WASHINGTON — The coronavirus pandemic is ravaging the U.S. Postal Service, with mail volume down by nearly a third already compared to same time last year and dropping quickly, as businesses drastically cut back on solicitations, advertisements and all kinds of letters that make up the bulk of mail service’s bottom line.
The falloff comes even as package delivery has surged — but not by nearly enough to offset the losses from mail volume.
The result, the Postal Service told Congress on Thursday, is a multibillion-dollar financial shortfall that could cause one of the government’s oldest and most reliable entities to run out of cash by the end of September and throw regular delivery into doubt at a time when Americans may still be trapped at home.
Megan J. Brennan, the postmaster general, told lawmakers on the House Oversight and Reform Committee on Thursday that the agency believed it would need $25 billion in federal grants to cover lost revenue from the pandemic, plus an additional $25 billion to update aging infrastructure. Another $14 billion is needed to pay off long-term debt related to the Postal Service’s retirement benefits program along with $25 billion in unrestricted borrowing authority to weather the rapidly unfolding crisis, she said, according to officials familiar with the information she shared privately, who described it on condition of anonymity.
Even with an increase in online shopping and package delivery to Americans cooped up at home, the agency could see a 50% reduction in total mail volume by the end of June, compared to the same period last year, Brennan told lawmakers. Postal officials fear a sizable portion of that lost mail may never return.
In total, the Postal Service anticipates losing $13 billion in revenue this fiscal year because of the pandemic and another $54 billion in losses over 10 years.
“They are chilling numbers,” said Rep. Gerald E. Connolly, D-Va., who leads the House subcommittee responsible for the Postal Service. “The reaction of a lot of my colleagues — their jaws were dropping. It is one thing to say the Postal Service is suffering. It is another to hear these specifics.”
As Congress spends trillions of dollars to try to save private businesses with loans and grants, the Postal Service has emerged as an unusual sticking point, bogged down by a long-running debate over its future. The agency does not normally use taxpayer money, but has struggled in recent years under mounting debt.
House Democrats are ready to give the Postal Service most of what it is asking for. But President Donald Trump has so far rejected direct relief, repeatedly saying the Postal Service could solve its own woes simply by raising prices on packages delivered for big online retailers like Amazon.
Steven Mnuchin, the Treasury secretary, squashed a bipartisan attempt to send the agency emergency funds last month, insisting instead that his department be given new authority to lend up to $10 billion to the Postal Service on terms it helps set, other officials familiar with the negotiations said.
Brennan told lawmakers Thursday that the agency was already in talks with the Treasury about the potential loan, but its revenue predictions suggest that money would not be enough if the crisis continues.
For now, the mail service, which operates under government-mandated service requirements, has continued uninterrupted. Even as scores of its more than 600,000 person workforce have fallen ill and some have died, mail sorters and carriers have continued to walk their routes in every corner of the country, in many cases the only physical lifeline Americans now have to the outside world. They deliver medicines, election ballots, coronavirus test kits and packages ordered online.
But the administration’s position has fanned fears among some lawmakers, postal union representatives and others who rely on the service that Trump administration officials are willing to let the postal network essentially go bankrupt to force its leaders to accept an overhaul to the postal business model that many conservatives have long sought — one that could limit delivery service and aid commercial competitors like FedEx and UPS.
In a statement to The New York Times, Brennan said the Postal Service was “at a critical juncture,” quickly losing revenue because demand for its most profitable postal products was “plummeting as a result of the pandemic.”
“At a time when America needs the Postal Service more than ever, the reason we are so needed is having a devastating effect on our business,” she said. “The sudden drop in mail volumes, our most profitable revenue stream, is steep and may never fully recover.”
She called on Congress to “shore up the finances of the Postal Service, and enable us to continue to fulfill our indispensable role during the pandemic, and to play an effective role in the nation’s economic recovery.”
Negotiators on Capitol Hill had reached a tentative deal last month to provide the Postal Service around $13 billion in direct relief as part of the $2 trillion CARES Act. The figure would have been far below a proposal by House Democrats, but it had the buy-in of a key Republican negotiator: Sen. Ron Johnson of Wisconsin, chairman of the Senate Homeland Security and Governmental Affairs Committee, according to the officials familiar with the talks, who were not authorized to publicly discuss them.
But Mnuchin said the administration would not have it. The Treasury secretary told lawmakers that a direct infusion of cash was a non-starter, and advocated instead for creating the $10 billion in new lending authority. Department officials did not respond to a request to comment Thursday on postal issues.
Connolly said Thursday that he would recommend House leadership promptly back the new, higher figures presented by the Postal Service.
“We weren’t shooting for the moon. We weren’t solving all the problems. We were just trying to get them through,” Connolly said. “The question is, will the Republicans join us?
Some Republican lawmakers remain open to direct cash payments, as well, under certain circumstances. Historically, the Postal Service has counted on strong support from Republicans representing rural districts, where their service is a lifeline to homes and small businesses. But it is unclear if they would allocate the funds without imposing reform requirements on the agency or if they are willing to overpower Mnuchin and the White House.
An independent executive agency, the Postal Service has not taken federal funding in decades, running instead off revenue raised from stamps and other postal products. But since the 2008 financial crisis, it has struggled to stay in the black, weighed down largely by a congressional mandate to pre-fund its retirement benefits programs.
The agency has stopped making those payments in recent years, running up billions of dollars in debt, while its mail delivery business has otherwise remained profitable. Lawmakers in both parties have proposed overhauls to the service along the way, but none have stuck.
Postal unions and Democrats fear that the Trump administration is now trying to take advantage of the coronavirus crisis to push through a long-sought overhaul of the Postal Service that would benefit private package carriers and eliminate certain costly rural delivery routes.
Trump has frequently criticized the service for not charging higher prices to deliver packages for large online retailers like Amazon — a company he has sometimes singled out in his Twitter tirades on postal issues. Aides have said the president’s criticisms often followed critical stories about his administration published by The Washington Post, which is owned by Amazon founder Jeff Bezos.
He repeated the criticism this week, as he appeared to reject calls for a cash bailout. Asked about Connolly’s proposal, he said the congressman should focus instead on raising package delivery prices.
“Tell your Democrat friend that he ought to focus on that, because if he focused on that, he could truly save the Post Office,” the president said.
Trump ordered a review of the Postal Service and its pricing policies in 2018. His administration published the review in December of that year. Its recommendations included steps that could reduce the frequency of mail delivery and increases in the prices of sending some packages. Online retailers criticized the recommendations, which they said could particularly hurt rural customers.
The report did not spur any action in Congress last year. But a longtime congressional advocate of changes to the service, Mark Meadows of North Carolina, recently took over as Trump’s chief of staff. Critics of the report fear the White House could be trying to use the pandemic as another opening.
“At the end of the day, they have an agenda,” said Mark Dimondstein, president of the American Postal Workers Union, which represents 200,000 postal workers. “Raise prices, reduce worker benefits, and reduce services, make it appear more profitable and set it up for sale.”
“The COVID crisis should not be used to achieve political aims,” he added.
A lobbying group on postal issues that includes Amazon and other online retailers, the Package Coalition, raised concerns this week that the strings Treasury officials might attach to postal loans could raise prices during a pandemic that has made Americans more dependent on package delivery.
“The Treasury has the Postal Service over a $10 billion barrel, and the Postal Service is on the brink of bankruptcy,” said the coalition’s chairman, former Army Secretary John M. McHugh. “What do you do? We’re worried they’ll accept the terms.”