The Postal Service is in dire need. Trump wants to block the loan that could save them.

April 30, 2020 Epidode of "Can He Do That" (Washington Post)

Transcript Provided by VITAC

Allison Michaels: The novel-coronavirus pandemic has left a tremendous number of businesses across the country without the revenue they're used to. For the United States Postal Service, its losses in revenue both from the pandemic and long predating it present a different kind of challenge. See, the Postal Service isn't a private company. It's a federal agency. So the ways to solve its financial problems are murkier. While Congress has stepped in to include a $10 billion loan to the Postal Service in the CARES Act relief package, the service has not yet seen that money. Last week, President Trump threatened to block that $10 billion loan unless the Postal Service dramatically raised shipping prices on online retailers. Trump has urged the Postal Service to raise prices since long before the coronavirus began. His latest move, though, the threat to block the agency's loan, reflects an unprecedented attempt to seize control of this agency, notably America's most popular government agency, according to the Pew Research Center. Meanwhile, time is running out. The Postal Service projects it could lose $23 billion over the next 18 months. So, can the president withhold money from a federal agency until it complies with his requests? And how are things different for the Postal Service that's tasked with operating from its own revenue and not from federal dollars? Plus, as we head toward the November election, in an era of social distancing, what might financial strain at the Postal Service mean for America's access to mail-in ballots? This is "Can He Do That?", a podcast that explores the powers and limitations of the American presidency. I'm Allison Michaels. Later in this episode, I spoke to elections administration expert Amber McReynolds about the challenges of an election that is likely to rely more than ever on mail-in ballots. I spoke to her about how a lack of funding to the Postal Service may play a role in how this election is conducted. But, first, I spoke to our reporter Jacob Bogage, who's been covering the latest news about the Postal Service closely. To understand Trump's actions in regards to withholding a loan that would help the Postal Service, I wanted to first understand how exactly the Postal Service's finances work.

Jacob Bogage: The Postal Service is supposed to run like a self-sustaining organization, basically almost like a private company. It employs 630,000 people. Those people, plus all the operations, the cost of delivering the mail is supposed to be derived from the profit it makes from delivering the mail, the revenue generated from delivering the mail. So the cost of stamps, the cost of delivering packages -- all of those things support or are supposed to support the Postal Service's operation.

Allison Michaels: And, yet, it's a federal agency in the executive branch of the government, but it collects its own revenue. Is it unusual for a federal agency to have to collect its own revenue like this?

Jacob Bogage: It is. The Postal Service is kind of a modern marvel, in that for decades upon decades upon decades of its existence, not only did it turn a profit, it turned massive profits. I mean, this was an incredible success story. And then the Internet hits, and we realized we don't have to send letters through the mail. I can send you an e-mail or a text message. I can pay my bills online. The local pizza shop doesn't have to send me a coupon to my door. It can send, you know, an e-mail or a text or it can advertise on social media or things like that. So that really affected the way the Postal Service does business, which was a unique method within the government.

Allison Michaels: And, so, just to clarify, the Postal Service takes no federal funding? It has never taken federal funding or has that changed over the years?

Jacob Bogage: The Postal Service hasn't taken federal funding since 1970, and that's when there was a major postal-reform package passed through Congress that transformed the Postal Service from your traditional government agency to this kind of quasi-government agency/quasi-private company. That's the last time it's taken federal funding. And, so, when we hear different politicians say the Postal Service costs the taxpayer money, the Postal Service doesn't cost the taxpayer money. The one caveat to that is that the Postal Service has a $15 billion line of credit through the Treasury Service. I guess you could say that's taxpayer money, because it's money sitting in the United States Treasury that the Postal Service can draw from in $3 billion annual increments. But when I send in my tax return, none of my tax dollars are then somehow getting appropriated to the Postal Service.

Allison Michaels: But that money from the Treasury Department is essentially what the Postal Service uses to fill in the gaps from what it cannot earn in its own revenue.

Jacob Bogage: That's right. The Postal Service has run in the red for the past 13 years. This past year, in 2019, it was a $8.8 billion in the red. And so how does it finance itself when it runs on an operating loss? It's through that borrowing from the U.S. Treasury.

Allison Michaels: So, does the Postal Service raise prices over time, then, to accommodate for lost revenue elsewhere?

Jacob Bogage: So, the Postal Service does raise prices, actually. Think about when you were growing up or when I was growing up. I remember a stamp cost something like 37 cents. A stamp today, I think, costs 55 cents. So the price of postage does go up. It's just linked to inflation and the cost of living, and that's determined by the Postal Review Committee, which is a panel that authorizes price increases from the Postal Service. The issue we're talking about in regard to recent news is packages and package prices, which are not linked. Those price changes are less linked to the cost of inflation, the cost of living, because the Postal Service competes with other companies to send packages, companies like FedEx and UPS and DHL. Even Amazon sends about half its own packages itself. So when the Postal Service wants to raise those prices on packages, it has to do it with competition in mind.

Allison Michaels: Okay, I want to talk a little bit more about that in detail later, but for now, let's just talk about how the Postal Service has been hit hard by the coronavirus pandemic on a number of levels. Can you just briefly explain how the virus has strained the service and its finances?

Jacob Bogage: The biggest way to explain it is that mail volume is down. So, when we talk about mail volume, specifically, in this case, we're talking about first-class mail. Those are bills, letters, the greeting cards your grandmother sends you, the card I have to send my mother in a couple weeks for Mother's Day. That's all first-class mail. It has a stamp on it or it's business mail. It's easy for the Postal Service to process. It's lightweight. They can transport it easily. That's where they make their highest profit margin is on first-class mail. There's this other thing called second-class mail. Think about that as, like, marketing mail. So the fliers you get. All of the fliers you have from Bed, Bath & Beyond that you haven't used yet -- those are second-class mail. Nobody's buying things that they would usually buy. When the economy slows down, people have less mail to send. And so that's where you see volumes decreasing and revenue decreasing. The Postal Service projects it could see a 30% to 50% drop in revenue by the time the coronavirus crisis is over. It could lose $23 billion in the next 18 months.

Allison Michaels: So, then let's talk more specifically about actions we've seen from the Trump administration over the past few weeks in regards to the Postal Service. Prior to the coronavirus pandemic, what were President Trump's chief complaints about the way the Postal Service operates?

Jacob Bogage: The exact same complaints about how it operates right now. It's about package prices to him. He has this idea in his head that increasing package rates on Internet shipment companies, like Amazon, like UPS, like FedEx, would somehow solve the Postal Service's problems. So, let's explain how that works. I'm going to use Amazon as an example, because it's easy and convenient. And there's a disclosure. Amazon's founder and chief executive, Jeff Bezos, also owns The Washington Post. Amazon doesn't deliver all of its packages. It delivers about half of its packages. For the remaining half, sometimes, it uses local delivery services. Sometimes, it uses contractors to come drop them off. A lot of the time, it uses the U.S. Postal Service because the U.S. Postal Service goes to 160 million addresses across the United States, six days a week. By law, the Postal Service has to go there. So it's pretty cheap to hand the Postal Service a package and say, "Hey, while you're headed off into the woods to deliver, you know, the mail to that house down the road, can you take this package of paper towels along with you?" The Postal Service makes money on that transaction. By law, it is required to make money on that transaction. If the Postal Service were to increase its rates on third-party shipping companies -- Amazon, UPS, FedEx, DHL, et cetera -- those companies would simply stop using the Postal Service. They would say, "We can find a cheaper way to do this on our own," and they would cut out the Postal Service as a middleman and just do it. Amazon already is on track to become the largest shipper of packages in the United States by 2022. It will outpace UPS and FedEx. UPS and FedEx already, right now, deliver about 3 billion to 5 billion packages on their own every year. If they were to stop doing business with the Postal Service because the Postal Service raised prices, I had an expert tell me -- and I've had multiple experts tell me, but one in the story I wrote recently -- it would kill the Postal Service. It would be the death knell of the Postal Service. We've talked about first-class mail earlier and how that's a revenue generator. First-class mail, in the past 10 years, has declined by 20 billion items. They're sending 20 billion items fewer this year than they did 10 years ago. Packages, on the other hand, have doubled. 10 years ago, they sent 3.1 billion packages. Last year, they sent 6.2 billion packages. Packages account for 5% of volume and 30% of revenue. If you were to cut that out -- It would be the only thing the Postal Service has left generating revenue, and if you cut that out, that would totally disappear. The Postal Service would never have a path to sustainability again.

Allison Michaels: So, given that your reporting shows that raising prices on packages would not be an effective means of helping the Postal Service's revenue, what does your reporting show on what motivates Trump's thoughts around this? Why does he want to see this happen? Why does he keep pressing this issue?

Jacob Bogage: That's the billion-dollar question. Nobody can really get inside Trump's head. A lot of this, by way of connecting the dots and by way of speaking with folks who negotiate with The White House on this issue, is aimed at Amazon and aimed at Jeff Bezos. Part of that is aimed at Jeff Bezos out of personal animus. Jeff Bezos also owns this publication, which has covered his administration very closely and not always to the president's liking. And this is one thing that it seems he knows about the Postal Service -- that it contracts with these other companies, and this is a way where he can exert some sort of influence. We mentioned, right at the top, that the Postal Service is part of the executive branch, right? Because the president can appoint members to the board of governors, which oversees the Postal Service. The board of governors then appoints the Postmaster General, like the C.E.O., the person who runs the Postal Service. But all of the Postal Service's oversight responsibilities lie with Congress. As soon as the president makes those appointments, he really doesn't have a lot of control over the operations of the Postal Service anymore. Congress does.

Allison Michaels: Yeah, I want to talk a little bit more about his attempts to sort of wrest control over the Postal Service. Under the stimulus relief package recently passed, the Treasury was authorized to loan $10 billion to the Postal Service. So, first, what about its structure makes the Postal Service eligible for a loan in the relief package? Have the stimulus relief bills included loans for other federal agencies?

Jacob Bogage: So, this is where we get in the weeds and where the politics really does matter. In the House version of that relief package, the bill that was passed included $25 billion -- not in a loan, just in a direct grant. "Here is a check for $25 billion. Take it, Postal Service, and do what you want with it." That bill went over to the Senate. The Senate said, "Eh, 25 is a little much. How about 13? $13 billion. Do whatever you want with it, Postal Service. You don't have to pay it back." The Treasury Department and The White House got involved and said, "No. We will not approve a bill that includes what's called a direct appropriation," or money you don't have to pay back. They said, "You can have a $10 billion loan, basically enough -- Here's some cash that you have to pay back to us, but here's enough cash that will keep you, you know, operating and keep you delivering the mail for a little while. But you have to pay it back to us. And we want to be able to attach terms to that loan." So, we talked about, earlier, the $15 billion the Postal Service can borrow from the Treasury. The Treasury is not allowed to attach terms and conditions to that loan. It can attach some interest rates. They're really, really low. But they can attach some sort of terms and conditions. The difference is that the Postal Service is in such a hole right now that it needs more than the $15 billion it's allowed. So, this $10 billion loan, which is a one-time thing, is extraordinary, in that the Treasury can attach terms, and those terms can be dictated by The White House to give it more control over the Postal Service. This is very unusual. Federal agencies kind of borrow from one another a lot and they borrow from the Treasury a lot. Rarely does one branch of government try to extract control over an agency through coercive borrowing.

Allison Michaels: Trump, last week, threatened to block that emergency loan to the Postal Service unless it dramatically raised shipping prices. So, to be clear, does the president have the power to block the Postal Service from receiving this emergency loan?

Jacob Bogage: Yes. He has to sign off on the terms of this loan or he has to allow Treasury Secretary Steven Mnuchin to sign off on the terms of the loan.

Allison Michaels: So, where does the loan stand now?

Jacob Bogage: It hasn't been approved. We've been told, from sources within the Treasury Department and within the Postal Service and within Congress, that they're still in preliminary discussions. But the idea that the Postal Service would be forced to raise rates is to, a lot of people on Capitol Hill, in both parties, and to a lot of people within the Postal Service, almost a nonstarter. And so when we look at future coronavirus relief packages, the Postal Service is hoping there is a stronger push from folks, especially in the Senate, which is controlled by the Republican Party, the president's party, to authorize another direct appropriation with the support that the president will not be able to block it, and the Postal Service won't be forced to utilize this $10 billion loan.

Allison Michaels: And the president cited raising prices is what he wanted to see, but are there other changes that Trump wants to see at the Postal Service?

Jacob Bogage: The president himself hasn't articulated the desire to see any more changes beyond that. He did, in December of 2018, impanel a task force to study the Postal Service. Their report, which came out December of 2018, had a few different policy recommendations for the Postal Service. Foremost among them was changing the Postal Service's relationship with organized labor groups. Some of the postal unions are kind of the last great big, powerful public-sector unions out there. So, that was one recommendation. Package requirements were another. Package rate requirements were another recommendation. The Postal Service is also run by the postmaster general, Megan Brennan, who's tried to retire. I mean, she's on her way out. And so she is a very easy person for the president to go after in these briefings and say, "The Postal Service is run poorly, and it costs lots of money. And if it had better leadership, that would be why -- that would solve problems." So she's a very easy person to go after. And part of the terms that we've reported on this $10 billion loan would allow the Trump administration, not the board of governors of the Postal Service, to name the next Postmaster General.

Allison Michaels: So, a last question for you. Has your reporting found criticism of Trump for these moves regarding the Postal Service, for potentially using this pandemic moment to target his pre-existing enemies?

Jacob Bogage: We have reported immense criticism toward the president and toward Treasury Secretary Mnuchin for these coercive bargaining tactics and basically leveraging a public-health emergency, leveraging this pandemic and the Postal Service's depleted financial position to institute some changes. Folks on both parties on Capitol Hill will tell you postal reform is necessary. The last big postal reform this country had was in 2006. That saddled -- What started as something that was very well-intentioned in that legislation has now saddled the Postal Service with $119 billion worth of debt that it has no hope of paying back. The Postal Service is in need of reform, desperately.

Allison Michaels: Now, the Postal Service's precarious financial future plays into another impact of the virus -- the challenge for Americans to follow guidelines and feel safe while also exercising their right to vote in an election year. Support in the U.S. for mail-in voting is growing amid the pandemic, so what impact could these developments with the Postal Service have come November? For that, I turned to Amber McReynolds. Amber is the C.E.O. of the National Vote at Home Institute, a nonpartisan organization that helps expand voting options in United States.

Allison Michaels: So, the U.S. Postal Service is faced with some dire economic circumstances if they don't get some relief money from the federal government. So I want to understand the ways in which the Postal Service may be more integral than ever before to how America votes for our next president. So, let's start here. How do laws around voting by mail vary by state?

Amber McReynolds: The kind of top end of the spectrum is a state like Utah or Colorado or Washington, where they automatically mail a ballot to every elector. Then, down from that, there are states like Arizona and Montana and New Jersey that allow voters to sign up for an absentee ballot, but on an ongoing basis. So they just have to fill out one request and they can say that they want to get a ballot mailed to them for all future elections. Then, down from that, there's states that allow voters to sign up for a ballot with no excuse, but the voters have to keep signing up for that ballot every election cycle to file that. And then, down from that, it's a group of states that still require excuses or they limit options, unless you're over a certain age, like Texas and like other states.

Allison Michaels: So, then in these emergency times, are states, if they so choose, able to change these laws quickly to ensure that vote by mail is an option for all voters by November?

Amber McReynolds: It varies by state. And, so, what we've seen is -- we've seen some states where the governor has modified the procedures or amended the rules or regulations around who could sign up to provide more options for voters, and we've seen that happen in a few states. We've also seen governors, like Maryland's Governor Hogan, call for an mail-ballot election, meaning every voter receives a ballot automatically before the election, both for their special congressional vacancy that they just had on Tuesday and also for their upcoming primary election. And then we've seen a couple of state legislative bodies make modifications to their existing laws and structures right now in advance of November.

Allison Michaels: So, then, realistically, will vote by mail be an option for voters in most states by November of 2020?

Amber McReynolds: Well, it's an option now in every state, but the problem is, is there's restrictions in certain states, and, you know, those states would have to lift some of those restrictions or make those voting by mail more accessible and provide it in a more cohesive way to the entire population, as opposed to how it's limited now. And there's a group of states that still do that, but for the most part, right now, in every state, you can sign up without an excuse, with an exception of a small group of states.

Allison Michaels: And just to be clear, what is an example of an excuse?

Amber McReynolds: For instance, in Texas right now -- and they just got challenged, legally, on this -- they actually allow voters over 65 to file a no-excuse request, meaning they don't have to have a reason to get the absentee ballot. But if you're under 65, you have to prove the need that you have to receive an absentee ballot. So, that could be a medical reason. Maybe you're in the hospital. It could mean that you're out of state, and you have to provide an excuse or a letter from your employer for work. It could be a medical-emergency person that is allocated out of state or something or out of the jurisdiction. Sometimes, law enforcement qualifies as an excuse. So, it really varies depending on the state that you're in. And some states also still require a notary for the absentee application. Not even just the ballot, but the actual application.

Allison Michaels: So, what are the potential bumps in the road for states who want to make changes toward enabling no-excuse mail-in voting?

Amber McReynolds: Well, there's not really any administrative hurdles or many roadblocks, except for policymakers not wanting to change or modify those provisions to ensure their voters can vote in a safe and secure way. States that are already providing a no-excuse option, if they want to expand that to accommodate, frankly, the inevitable uptick and the increase in vote by mail for November, they have to procure additional equipment and they really need to review their internal processes right now just to make sure they can handle an increase in volume, whether that be on the application process, which is some of the issues we saw in Wisconsin, or on the ballot-acceptance and then ballot-counting aspect on the back end, because it's important to make sure that you can handle the volume with your current equipment and current structure.

Allison Michaels: Who controls these efforts and processes?

Amber McReynolds: Most of what I just described happens at the local level. And a lot of people think that secretaries of state run the election process. They have a role and they oversee policies and rules and regulations, but they don't actually run the actual election of serving voters, processing voter registration, processing ballots, counting ballots. They don't actually have a role in that. So, it's actually more at the local level, whether it be the county o