the history section above and the examples of anti-union rhetoric below there is one inescapable event that has occurred that has by itself brought the postal service to it knees. That event is not the internet, not our competitors, not the forces of competition, not the slow pace of or increased number of rate increases, not the drop in volume, not failed policies, not mismanagement, not work stoppages, not an inability to keep pace with new technology and not corruption. The postal service has in the past, present and will in the future be able to handle all of these events, but for the introduction of an un-natural event that by its existence and design is meant to strangle the postal service out of existence. That event is the Postal Accountability and Enhancement Act of 2006 [PAEA]
  The passage of the PAEA is the most significant piece of evidence in support of the mythical ‘Plan B’. While the drops in first class letter volume was real they were not significant enough to cause the losses sustained by the postal services since 2006. The drop in volume and the recession of recent years have given cover to the real reason for the losses the postal service have experienced over the time since the passage of the PAEA. The death blow that was contained in the PAEA was the requirement for the Postal Service to pre-fund retiree health benefits [RHB]:
  “… to make an annual payment ranging from $5.4 to $5.8 billion from 2007 to 2016. In addition, under PAEA, the Postal Service makes a separate payment to the Office of Personnel Management (OPM) for its annual retiree health benefit premiums until 2016.”     USPSThe root cause of the USPS financial problems is neither the recession or declining volume:

  “…the Postal Service would have experienced a cumulative surplus of $3.7 billion over the last three fiscal years, despite declining mail volume, an economy in chaos, and electronic diversion….”  William Burris, APWU President

All one has to do is look at the math involved over the last 4 years to see how the PAEA [RHB] has impacted net profits.
Without the RHB payments 2009 would have been the only year of net losses and those losses would probably be reversed or at least manageable in conjunction with an economic turnaround. The PAEA has saddled the postal service with an obligation that no other public or private entity is burdened with. The only government agency or department that has ever turned a profit, and therefore is financially viable, is saddled with an obligation that no private sector entity could survive. That and the refusal of a modification of the formula for computing the RHB is the ‘smoking gun’ that points to the existence of a Plan B tactic supported and implemented by the republican pro-privatization movement.

If there is any doubt that right-wing conservatives are pro-privatization, anti-union, anti federal worker and specifically anti-Postal Workers then check out these articles from this website and others:  NEW EXAMPLE…   FOXNews-Phony Bailout Headline

• They’re coming to take you away, ha, ha: Your job that is.
  
• Congressman’s Call for Concessions Should Drive Postal Workers to the Polls
  
• Another anti-postal worker rant from the right
  
• Your Job Security Under Attack!
  
• Will Postal Workers Be Among The First ‘To Feel The Wrath’? 
  
• “Economist” who predicted Dow 36,000 tries his hand at postal finances
  
• The Real Facts and Figures Behind the Postal Service.

This is an opinion piece meant to persuade you that we, you and me, are complicit in the demise of a proud and traditional institution because we no longer stand together in the protection of this institution and our careers. The only way to protect ourselves is to realize that whether at the level of conspiracy, or political strategy or management incompetence we do need to see what is happening. We need to understand that the threat is being played out politically. We need to realize that our only hope is to stand together politically, realizing the political landscape, and support our Union in solidarity.
It is time that we all realize:

• that when politicians make anti-union remarks that whether you’re in the union or not or don’t like the union they are still talking about YOU! Not everyone around you, but you too.
  
• that when politicians make anti-federal worker comments they are not separating postal workers from other federal workers. Half the time they don’t know the difference!
  
• we stand together or we fall apart…

This is part two in a series: The Very Real Threat Of Postal Privatization:  The series:

1. The Very Real Threat Of Postal Privatization:   [This post]
   
2. The History of Postal Privatization [And How It Works]   [This post it has been updated [12:30pm, 2-8-2011] since its initial publication. See note at end of article.]
   
3. What a Privatized Postal Service Would Look Like    [forthcoming]
   
4. The ‘Perfect Storm’ That Threatens Us   [forthcoming]

Additional material:   Postal Downsizing Strategies
note: My apologies, I published this post without having inserted a very important ‘section’. That section has been inserted and is  represented by text in this color. GlennDL

www.postal-indy.com