Only a few months ago the question “what happens if USPS shut down?” would have been an academic exercise. However, as a result of the CoronaVirus pandemic, it’s now a real possibility.
According to some lawmakers, “the Postal Service will not survive the summer without immediate help from Congress and the White House.”
The reason for the concern is that the volume of mail has plummeted in the wake of the pandemic, having a massive impact on USPS’s bottom line.
USPS was already hurting even before the CoronaVirus pandemic. The service lost $3.9 billion in 2018 and had cumulative losses of nearly $70 billion. According to lawmakers, CoronaVirus could be the final nail in USPS’s coffin.
In order to save USPS from potentially going bust as early as June, Representatives Carolyn Maloney and Gerry Connolly introduced a bill last month to provide USPS with $25 billion in funding to stave off bankruptcy. The bill ultimately failed.
Since then, the problems for USPS have persisted. On Thursday, the service requested emergency access to a total $75 of billion in order to avoid becoming illiquid by the fall.
Initially, lawmakers requested $25 billion as part of the Coronavirus stimulus package but were only able to get a $10 billion line of credit which, according to the Post Master General, would not be enough to save USPS from “running out of cash.”
The most recent request was made by the USPS board of directors, all of whom were appointed by President Trump. In it, the governors ask for the following:
1. $25 billion in cash to offset losses
2. $25 billion for immediate projects to “modernize” USPS
3. $25 billion in “unrestricted borrowing authority”
As it stands, it seems the President is not in favor of providing USPS with a safety line. In fact, he said he would refuse to sign the CARES act if it included additional funding for USPS.
Trump has stated that instead of a cash injection, USPS should simply raise their prices.
If history proves any indication, it’s unlikely that USPS would be allowed to disappear. However, it is worth looking at what kind of impact such an event would have if it were to happen.
What Would USPS Going Under Look Like?
It’s unlikely that if USPS were to run out of money it would cease to exist. The CEO of the mail industry advocate group “The Association for Postal Commerce” has stated that “predictions of the Postal Service’s imminent collapse are dramatically overstated.”
The United States Postal service is an institution that has existed since 1775, with the position of Post Master General being created by Benjamin Franklin in 1775.
The oldest Federal Law Enforcement in the country is the Postal Inspection Services – its mandate is entirely focused on US Mail protection.
All of this is to say, shutting down an institution like the United States Postal Service is not something that would happen overnight. It’s unlikely that we will see USPS go away.
This may, however, be the catalyst for much-needed reforms to make the service more efficient.
While incredibly unlikely altogether, if USPS were to fail the result would most likely be a private take over of the service.
Amazon Still Relies Heavily on USPS
It’s been widely reported that Amazon has, over the last year, made significant progress in taking over its own delivery operations.
Research released in June showed that Amazon still utilized USPS for nearly 40% of its deliveries.
But the Coronavirus pandemic has shifted the landscape in new ways. Last week, Amazon announced it was “pausing” its in-house last-mile delivery service – the very same service that enabled it to no longer rely as heavily on other carriers.
eCommerce is More Important Than Ever
While Amazon is still the biggest eCommerce player, the pandemic has closed nearly all brick and mortar stores causing almost all purchasing to be done online. USPS is an important partner for many eCommerce outlets and if it were to fold, the knock-on effects would mean greater strain on other carriers such as UPS and FedEx. Who, themselves, are struggling to adapt to the new reality.
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