Thursday, February 13, 2014

The Postal Option

In his effort to improve the economy, President Obama has emphasized jobs, jobs, jobs.  In his State of the Union address in January, President Obama recognized "the budget compromise should leave us freer to focus on creating new jobs, not creating new crises."    He asserted "We also have the chance, right now, to beat other countries in the race for the next wave of high-tech manufacturing jobs" and encouraged legislators to "do more to help the entrepreneurs and small business owners who create most new jobs in America." He promised " my administration will keep working with the industry to sustain production and jobs growth while strengthening protection of our air, our water, our communities."

We'll know whether the President is true to his word on that last piece when he decides whether to approve the Keystone XL pipeline, designed to ruin the environment in order to allow oil companies to shift oil from the American midwest to Asia, especially mainland China (video, below).

But Obama could make a substantial difference in a less controversial area.  The U.S. Postal Service, a semi-autonomous agency since 1970, has been pre-funding retirement benefits for its employees 70 years out as required by a 2006 law.  It must pay  $5.5 billion annually into the fund, despite the $47 billion currently there, and consequently lost $354 million in 2013. The US Inspector General in a white paper has suggested the USPS be empowered to, as David Dayen later noted, "offer basic banking services to customers, like savings accounts, debit cards, and even simple loans" so the poor and the working class don't have to resort to the likes of check cashing stores, pawn shops, and payday lenders. Promoted by Dayen, the idea has been endorsed by Senator Elizabeth Warren (D-Mass.)

But banks have expressed concern over the concept, and  Postmaster General Patrick Donahoe has not been supportive, preferring to reduce services and support a pilot program in which (non-union) Staples employees sell traditional postal service products to customers. Dayen explains 

The cynic would say that Donahoe’s preference for job-cutting and privatization over new revenue options like postal banking reflects poorly on President Barack Obama; after all, Donahoe's his postmaster general. That’s partially right and partially wrong. Though the postmaster was once a member of the presidential cabinet—the nation’s first was Benjamin Franklin—that changed in 1970, with a reorganization making the Postal Service a semi-autonomous agency. Instead, a Board of Governors, composed of nine members appointed by the president and confirmed by the Senate, chooses the postmaster general and chief deputy (who then become the other two members of the board). The postmaster serves at the pleasure of the board and could be replaced at any time. The Board of Governors operates like a board of directors of a private company, not only choosing the executive team but also approving compensation packages, directing expenditures, conducting long-range planning and setting “policies on all postal matters,” according to the USPS website. So postal banking rests in the board's hands.

Here’s where Obama deserves criticism: There are five vacancies on the nine-member board. He has not successfully placed a single appointee on it during his entire tenure in office. The four existing members were all appointed by George W. Bush.

Currently, the board consists of chairman Mickey Barnett, a former Republican state senator from New Mexico and onetime aide to Senator Pete Domenici; vice chair James Bilbray, an-ex Democratic congressman from Nevada; Louis Giuliano, former CEO of ITT Corporation and a senior advisor to the Carlyle Group; and Ellen Williams, a lobbyist and former chairwoman of the Republican Party of Kentucky. So the decision-making entity for the Postal Service remains in partisan Republican hands, five years into the Obama presidency. It’s not surprising, then, that they’ve used a relatively artificial retirement funding crisis to shrink the agency and privatize services. 

Obama could fill the vacancies and restore a Democratic majority (by law, no more than five members of the board must come from one party, but with five vacancies to work with, he can certainly establish a majority).2In addition, Barnett’s term has already expired, and Giuliano and Williams’s terms expire in December. So Obama could remake this board with members more favorable to a truly innovative agenda for the Postal Service that includes non-bank financial services. And since board members serve seven-year terms, they would be insulated from political shifts through the next presidential term.

The Board of Governors does not have unchecked power on postal policy. The Postal Regulatory Commission (PRC), also created in 1970, oversees the USPS, determining compliance with the law and making policy recommendations for the Board of Governors. So the PRC would have to determine whether the USPS could engage in postal banking through its existing authority. In 2008, the PRC upheld that money orders were a core postal service, and in a footnote mused that “stored value cards” (i.e. prepaid debit cards) could be classified in a similar manner. A favorable ruling from the PRC would be critical to postal banking. 

Here, too, the Obama Administration has been asleep at the switch.  The PRC has two vacancies, and currently the panel includes two Republicans (a longtime Republican National Committee official and a former Congressional chief of staff) and one Democrat. Once again, actually appointing nominees would lead to a Democratic majority on the commission.

The Obama Administration has often been criticized for failing to fill executive branch agencies with key appointments in a timely manner. It was understandable for the White House to slow-walk what may have been considered low-priority appointments when Senate Republicans routinely blocked every nominee. But since Senate Majority Leader Harry Reid triggered the nuclear option, nominees only need 50 votes for confirmation, lessening the possibility for obstruction and making the administration’s sluggishness far more frustrating. 

In effect, you have a Republican majority controlling an executive agency under a Democratic president, which happens to be the country’s second-largest civilian employer, behind Walmart. The loss of over 125,000 postal jobs has had a detrimental effect on employment, and the resistance to ideas like postal banking prevents low-wage communities from an alternative to payday lenders, check-cashing stores and other unscrupulous operators. Yet the White House has shown no urgency in reversing the conservative governing ideology at the Postal Service. If nothing else, there’s an economic imperative for the White House to act. They claim to want to reduce inequality through executive action. Postal banking is a major opportunity to do so.

This clearly should be done, but Barack Obama loathes traveling far from the middle of the road.  Having now ordered that federal contractors pay a minimum wage of $10.10 per hour, expecting him now to do the right thing somewhere else may be a bridge too far.

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