If the conversation about the end of the U.S. Postal Service sounds familiar, it’s not just because we’ve heard variations of it since 1970, when the old Post Office Department became a separate business. It’s also because the destruction of mail delivery closely parallels the wrecking of American passenger rail. Apparently the Congress has it in for quasi-public institutions with work forces composed disproportionately of African-Americans.
Passenger rail has always been a losing proposition; the money is in freight. But until the late 20th Century, as the price of using public assets—tracks, switches, signals and the rest—freight railroad companies were required to carry passengers at a loss. Then somehow this social compact broke down. Both railroads and their regulators started talking as if railroading were an ordinary commercial enterprise instead of a public utility. Ordinary for-profits aren’t expected to maintain business lines at a loss. Indeed, to the extent they do so, they’re considered incompetent. So the people making money from national railroad facilities were able to persuade Congress that they shouldn’t have to bother maintaining passenger service. In other words, the railroads figured out how to shift their burden—what had been a simple cost of doing business—to the public. Voila: Amtrak.
Independent passenger rail was bound to be a financial failure, and it was. So year after year after year Congress has complained about Amtrak’s losses and tried to reduce them by shrinking the system until by now it’s small enough to drown in the proverbial bathtub. Little-noticed along the way is the fact that many of the jobs being lost belong to black people.
The Brotherhood of Sleeping Car Porters was the first black-led union recognized by the AFL, and probably the most powerful union dominated by African-Americans in the United States.  Much of the foundation of the black middle class was laid on the decent wages and benefits and pensions fought for and won by that union. So whatever hurts Amtrak—and these days, pretty much everything does—also hurts the African-American community.
Now connect the dots to the Postal Service. Mail, like rail, is a public utility.  (If you doubt that, take a look at the Constitution, where the Post Office rates a specific mention.) A group of companies—the mailing houses and catalog producers—get to use this public utility to make a private profit, and they’re doing very well by that arrangement.
Once again, though, the price they were supposed to be paying for this benefit was to subsidize service to individuals. So once again, someone re-conceived this public utility as an independent corporation subject only to the iron law of profit and loss. Now the profitable commercial service can continue on its merry way while the money-losing public service is forced to resort to the kind of cuts which predict—if they don’t actually cause—an imminent visit to the scrapheap (or bathtub).
And once again, an outsized group of the fired employees are African-Americans, because the Post Office was an equal opportunity employer before the phrase had even been coined. So right in the middle of the Great Recession another pillar of the black middle class is knocked down.
There is an alternative to the current flood of crocodile tears over the death of written communication. We could return to the social compact that regarded mail service—and rail service, for that matter—as something to be paid for by the people who benefit from it most. That doesn’t mean those of us who receive an occasional Saturday letter, or sometimes take the Metroliner—it means the freight shippers. In the case of the Post Office, at least, the public has been subsidizing them instead of the other way around. End that particular piece of corporate welfare and see how many post offices can suddenly re-open.
Perhaps it’s only a coincidence that these two agencies, staffed by black workers, have been asked to do the impossible and then punished for failing to manage it. But coincidences of this kind—which permit imposition of exceptional harm on one group provided the primary purpose of the harm is making money—are precisely what is meant by the term “institutional racism.”
It isn’t too late to remember that rail and mail are public utilities and to govern them accordingly. Otherwise, we’re just echoing the words of an earlier Gilded Age, spoken by a railway man as he was cancelling a mail train: “The public be damned!”
The association of race to rail car service or the post office was a political accident of the 19th century. The Post Office was a means of political patronage — for decades, the Postmaster General was a Cabinet member, and, usually, the closest political associate to the President. (Since the 1960s, the distinction of being the closest political associate of the President in the cabinet has gone to the Attorney General; what does that say about our political evolution?) Republicans rewarded their black supporters during and after Reconstruction; in the South, the local postmaster was often one of the very few pillars of the community independent of the white oligarchy.)
The Pullman Palace Car company, which supplied the sleeping cars, and service attendants, for railroads was headed up for many years by Robert Todd Lincoln, Abraham Lincoln’s only surviving son. There’s no evidence that Robert’s attitudes on race were anything but patronizing to the point of hostility, but, nevertheless, even in the South, Pullman never yielded to segregation — never had blacks-only cabins or cars, and no one was willing to challenge Lincoln. The job of Pullman porter, though menial, paid well and was prized. Like all railroad jobs, it was unionized, and the porters’ union was a rare funded voice for african-americans through some dark times.
In terms of the economics, the problems and dynamics of networks with large sunk costs, but large system effects, are not a featured part of the Mankiw eCON 101 curriculum. It offends their conservative-libertarian vision in multiple ways, that a major part of the economy might not “naturally” tend toward an “efficient” née profitable equilibrium, or that the major benefits of a system might not be private, but publicly difffused.
I say all of this as a sympathetic preface to rejecting preservationism as a liberal desideratum, and race as a catch-all diagnosis of the pathologies of the Right. The hostility to the postal workers or Amtrak isn’t about race, so much as it is about the money. It is always primarily about the money. Racism was always about the money, just another way of devising a political and economic method to monopolize resources for a few and dominate and exploit the rest.
As we confront the reality of climate change and the need to reduce our carbon footprint, a major revival of passenger and freight rail to support a higher density of economic life is an obvious path forward. That’s certainly not Amtrak, though.
The first-class letter is obsolete. We ought to be building a public system of identity, communications and payments, with an electronic basis, which protects the individual. But, we’re not even talking about it. Instead, we’re allowing the vultures and parasites dominate our economy — both the new parts and the dying ones.
I think international context would help: Is passenger rail and non-commerical postal services cross-subsidized by freight rail and commercial mail, respectively, in other countries?
I think the postal service would be taking hits regardless of politics, just because of the rise of electronic transactions that negate a lot of the use of paper mail Your line of argumentation above is new and intriguing though on both topics.
Frank
In Europe, a larger percentage of freight is carried by truck than is the case in the US.
The amount of First Class Mail peaked in 2001 and has dropped to about what it was in the mid ’80s.
The Republican led, Issa facilitated, demise of the USPS is about as crazy and unAmerican as flying one’s plane into an IRS building!
Our reverence for Ben Franklin is being destroyed by Congressional Republicans! Me thinks Ben would condemn Darryl Issa and his ilk as untoward for not realizing the need and essential aspects of public utlility for all Americans, and not acting to preserve such public goods!
The “crisis” exists solely because the USPS is being required to fully fund the next 75 years of pensions - including pension benefits for people who are not born yet. I’m willing to bet that once the $56 Billion is pushed into the pension fund, then the USPS will be sold off - “privatized” if you will, or “piratized” as I call it - to some campaign contributor for a token $1 sale (“it is loosing money, you know”) and the new owner will cancel the pension and then keep the $56 Billion.
http://www.govtrack.us/congress/billtext.xpd?bill=h109-6407
This. A thousand times this.
How many other businesses, or governmental units, have to prepay pensions 75 years in advance? None, because this requirement is unheard of. When you consider how hard it must be to put $56 billion aside, it’s pretty amazing the Post Office is doing as well as it.
The other drain on the post office that is continually overlooked is how they are used by their competitors — when FedEx or UPS has something that needs to be delivered to someplace not on their regular routes, they send that package, that package the customer gave to FedEx or UPS, TO THE POST OFFICE, which then delivers it for the same modest fee they charge everyone else. Again, how many other businesses have to do their competitor’s work for them, at the competitor’s profit?
Talk about an unlevel playing field. Just another of those long-acting gifts from the Bush days.
How many other businesses, or governmental units, have to prepay pensions 75 years in advance?
All businesses are required to prefund their pensions.
Who requires this? Because they’re not doing their job. If they were we wouldn’t need a Pension Benefit Guaranty Corp. http://www.pbgc.gov/
To answer my own, rhetorical, question, no one. There is no such requirement. It may be prudent to properly fund a pension fund but it is often a lot more profitable to just say it is funded and then ignore doing the funding.
not all businesses are required to prefund their pensions to such a distant time horizon.
None of them are required to prefund their pensions in this fashion. The governing rules are ERISA, the Pension Protection Act of 2006 and FAS 87 and 88 (no, I can’t remember where they are in the new codification). The first two establish that companies are required to make sure that assets within the plan equal its liabilities, subject to certain restrictions on the assumptions that can be made. The second two establish that liabilities are created in the same way that all other deferred compensation is, namely that it goes on the balance sheet when it is earned.
This means that the proportion of an employee’s eventual pension that he accumulates in a given year must be funded as of that year. This is true even if they are not yet vested, though the company is required to make an estimate of the percentage of employees that will leave before they are vested and adjust the liability accordingly.
The upshot is that everyone except the USPS only need to fund their pension plan for a portion of the eventual costs of all of their current eligible employees and all of their already retired employees. The USPS is now required to fund all of the eventual cost of all of their current and retired employees as well as all of the eventual cost of employees they have not hired yet who will still be collecting benefits in 2087. And they have ten years in which to make up the difference between what they were previously required to fund.
Though I consider it possible that you knew that already and are just spinning bullshit.
No, I missed the distinction between what the Post Office is required to fund and the normal “current earned pensions must be fully funded” of the ERISA standard.
And to H-the PBGC is needed because pensions can be fully funded at a point in time, and due to poor asset performance or longer-than-expected lifetimes, still not be able to pay the liabilities at some future point.
Or because management or vulture “investors” strip the assets that are supposed to fund the pensions and leave nothing but the liability-which they have gotten the government to pick up?
That’s another rhetorical question.
I note that the USPS is responding to money troubles in the same way that Amtrak has over the years: If you’re losing money, cut service further and (presumably) see if anyone complains.
Like it or not, they have to be able to pay the bills. In the case of Amtrak, the dwindling of their subsidy from the government has required them to cut expenses. In the case of the Post Office, the combination of declining volume and the pension requirement has required that they cut expenses. Neither of them has a choice about that. Under the current circumstances, neither of them has the cash available to continue the service that they were previously providing. A lack of profit can be tolerated for a time in the hopes of building a business. A lack of cash is an absolute barrier. That’s why the Cash Flow Statement is often a better gauge of a company’s prospects than the Balance Sheet or the Income Statement.
If you can’t pay someone, they won’t work for you or sell you things.
I’d been working on something remarkably similar to this; now, all I have to do is link. Brilliant, well-argued, and necessary. Thank you.
Excellent! Thank you, Kelly. Now, if you know of a way to penetrate rock-hard GOP skulls, please let us know.
Amazing that even the Germans hate America’s black middle class: http://www.nytimes.com/2011/10/31/world/europe/deutsche-post-reinvents-services-in-a-digital-world.html
Passenger Rail was not always a “losing proposition”; certain areas were a losing proposition (such as the transcontinental railroads). Other areas are profitable in of themselves, such as the Northeast Corridor. We also have successful examples of privatization from outside of the US (the famous Japanese Shinkansen System was privatized in 1987 because it was nearly bankrupt, and is doing fairly well today).
It’s also not a mystery that this “social compact” broke down. It ended because both the freight rail and passenger rail businesses were hemorrhaging money in the second half of the twentieth century, and because the “rail transport as public utility” system made no sense when the public now had viable alternatives in the form of air and automobile travel for both shipping and passengers. Eliminating those regulations on freight rail in 1980 were a huge boon that saved the business, and kept it from becoming what Amtrak is today.
100 years ago, the “rail transport as public utility” argument might have made sense. There simply weren’t any realistic competitors to rail travel in terms of overland shipping/passenger travel, and a rail line could make or break a town. But nowadays, many towns survive quite well without rail lines, and there is no lack of alternatives.
Of course, part of Amtrak’s problem is the requirement that freight rail always (and I do mean always) has priority for track usage when there is a conflict. If a passenger train gets behind schedule at all, the problem is all but guaranteed to compound because it has lost the window in which it was expected to be able to go through, and now has to sit in sidings as freight trains go past. This is how a fifteen minute delay in Montana turns into an arrival in Chicago eight hours late, and why no one wants to use Amtrak for those kinds of runs.
The simple fact is that you can’t effectively or efficiently run both passenger and freight services on the same set of rails. Their scheduling requirements just aren’t compatible. Passenger rail works so well in Europe because there isn’t much freight shipped that way.
If we only have one set of rails, and thus have to make a choice as to which of the two to prioritize, I think the US has made the right choice. Getting as many trucks as possible off of the highways and onto the rails does more good than doing the same with passengers. I’m just not sure that it wouldn’t be better to lay a second rail system (call it high speed if you want) so that we can do both.
I think it would be better to lay a second set of tracks built for higher-speed passenger trains. They might not profitable outside of certain areas, but Amtrak in general isn’t profitable outside of certain areas.
I agree, but how do you propose to get that set of tracks built absent the public utility model?
Privatize the rail line, then subsidize the construction of high speed tracks in certain areas.
looking past the consequences of losing the postal service and its jobs, is no one even slightly concerned that we are abandoning the postal service in favor of a system with much more complex infrastructure needs, which infrastructure is much more vulnerable to irresponsible republican policies ranging from their inability to see the value of maintaining and improving infrastructure in general to the short-sighted rejection of climate change which is much more likely to destroy the internet and cellular infrastructure than the postal infrastructure. letters and parcels can be sorted and delivered without a functioning electric grid. what about email?
You make it sound like the system for delivering mail is about to disappear, or that it couldn’t be reconstituted later. We’ve got a thriving private shipping sector (FedEx and UPS in the US, with even more potential competitors abroad).
Of course, they are thriving because they get to piggyback on the USPS to addresses that it would be unprofitable for them to deliver to directly. Imagine what it would be like if the USPS disappeared and then the other services declared that they weren’t going to ship to 60% of the zip codes in the country, only the ones in densely populated enough areas where they can make money doing it.
Precisely.
I’m sorry Kelly but you are wrong. Freight rails successfully ran passenger rail service, often profitably, up until 1974. Facing stiff competition from air travel, car travel, and bus travel, freight operators petitioned to consolidate passenger rail service into one company. The government, operating under the premise that this would create a monopoly, blocked this merger. The freight rails argued unsuccessfully that this was no monopoly since they competed with other forms of transit. In the end they decided to simply dump passenger rail service.
Ironically this created the very monopoly that the government hoped to avoid: Amtrak. Likewise many municipalities cobbled together a local monopoly to keep passenger rail service active. Chicago’s Metra is an example of this. Amtrak would be profitable if it were allowed to run itself like a business and dump the unproductive corridors, which are basically all the corridors where Amtrak does not own the tracks.
In some ways it is too bad, but in others not. Passenger rail can’t compete with buses because the highways are highly subsidized. The US highways system is one of the most expensive public works projects ever: http://xkcd.com/980/
So no, passenger rail and the Post Office are not analogous. Your point is way off the mark, which is a bad way to start out blogging. In the future I suggest doing some research before posting so you know what you are talking about. Being uninformed often leads to bad arguments.
This is absurd: The postal service is going down the tubes for the same reason the buggy whip manufacturers did; What it does is becoming obsolete. It’s got nothing at all to do with race.
so buggy whip manufacturers had an extraordinary requirement to fund their pensions over and beyond what any other entity had to? brett, you have taught me something i had not known before, thanks.
So, you’re going to claim that the core business of the postal service, physically transporting short written messages, isn’t going the way of the buggy whip?
I guess I missed the part of the argument which explains why it is a public good, and for that reason cannot be efficiently provided privately.