House lawmakers pushed back strongly on the Trump administration’s proposal to restructure, and ultimately privatize the Postal Service at a hearing Wednesday, the first indication from Congress that the White House may face an uphill battle implementing this aspect of its government reorganization plan.
Margaret Weichert, the Office of Management and Budget’s deputy director for management, defended the Trump administration’s government reorganization plan before the House Oversight and Government Reform Committee.
While the Postal Service doesn’t receive annual funding from Congress, and is mandated by the Constitution, Weichert said the agency’s continued financial losses led the Trump administration to recommend privatizing USPS.
“Change in the economic model for the Postal Service, and particularly the drop in first-class mail, have fundamentally affected our ability to meet our liabilities for employee benefits, as well as to be economically viable as an independent agency,” Weichert said.
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Since 2001, first-class mail, one of the Postal Service’s most profitable products, has declined by 40 percent.
The agency has posted net losses for the last 11 fiscal years, and posted a $1.3 billion loss in the second quarter of fiscal 2018 — more than double the loss from the same period last year.
However, USPS continues to see rapid growth in its package and shipping business. Ten years ago, USPS took in about $1.5 billion in parcel revenue. In recent years, it’s been earning more than $20 billion in packages.
Rep. Elijah Cummings (D-Md.), the committee’s ranking member, expressed concern with the administration’s decision to go right to selling off the Postal Service, instead of looking to reform it.
The Trump administration announced its intention to ultimately privatize the Postal Service before the White House’s postal task force was scheduled to release its recommendations for the agency in August.
“Instead of working with us, President [Donald] Trump unilaterally appointed a task force to come up with its own ideas about the Postal Service. Then, without even waiting for his own task force’s results, President Trump rushed in this proposal to eliminate it entirely,” Cummings said. “Like so many other ideas that come out of this White House, President’s Trump’s proposal to privatize the Postal Service is disorganized, unilateral and frankly incompetent. I do not think this plan is a serious one.”
Last year, the committee passed a bipartisan postal reform bill that Cummings said would put USPS on “more solid financial footing,” but the legislation never received a full House vote.
Weichert explained the administration would first need to get USPS on a more stable financial trajectory before selling it to the private sector.
“Privatization is definitely a vision for the longer term and a framework that could be looked at,” she said. “The near-term has to be about economic improvement in the Postal Service. You couldn’t privatize an entity that has the level of liabilities and economic challenge that the existing Postal Service does.”
USPS has more than $100 billion in unfunded liabilities, and owes another $15 billion to the Treasury Department’s Federal Financing Bank.
For more than a decade, USPS has had to prefund health benefits for future postal retirees, and has defaulted on several scheduled payments to the fund.
Most of the recent reform bills proposed in House and Senate would require postal retirees to enroll in Medicare parts A, B and D, and would eliminate most of its prefunding burden.
Rep. Gerry Connolly (D-Va.) told Weichert that the Trump administration should have first addressed the “onerous” prefunding mandate before seeking to privatize the Postal Service
“I would love the administration to at least acknowledge that that’s a major problem,” Connolly said.
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While the postal unions expressed surprise with the White House’s privatization plan last week, it remains unclear how much input the White House sought from USPS management before issuing its plan.
“Other agencies had the opportunity to submit reorganization plans with their own perspectives. Did you offer this opportunity to the Postal Service?” Rep. Brenda Lawrence (D-Mich.) asked.
“I don’t know the answer to that question,” Weichert responded.
“Did OMB consult the Postal Service at any point in the process of creating such a plan, or did your task force at any time even ask for it? Again, you don’t know?” Lawrence asked.
“I don’t know,” Weichert said, adding that she couldn’t confirm either way if OMB or the White House postal task force asked for a proposal from the Postal Service, or if one existed.
Lawrence said she was concerned with the administration’s “very severe recommendation” to move straight to privatizing USPS, instead of looking at reforming the Postal Service’s business model.
“How in the world did you get from saying we want to be economically feasible to selling it to the highest bidder and to privatize it? I just don’t understand that leap, unless it is purely political,” she said.
Weichert said the administration conducted an “external analysis” to determine the best path forward for USPS, and looked at how other countries run their postal services.
“You looked at other countries, but you did not talk to the organization that you’re talking about privatizing. Something seems wrong with that,” Lawrence responded.
Rep. Glenn Grothman (R-Wis.) also expressed doubts with how feasible it would be for the administration to sell the Postal Service.
“I will point out the Post Office is in the Constitution. I think it’s important for everybody to realize what’s in the Constitution, and also for everybody to realize what’s not in the Constitution, and what the federal government is forbidden to do,” Grothman said.
In March, Sens. Tom Carper (D-Del.), Heidi Heitkamp (D-N.D.). Claire McCaskill (D-Mo.) and Jerry Moran (R-Kan.) introduced the most recent legislative attempt at postal reform. The bill, much like efforts in the House, would require postal retirees to enroll in Medicare.
Moran joined House lawmakers in expressing his concerns over privatizing USPS, and urged members of the administration, including Treasury Secretary Steve Mnuchin, the head of the White House postal task force, to instead lend support to legislative fixes.
“The Postal Service has been operating at a deficit for over a decade – it is clear that we must act to provide a sustainable path forward that relieves financial pressure while protecting taxpayers from a future bailout. However, I do not believe privatization is a prudent solution,” Moran said in a statement.
Following the release of the president’s proposal to privatize the Postal Service, Heitkamp and Rep. Mark Meadows (R-N.C.), the chairman of the government operations subcommittee, met with members of the postal task force to discuss pending postal reform bills in the House and Senate.
“In our meeting with the new postal task force, Congressman Meadows and I conveyed how our rural communities back home rely on accessible and affordable mail service to survive, and we pushed back against the administration’s extreme restructuring proposal. Heitkamp said. “However, we also acknowledged the urgent need to address the chronic challenges facing the Postal Service, such as its fraught financial situation.”
Following the release of the government reorganization plan, Postmaster General Megan Brennan said lawmakers should decide whether USPS should remain a government entity.
“Ultimately, it will be for Congress to decide whether the best path to financial sustainability is to preserve the Postal Service status as a government institution focused on our mission of public service, while giving us more authority to meet our responsibilities, or whether a profit-maximizing corporate model is preferable,” Brennan said in a statement. “We will continue to work with all parties, including the Presidential Task Force established to conduct a comprehensive assessment of the Postal Service, to address these significant public policy issues.”
The Postal Service didn’t immediately confirm whether it had written a reorganization plan like other agencies, or whether it was asked by the Trump administration to write one.