Speaking June 3 at the opening general session of the 2024 National Postal Forum, Postmaster General Louis DeJoy took a different approach in his usual rant about what was wrong when he arrived to lead the Postal Service in June 2020.
Rather than simply decrying his predecessors’ lack of a plan, he reviewed the operational and ratemaking fundamentals in place for the first 35 years of the agency’s existence. His basic argument was that there was balance: the USPS was a functional bureaucracy, executing its universal service obligations and providing services sought by ratepayers, funded by a cost-of-service ratemaking process that ensured that revenues covered costs. Passage of the Postal Accountability and Enhancement Act in 2006 disrupted this, he argued, framing the situation almost sympathetically:
… At almost the same time the digital revolution compounded with the Great Recession, caused mail volume to decline at an extraordinary pace. Immediately, losses began mounting!
“Well, the bureaucracy, and now defunct monopoly, and Title 39, and 900 Policies and Procedures manuals, and union agreements, and regional executive judgment, and the committed public servants well-experienced in delivering universal service under the old rules, with their massive infrastructure, did not have an adequate answer or the time to develop one, for how to overcome this dramatic shock to the business model, which no longer ensured that costs would be covered.
“Such began the 15-year aftershock, and the fallout, which brought the Postal Service to near catastrophic failure when I arrived here in June of 2020 at the beginning of the pandemic. And there was no plan to solve for this anywhere, from anyone! Looking back to 2006, how could the Postal Service have had an answer? How could a massive bureaucracy, populated with hundreds of thousands of dedicated public servants, who were the product of an ingrained institutional memory, wholly focused on providing universal service to the American people and a decades-long understanding that costs would be covered by the system….
“Adding to the problem, and just like today, after passing the PAEA, Congress did not change their expectations of the service obligations even a little. They remained in love with the Universal Service Mission.”
This relatively compassionate retrospective continued for several minutes, effectively painting a picture for listeners of an institution struggling to adapt to an altered business environment in which it had no experience.
(Early along in his review of the post-PAEA situation, he repeated his frequent complaint about the Postal Regulatory Commission, blaming it for what he saw as the Postal Service’s inadequate revenues, overlooking that the commission can’t arbitrarily waive the legally-mandated CPI cap on rates and perpetuate a cost-of-service ratemaking process.)
For perhaps the first time, his comments reflected an understanding of his predecessors’ situation – continued legacy obligations that had to be met without the revenue model that had been in place, all requiring changes for which there had been neither the time nor the preparation to enable an orderly transition.
The pitch
Of course, this artful review set the stage for the balance of his speech in which, characteristically, he framed himself and his 10-Year Plan as the only path to salvation for the USPS.
First he constructed his opposition – Congress, the PRC, and “stakeholders” (read: commercial ratepayers) who “resisted change” because it was “too politically and financially untenable for our stakeholders to even consider.” “To this day,” he added, critics “fail to accept the sweeping changes required, the speed at which they need to be accomplished, and the imperfection that materializes when taking on such an endeavor.” Then came the pitch.
“When I arrived, the trajectory was in plain sight. … We have a plan. … It’s called the Delivering for America plan, and we are making great progress on the strategies it identifies. And that is what I hope you come away with from this forum. Our efforts do not come without uncomfortable consequences, to our customers, to the American people, and to our employees. But they must be made. We are doing the necessary and important work for the nation, to develop a new path forward.”
While it was somewhat refreshing to hear the revised, and relatively effective, retrospective that set up his pitch, he still reverted to his habit of having to construct demons to fight, simplistically categorizing any disagreement or question of his Plan as stark and total opposition. (Maybe we need to wait until the next Forum to see if that changes.)
Tulino
As would be expected at an NPF presentation, there were the usual professionally-produced videos, showing spiffed-up facilities and vehicles, and featuring executives and employees filled with evangelical spirit, singing the praises of The Plan. Such vignettes are supposed to convince the audience – mostly people whose normal lives don’t expose them to postal news – that what they’re seeing and hearing is reality.
After the first such video, Deputy PMG Doug Tulino took the stage to provide his supportive comments. Like DeJoy, he relied on framing opposition from unnamed stakeholders to symbolize the enemies of what The Plan seeks to accomplish.
Interestingly – especially given Tulino’s other role as head of HR – he faulted those stakeholders’ role in “prior attempts to make changes” because their “primary objective was to focus on cost-cutting through labor reductions.” Apparently, in his view, trimming complement and employee costs is bad.
However, most ironically, particularly to people aware of how DeJoy et al have operated, Tulino asserted that it’s “important to Louis and me that we are transparent with all stakeholders,” adding that they’ve given stakeholders “an opportunity to understand what we are doing.”
Anyone at all familiar with how the network changes have been implemented knows that the Postal Service has never provided ratepayer and mailer groups with any “official” listing of the RPDC, LPD, and S&DC facility sites or their activation status. Rather, those “stakeholders” must rely on information provided to the unions (as required by contracts) then leaked to others. Moreover, though the PMG regularly harangues mailer organizations, neither he nor his senior executives have ever held an open session where questions could be asked and answered, and discussions held so that the “understanding” Tulino alleges could be developed.
Of course, given the naïveté of most of the audience, Tulino’s assertion was taken as fact.
The business model
DeJoy returned, and picked up where he left off – saying the USPS is an organization that has “a costly public service obligation and lacks a funding source adequate to cover the cost, in the manner that we serve.” Continuing, he reflected on the post-PAEA environment, stating
“When product volume and reimbursable revenue changed, so that its cost to provide these services could not be covered, it was unable to adjust its service in a meaningful way to reduce its cost of operations. Thus, the broken business model. We are now trying to fix the broken business model.”
This essentially sums up the disconnect between a basic underlying principle of the PAEA ratesetting process, the external cost circumstances of the USPS, and DeJoy’s view of how it all should be funded.
The changes to ratemaking made in 2006 were an attempt to make the Postal Service live within its means, i.e., to stop expecting a blank check as an alternative to reasonable cost control; DeJoy doesn’t get that – he wants blank checks. What he fails to articulate clearly, and to use his political assets to seek to change, is the Universal Service Obligation conundrum. The cost of that obligation may have once been arguably supportable through monopoly product revenue, but no more. The feebleness of that revenue stream now, combined with the growing costs of universal service, appropriately can be called a “broken business model.”
However, in the Postal Service Reform Act of 2022, DeJoy embraced codification of six-day delivery – likely as a quid pro quo for the carriers’ unions’ support for the legislation that also repealed the “prefunding” obligation. At the NPF, however, his tune was different, complaining about the cost of six-day delivery and claiming that “more than half of our carrier routes lose money.” That may win the support of those in the audience who don’t know the whole story. (And though he avoided the term “half-full trucks,” he still emphasized the drive for “more cubic volume.”)
Beyond that, despite his bluster in public forums, DeJoy knows well that proposing to diminish the USO would have no political support. Nonetheless, the eventual need for public funding to underwrite the USO is being realized more often. While politically distasteful, it may become necessary as the gulf widens between the USO’s costs and the willingness of commercial ratepayers to foot the bill. So far, DeJoy has only bemoaned the “broken business model” but hasn’t taken steps to manage its costs or find new revenue sources to pay for it – more packages likely aren’t the answer, either.
The infrastructure
In describing the many processing and transportation networks that had evolved over the decades before his arrival, DeJoy may have correctly noted the net inefficiency that they caused but, unfortunately, couldn’t stop himself from being needlessly derisive, calling them “silly” and “random,” with “dilapidated facilities.” His capacity to understand his predecessors’ circumstances apparently had run out.
Moreover, still needing an enemy to fight, he characterized the existing processing and transportation networks as a “sacred cow” that’s “a shrine to political nonsense, failed practices, and resistance to change.”
Modernizing the postal infrastructure is one topic on which there’s little argument from the commercial mailer community. Most opposition is from the unions and politicians concerned about losing jobs at local facilities, yet DeJoy paints everyone with the same brush, discarding potential support.
Regardless, DeJoy assured the audience that all the planned changes “improve our productivity dramatically and significantly reduce our transportation cost, while providing reliable service.” Whether productivity and cost reduction will be provided has yet to be shown, but service quality has worsened as can be proven by the Postal Service’s own data.
The video that followed this segment featured the new Atlanta Regional Processing and Distribution Center, starring the predictable upbeat employees and managers and clever camera angles. However, it also focused on packages and package processing – not mail – and echoed the PMG’s fixation about transportation “efficiency” as defined by fewer trips and full trucks; no mention was made of any impact on timely service.
As with other parts of the speech, the video was meant to give attendees the impression of a happy workforce operating a modern and efficient processing center. People who’ve visited or monitored the Atlanta RPDC know differently, but full disclosure of the facts wasn’t DeJoy’s objective.
Yet another video followed, this one set in the South Atlanta S&DC, and filled with the more laudatory comments from employees and managers, emphasis on the facility’s efficient package processing, and the availability of “amperage” for new electric vehicles. (To hear some employees, making them happy only required painting the break room and installing an ice machine.) Not discussed – and therefore not presented to the audience – was the open question of how many more carriers and vehicles will be needed to offset the lost street time as the S&DC’s carriers drive through Atlanta traffic to reach their now-distant delivery routes.
After two more segments, DeJoy introduced one more video, this one about the agency’s sustainability efforts. In this production more than any other, not only were measures to assure “full trucks” and “optimize” routes front and center, they were shamelessly greenwashed as environmentally desirable; any service impact wasn’t mentioned.
DeJoy came back to close, both the 80-minute speech and the pitch for his Plan, before unenthusiastically sending everyone off to enjoy the Forum and quickly moving off stage.
Observations
Though the opening session speeches by the sitting PMGs customarily were positive reports on what the agency was doing and its important initiatives, the traditional content of the NPF has been commandeered, replaced by a days-long live infomercial for DeJoy as visionary and his Plan as dogma.
A picture on the big screen behind him showed the covers of his Plan and two subsequent annual updates. A third should be due, and it will be interesting to read how the situation after three years – finances, facilities, prices, and service – is spun to assert that everything is fine, his employees are supportive, and it’s all going to work out as planned.
While the Postal Forum audience may never hear anything to the contrary, people more informed know he was selling his Plan and painting as pretty a picture of its success as he can. Unfortunately for DeJoy and his cadre of sycophant cheerleaders, the gap between what we’re to believe and what we can see for ourselves is becoming too wide for him and his apostles to paint over.
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