January 7, 2022 •
From the GCA Desk: An Uncertain Future
This November, the USPS Board of Governors held an open meeting and announced financial and service performance numbers that seemingly show that the 10-year “Delivering for America” plan is greatly successful. USPS losses for FY2021 were half of that in FY2020, and service performance improved significantly in all major categories. But all is not what seems with service or financial performance, and how the 2021 holiday peak mailing season plays out may determine Postmaster General Louis DeJoy’s future.
DeJoy entered his position just before the pandemic as one of the final acolytes of President Trump, and he remains polarizing. The Biden administration has purged nearly every other individual tied to the previous administration, making DeJoy’s longevity remarkable. He achieved this with calculated bets in his 10-year plan that prioritize increasing package volumes at the expense of traditional mail and growing the ranks of unionized career USPS employees. The plan intentionally sacrifices 42% of mail volume through a combination of excessive rate increases and service cuts, allowing the USPS to add as many as 100,000 permanent employees.
The results reported at the Board meeting suggest that the plan is well on its way to achieving those outcomes. Thanks to the ill-timed large postage increase in August 2021, USPS revenues are up, mail volumes are down, and it added more than 30,000 permanent employees. It also touted service performance improvements across the board for mail “in measurement.” A lot rides on that qualifier because a lot of mail that is subject to the USPS service standards isn’t measured for various reasons, enabling broad generalizations about service performance based on mail that is easiest to process and deliver.
The actual reality is quite different, and mailers in every category report significant service delays, especially in rural areas. In fact, USPS employees in the open comment portion of the meeting noted threats from irate customers whose businesses and livelihoods were impacted by mail delays that are driven by USPS’s prioritization in processing packages as well as transportation changes that sacrifice speed to ensure full capacity utilization.
The question is whether DeJoy’s bet will pay off. The holiday peak season will ultimately tell the tale. He assumed his role as a logistics expert who could ensure that the trucks run on time. The service problems, shortages of mailing equipment, and growing costs from system changes that were supposed to bring greater efficiency are potentially troubling. The board meeting also revealed signs of political unrest.
While the plan implementation and reports appear to still have unanimous support, a motion to re-appoint Governor Ron Bloom as chair faced unusual opposition from Governors Ron Stroman and Anton Hajjar. Although a Democratic appointee, Bloom is seen as DeJoy’s promoter and enabler as Board Chair. The unions have supported Bloom and worked to suppress the small but vocal group of Members of Congress from within progressive ranks seeking DeJoy’s firing, but that group apparently prevailed, as it was announced that Bloom would not be renominated and a replacement for both his and John Barger’s positions would be put forward. But DeJoy also raised ire from his Republican advocates via the implementation of large, unexpected postage increases in August and the initiation of a postal banking pilot project for which no notice was given and which many conservatives strongly oppose. A bigger question is whether DeJoy’s attempt to compete as a preeminent package delivery provider can be successful given the headwinds from a unionized workforce and constraints from Congress in the face of intense competition from established private-sector companies like UPS, Fed-EX, and an increasingly aggressive Amazon. Once the new governors are confirmed, DeJoy’s support on the Board will be significantly reduced, making USPS service performance during the holidays even more critical to his tenure.
Another challenge for DeJoy is that his plan hinges on the enactment of postal reform legislation. The greeting card industry supports the passage of this legislation and, in theory, the path should have been clear with Democratic control and postal union support. The Democratic Congress in the Obama administration also failed to correct the problems from the 2006 reform law, so control is no guarantee of success here. This time, postal reform is stuck behind the internal Democratic debate over the Build Back Better infrastructure package. Failure to pass the bill this year will push it into the challenging mid term election session. This is a problem for greeting card mailers who may not be able to argue for lower stamp price increases from the savings, but also for DeJoy whose plan depends on the savings from the bill.
All these factors make December a critical month for the greeting card industry and for the USPS’s leadership. So this holiday season will determine who, if anyone, will be singing “DeJoy to the World.”