Common Cents

Part Time Post

Ralph Murphy

(8/17)United States Postmaster General Louis DeVoy announced major structural changes at the United States Post Office (USPS) to include executive firings and equipment decommissioning. The August announcement followed a reported 2.2 billion dollar operating loss to the independent executive department in the second economic quarters earnings linked to its service. It was paralleled by a reversal on withdrawal from a United Nations mail cartel called the Universal Postal Union (UPU) that establishes rates and regulatory restrictions. Cost overruns, political ploys, consumer trends and world relations all merge in the program review and the unlikely low complexity agency of high utility has now been cast into the world stage as a real power broker.

The money associated with managing USPS seems the bottom line on the issue. At 71 billion annual operational cost its not dissimilar to other bloated departments like Transportation or Health and Human Services but it has run chronic deficits reportedly since inception following 1970’s trade legislation that established the Postal Regulatory Commission. It was an attempt by American authorities to wrest rate and regulatory control from the UPU which dictated arbitrary billing from its cartel like United Nations affiliate in Bern, Switzerland.

The result however was continued rate compliance to UPU dictate, some deference to private sector package deliverers, and a union coalition that became almost radically politicized with retirement snd pension benefits of its over 600,,000 employees few other departments had envisioned let alone realized. USPS annual operating losses the past few years have averaged a predictable 5-6 billion dollars in poorly tracked outflows that fit domestic and foreign system and pension plans not relevant to the service cost. The accumulated debt is difficult to discern but 20 billion was quoted as ostensibly owed the UN group.

The negotiations and rationale for using the USPS as a leverage to influence legislation domestic politics and trade flows are varied and often complex. The system itself uses relatively inexpensive and low capital requirement relevant to its inelastic need and demand. It’s exactly the type of program that the federal government is comfortable weighing in on as again the exposure so high in tangible delivery and management requirement void of advanced system support. Its not producing for variable consumer trends, its just a predictably static broker service but of vital need. DeVoy has joined the President and claimed mail-in votes polls could be affected by a drop in service to decommissioned machinery as the funding gap remains an issue. It triggered a Democrat Congressional reaction bemoaning losses of USPS funds which implies their members party to the program deficits.

There are other factors or systems involved in the outsourced program costs. They include private sector package delivery services linked in legislation and subsidy support, but again are all subject to the cartel like dictates of the UN’s mail service. The UPU has to be broadly reviewed with the goal of optimal production and in that case it would require world antitrust enforcement. To digress the UPU is probably the most successful cartel or collusive market oriented service the world has ever known. Established in 1874 by a Treaty of Bern it initially sought rate and regulatory harmony among its then mostly European members. America was one of the 21 early signatories as well having passed a Postal Act of 1872 that made the department a vaulted cabinet position. It joined the UN under app the same name as one of its first departments in 1948.

The UPU set rate and regulatory authority both to member internal markets and importantly cross border ones with proceeds remaining to the sender nation. The idea was a response would be triggered by the receiver. Mercantile like one sided commercial sending intervened however with periodicals for example tilting the stamp in favor of the sender nation and sender receipts "piled up", The receiver nations petitioned UPU and the UN brokered what became known as terminal dues or the receiver trying to regain a percentage of the postage earnings. They did have a point as again they’d have to receive the mailing and weren’t paid to treaty terms, but the terminal dues became simply pegged funding demands brokered by the UPU and a significant domestic issue. They were introduced in the late 1960 s during the early Nixon administration and helped trigger the Postal Reorganization Act of 1970 that established the PRC as an independent federal department.

The health and pension packages approach military combat service awards associated with uncommon valor. At reportedly 71 billion dollars it does also appear to fund its other members and a pricing and rate policy that became so difficult to directly challenge further domestic legislation followed that hasn’t quite changed the cartel role beyond cosmetic or superficial largesse or restriction lifts as the outflow levels continue and service remains about the same.

There were noteworthy changes to domestic policy that went beyond the immediate rejection of having to pay the arbitrary terminal dues by western powers. The uniform rate that the Bern Congress had regulated between 1874 inception and the 1969 terminal dues program were methodically the same as envisioned in its charter objective of uniform rates and guaranteed access cross border. By the PRC however package delivery enterprises were allowed some market discretion though oddly first class letters remained an internal monopoly as per statute only USPS mail boxes could control that market.

It was an unusual deal but upheld by even 2004 Supreme Court rulings specific to the matter. It helped trigger a Postal Accountability and Enhancement Act of 2006 where the PRC tasked the USPS to establish a system of modern rates and regulation for the delivery service they could take to the UPU in Switzerland and present at their policy meetings as the dues kept rising beyond realistic trade costs. They tripled the costs to the Americans at each of their five year meetings from the late 1970 s to the 2006 legislation but again did also diversify rates to several group nations, Four categories were noted linked to wealth, and the package handlers were afforded less trade control. That issue had generated a major market interest. FedEx reportedly is worth about 70 billion dollars , UPS similar and DHL to Europe also had that type fund access.

Mailings involve huge money for a simple service, imply caps and redirects of cash, equipment and exchange or treaty controls that while can be brokered through that method would sort out to convention by minimal intervention of the government. In that case the United Nations thought it could rebalance wealth toward poor non performers in a system that has gone too long and far from charter. There’s also an e- commerce issue as some substitute markets have developed that would have used mailings but it likely does generate other tangible postal need. That might be the package uptick and newer delivery volume or cost concern.

That lead to a series of ‘Extraordinary Congress’ meetings of the UPU with the most recent one last September where Whit House Trade Representative Peter Navarro accepted a deal to stay in UPU if a rate rise in package handling was permitted. The Americans now pay ‘Victory dues’ instead of terminal dues in much the same arrangement as the 1960 s. The UPU is to meet again next month as the west wants a better transfer system and the trade need again simple but effective physical control of tangible deliveries. The State Department has been involved in treaty terms since the 2006 Act, but the UN has remained largely unchallenged.

The fallout from UPU cartel interests are intriguing control jumbles. It’s a world cartel operated much like a commodity one with relatively predictable trade patterns, costs and income guarantees, but spins off some private sector programs and more specifically the internal monopoly on letters but oligopoly or limited supply access to other associated markets as with package delivery. USPS ostensibly competes in the latter with the private sector as UPS or Fedex with others were noted as involved. Those were also linked to the sales of goods or services. All refer to the 70 billion dollars which probably means collusion, but he market is low enough in complexity governing authority has been able to meet the basic market requirement. Cost incentives have been the overruns. USPS reports annual losses of the granted 6 billion dollars and is on track to continue the program witness DeJoy in attacking it if payments aren’t made, his motive isn’t clear yet.

As long as the Universal Postal Union is allowed control over the rates of its members, now 192 nations linked to the UN body there will surely be arbitrary dictate to policy requirements, cost overruns and poor service. Rather than the terminal dues type balancing repayments receiver nations could levy a second stamp on incoming foreign mail paid by the sender. Market forces would balance the cost as with any exchange unless an artificial barrier is introduced and UPU control policy defines the problem. The group formally meets again in Bern next month for a relatively impromptu fifth extraordinary Congress. Perhaps the west can send a representative ready to address that UN cost account as a knotty shakedown not a viable aid means and let the market determine optimal cost and transfer method void of its arbitrary dictates.