With proposed rate increases, postage would be 70% or more of the total cost
On February 24, the US House of Representatives’ Committee on Oversight and Reform convened for a hearing on Postal Reform. Committee Chairwoman Rep. Carolyn B. Maloney invited Quad’s Chairman, President & CEO Joel Quadracci to testify on behalf of the Postal Service’s private customers.
This was Joel’s fourth Congressional testimony in the past decade, and he made it clear that not enough has changed. The COVID-19 pandemic’s extraordinary toll on our nation’s infrastructure accelerated the urgency of postal reform — the USPS can and must make changes that will let it thrive financially instead of deteriorate. Raising prices without oversight will put it in a deeper hole, with its biggest customers unable to afford to market through the Postal Service. At the same time, its service won’t improve as it seeks to do little more than maintain status quo.
Joel’s five-minute verbal testimony laid out the mailing industry’s greatest concerns. His statement offers solutions that would benefit both USPS customers and the Postal Service itself.
On behalf of business mailers and industry coalition C21, Joel was the voice of postage payers. His testimony combined with other participants spun into a contentious session, which lasted more than five hours. Postmaster General Louis DeJoy, Board of Governors Chairman Ron Bloom, Postal Service Inspector General Tammy L. Whitcomb, American Postal Workers Union President Mark Dimondstein and American Enterprise Institute Resident Scholar Kevin Kosar were participants with Joel.
Read Joel’s verbal testimony below and download his full written testimony in the accompanying PDF.
Good morning, Madame Chairwoman, Ranking Member Comer, and Distinguished Members of the Committee. Thank you for your leadership in pursuing bipartisan postal reform legislation and for holding this hearing.
If ever the country needed a reminder of just how important the USPS is to our way of life, we got it in 2020. We all relied on the Postal Service to deliver groceries, medications, online purchases and other basic goods – which have sustained the economy throughout the pandemic. We are grateful to the postal workers bravely serving on the front lines.
I have the good fortune to lead an outstanding company in a critical industry, Quad/Graphics. I am also here on behalf of the Coalition for a 21st Century Postal Service. With mailers and shippers of every kind and members of our supply chain, C21 represents a broad cross-section of an industry that, in 2019, in partnership with USPS generated $1.6 trillion in sales and employed 7.3 million workers.
Given the combination of service and pricing circumstances over the past year, our coalition and the industry as a whole are alarmed and question the continued ability of the Postal Service to provide affordable universal service. We firmly believe that raising prices and/or reducing service will only exacerbate the problem of retaining volume. The solution, in our view, is for Congress to act on comprehensive reform legislation. The Chairwoman’s discussion draft is an important step forward, that our coalition supports wholeheartedly, but we believe more is necessary.
I was two years old when Quad was founded by my father and have quite literally grown up as part of the mailing/marketing industry. I can attest firsthand that the USPS continues to be a vital partner to this industry. Especially when you consider that each year over 8 billion pieces of mail originates from one of our plants; this accounts for just over 12% of the overall marketing mail in the country.
However, the Postal Service stands on the precipice of another deep step down in its volumes and revenues. The combination of crushing mail rate increases authorized by the PRC and the recent chaos in delivery has shaken the confidence of the industry in the postal system. Postage is now more than 60% of the cost of a mailing and with the PRC proposed rate increases that number will jump to nearly 70% or more, disproportionately impacting mail decisions every day.
Quad turns 50 this year and while many aspects of being a printer have changed, one remains the same – serving our customers is paramount. The same holds for USPS. Mailing in a digital world requires that all aspects of the effort work together as now more than ever we live in a real-time world and service delays hurt. USPS is a vital partner serving the American public and missing delivery and “in-home” dates reduces or even eliminates the value of the catalog from our favorite store, the greeting card from Grandma, your hometown newspaper, the magazine you have been waiting for and we all know how frustrated we get when our e-commerce deliveries are delayed. Missed deadlines erode the confidence in the mail and volume declines.
Our coalition strongly supports the Discussion Draft: in particular the service performance measurement and transparency provision; integrating postal annuitants into Medicare; and repeal of the requirement to “prefund” postal retiree health care and moving to a pay-as-you go model – a best practices throughout the private sector and enjoys bipartisan support.
However, more needs to be done.
First, the unsustainable rate increases authorized by the PRC – which will equal three- and four-times inflation – must be avoided. We recommend that the Committee direct the PRC to conduct a second, time-limited, review in order to recalculate rates based on the events of 2020, the impact of this bill and other postal developments, none of which were considered in its initial review.
Second, my written testimony goes into more detail but if at least some of USPS’ retirement assets were invested in instruments outside government the higher annual returns from the would net the USPS billions of dollars. The Thrift Savings Plan in which most federal employee’ retirement funds are safely invested.
Third, the time has come to codify the mandate for delivery six days per week and combine it with a directive that the postal network remain one integrated whole. This will help to ensure that the USPS continues to be the essential communications tool and lifeline it offers to the public, no matter where they live.
We also want to bring your attention to overcharges imposed on the Postal Service for the Civil Service Retirement System, which total anywhere from $50 – $111 billion. They should be returned to the USPS.
The Postal Service is at a tipping point. The impacts of COVID are exacerbating its financial situation. Maintaining its self-funding status is critical to the American public. If business mailers, which generate 90% of USPS’ revenue, are priced out of the mail, taxpayers will be forced to pay the costs.
USPS can have its deficit closed, remain self-funded and a valuable mailing partner by enacting the common sense reforms proposed in the Chairwoman’s bill along with the additional reforms I’ve laid out for you, but we must act now.
Thank you, Madame Chairwoman, for inviting me to testify at today’s hearing. My company and the broad industry coalition I represent appreciate your efforts, those of the Ranking Member and all the Members of the Committee working to craft a bipartisan solution for the USPS.
I will be pleased to respond to any questions you may have.