Analysis: How Trump, Mnuchin and DeJoy edged the Postal Service into a crisis

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Soon after Louis DeJoy arrived at the U.S. Postal Service’s L’Enfant Plaza headquarters in mid-June, Mark Dimondstein, the veteran leader of the agency’s largest union, called to get on the new postmaster general’s schedule. He had urgent matters to discuss: The coronavirus pandemic was forcing widespread absenteeism among his 200,000 […]

Soon after Louis DeJoy arrived at the U.S. Postal Service’s L’Enfant Plaza headquarters in mid-June, Mark Dimondstein, the veteran leader of the agency’s largest union, called to get on the new postmaster general’s schedule.

He had urgent matters to discuss: The coronavirus pandemic was forcing widespread absenteeism among his 200,000 members. Protective gear was running low. The post office needed a plan to handle a historic crush of mail-in ballots.

Dimondstein had spoken weekly with DeJoy’s predecessor, Megan Brennan. But it would take six weeks for him to get an audience with the new boss, and by then, the labor leader had other priorities: to halt the rapid-fire cost-cutting moves DeJoy ordered that were degrading the delivery of mail, medicine, food and other staples to a country homebound as the virus was surging again.

“You’ve been there less than a month,” Dimondstein said in an interview. “Wouldn’t you want to get the opinion of the unions and the mailing community on what might happen if you cut service like this? He never talked to us or sought our input.”

DeJoy’s short tenure leading the Postal Service has quickly engulfed an apolitical corner of the government first led by Benjamin Franklin in a controversy that’s fueling alarm over the reliability of vital services and the integrity of voting in November.

People familiar with his rocky 69 days in the job say DeJoy came into office not adequately focused on the two biggest challenges facing the post office – the pandemic and the upcoming election. Instead, he absorbed himself with making long-term changes that Republicans have long sought to run the money-losing agency more like a business, while also addressing one of President Donald Trump’s obsessions: what the Postal Service charges Amazon for the “last mile” delivery of packages.

A longtime logistics executive and GOP fundraiser, DeJoy was hired after a methodical campaign by Trump and Treasury Secretary Steven Mnuchin to ensure a Republican takeover of the agency’s Board of Governors, depleted for years and with no members when Trump took office. The president has long fixated on the Postal Service, complaining without evidence that it gives preferential treatment and money-losing terms to Amazon, a concern that associates say is rooted in his dislike of coverage in The Washington Post, owned by Amazon founder and CEO Jeff Bezos.

In his early weeks, DeJoy examined Amazon’s shipping contracts following the board’s hiring of an outside firm to review them – and came away unconcerned.

At the same time, he moved quickly to cut costs, targeting overtime that had exploded during the pandemic as postal workers fell ill and quarantined, while continuing the removal of blue mailboxes and dismantling mail-sorting machines that had begun before his tenure.

These policies continued even as it became clear that the Postal Service wouldn’t face an immediate financial crunch as a result of the pandemic.

Soon, reports of mail delays rippled from Montana to Pennsylvania, and complaints poured into lawmakers’s offices. According to internal Postal Service data released Saturday by a House panel investigating the agency, on-time mail rates abruptly fell starting at the end of June.

Trump, meanwhile, took to Twitter with threats to withhold money from the Postal Service to impede mail balloting this fall.

DeJoy came under mounting scrutiny, facing calls for investigations and demands for his resignation. He was summoned before Congress.

“When deliveries of food and prescriptions are so important now, to artificially put a delay on the mail would not seem like the right approach,” said John M. McHugh, a former Army secretary and GOP congressman from New York who now leads the Package Coalition, an industry group of online retailers led by Amazon, eBay, QVC and CVS Health.

“For the first time in American history, people are questioning, ‘Is the Postal Service going to be there for me and do its job?’ ” McHugh said. “Either [DeJoy] didn’t care about that or he ignored it.”

DeJoy relented Tuesday under pressure from the Board of Governors and announced that he would suspend any overhauls until after the election. But he continues to face lawsuits from two dozen states and outside groups over his oversight of the post office.

This account of DeJoy’s tenure and how the nation’s most respected federal agency fell into crisis is based on interviews with more than a dozen current and former postal and Trump administration officials, lawmakers and private-sector groups that do business with the post office. Many of the people spoke on the condition of anonymity to discuss private conversations and sensitive issues.

The post office’s predicament has resulted from accumulating financial issues long neglected by Congress, as well as the coronavirus pandemic. The Trump administration’s approach to postal issues and DeJoy’s arrival two months ago turned them into a full-bore crisis.

For someone who’s long played in political circles – a top Republican National Committee fundraiser whose wife is Trump’s nominee for ambassador to Canada – DeJoy demonstrated a surprisingly go-it-alone approach to management of the agency, ignoring key constituencies as he pressed for immediate changes.

He came in “like a bull in a china shop,” and said he was going to make the Postal Service profitable and didn’t care what criticism he took, a person who spoke with him recalled.

In recent days, DeJoy has told associates that Trump’s comments are hurting his ability to turn around the agency. He has told them the reaction to his moves is overblown and that he does not care, but his family was said to be annoyed by a recent protest outside their residence. DeJoy allies have tried to convince him to speak more to the public about what he is doing, but he has rebuffed them.

House Democrats are expected to grill him at a hearing Monday.On Saturday, they passed a $25 billion infusion to fund the Postal Service and prohibit it from taking any actions that would stymie ballot collection this fall, but the Senate is not expected to take it up unless it is part of a broader economic relief bill.

DeJoy, through a Postal Service spokesman, declined a request for an interview. “The Postmaster General looks forward to appearing before the House Committee on Oversight and Reform,” spokesman David Partenheimer said in an email.

But in his testimony Friday, he told Senate lawmakers he was “extremely highly confident” his agency could handle a massive vote-by-mail program this fall. He denied as “outrageous” claims that his cost-cutting was a deliberate effort to help Trump get reelected by slowing the delivery of ballots.

He defended his service changes as vital to shoring up the agency’s bottom line and said he would not restore hundreds of blue mailboxes and sorting machines.

“We are not self-sustaining,” DeJoy told lawmakers. “One thing that’s not in the plan is not doing anything after the election.”

Still, Democrats, say they aren’t taking his assurances. And the agency’s normally behind-the-scenes Board of Governors, which had given him largely free rein, is now asserting more control, forming a new election task force to ensure that mail balloting runs smoothly in November.

“The United States Postal Service will play an indispensable role in ensuring that those Americans who wish to vote by mail will be able to do so,” said Donald Lee Moak, a postal governor who is leading the new committee. “The postal governors take our responsibility with the utmost gravity and will work to ensure that the Postal Service continues to perform for the American people this election season.”

Postal workers sort parcels at Margaret L. Sellers Processing and Distribution Center at the USPS Carmel Mountain Post Office on May 14, 2020 in San Diego, California. The post office is seeing a huge increase in the amount of packages its handling. (Eduardo Contreras/The San Diego Union-Tribune/TNS)

The battle over the future of the post office and its 633,000 mostly unionized workers has been years in the making, starting with a plunge in first-class mail as Americans turned to the Internet.

The agency has not taken federal funding since 1970, operating instead with revenue it raises from sales of stamps and other postal products.

For a decade before the coronavirus appeared, the agency lost billions of dollars a year, weighed down by an unusual congressional requirement to pre-fund retiree health benefits. The agency has been able to stay solvent only thanks to a $15 billion line of credit from Treasury, first approved by Congress many years ago.

Bipartisan proposals for reform, which include service cuts and debt forgiveness, have stagnated for years, driven by sensitivities to politically powerful postal unions, lawmakers representing rural areas, and large mailers wary of price increases.

After it went years without a voting quorum, Trump was able to reshape the traditionally nonpartisan postal board in three years to set his priorities in motion. When his administration took office in 2017, the nine-member board was empty. Trump tasked Mnuchin with filling it with a majority of appointees designated to the party in the White House.

“Everything was set up to make it seem like it wasn’t driven by the whole Amazon thing,” said a person familiar with Mnuchin’s efforts. “He would come back from meetings at the White House [and] wanted to know where things stood and where appointees to the board stood.”

Mnuchin made clear he wanted to push out Brennan, a letter carrier who rose through the ranks to eventually lead the agency, the person said. He urged Senate Majority Leader Mitch McConnell (R-Ky.) to vet potential nominees through his caucus.

The nominees had ties to Republican causes. Robert M. Duncan, a former Republican National Committee chairman and close ally of McConnell who became chairman in 2018, met with Mnuchin, the person said, and the secretary made clear his plan to oust Brennan. Duncan was hesitant, the person said, but not opposed.

“He wanted backup,” the person said. And Mnuchin continued to seek out new governors.

David Williams, the former Postal Service inspector general and the board’s vice chairman until his resignation in protest in April against Mnuchin’s involvement, told House Democrats on Thursday that Mnuchin demanded that new governors “come to his office to kiss the ring and receive his blessing before confirmation.”

Facing mounting criticism,Treasury on Friday released a fact sheet on Mnuchin’s involvement.

The document rejected any allegations of untoward, partisan behavior, saying that Mnuchin met with governors as part of his effort to ensure sound governance at the Postal Service, which is his responsibility given the Treasury loan. Mnuchin, through a spokeswoman, declined a request for an interview.

“Like any responsible creditor, the Secretary takes seriously his responsibilities for sound stewardship of the taxpayer dollars [Treasury] has lent to the USPS,” a statement said.

By last fall, Mnuchin had successfully reshaped the board, with four Republicans and two Democrats, and Brennan announced her retirement. She planned to step down by the end of January 2020.

But as the search for her replacement dragged on, the coronavirus exploded, raising fears about what it would mean for the Postal Service. Brennan told lawmakers in April that the agency could lose more than $20 billion.

While the House and Senate were willing to offer billions in a bailout, Trump privately threatened to veto the bill if it included any direct postal aid. Instead, the White House authorized a $10 billion loan.

In exchange, Mnuchin demanded that his department approve the next postmaster general, higher package rates and new negotiated service agreements.

Fearful the nation’s mail service could run out of money, the Senate approved the deal.

At the height of the pandemic in April, Trump called the post office a “joke” and demanded that it raise package prices by 400 percent in exchange for the loan.

But by May, its financial outlook had improved, buoyed by a growing package volume as Americans ordered supplies online.

Mnuchin had discussed the job with DeJoy before the pandemic but the North Carolina businessman wasn’t interested, an official with knowledge of the discussions said. DeJoy was one of the president’s top financial supporters, giving more than $2 million to Republican causes since Trump took office and holding sway in the Republican Party. He was leading fundraising for the Republican convention and was one of a few guests who attended a Florida fundraiser earlier this year with a $580,600 price ticket.

There also had been concern in the spring that Trump would be upset about pulling DeJoy off convention fundraising. A Treasury official denied that Mnuchin offered or discussed the job with DeJoy “or anyone else.”

But when offered by the job this year, DeJoy took it.

Williams told lawmakers last week that before DeJoy’s name was forwarded by a GOP board member, John Barger, the board had interviewed close to 20 candidates. “There were good candidates,” Williams said. He said he believed that DeJoy had not been sufficiently vetted and was not qualified.

The governors named DeJoy as Brennan’s successor on May 7. They also retained an outside consulting firm to study the agreements with Amazon and other companies.

After he took office June 15, DeJoy moved swiftly to cut costs. His efforts backfired almost immediately.

“His rigorous approach to restructuring became very combustible,” said Paul Steidler, a postal expert at the Lexington Institute, a conservative think tank.

As postal managers struggled to keep their facilities fully staffed to handle the crush of e-commerce packages, DeJoy was ordering them to slash overtime hours, according to internal documents circulated to middle managers.

DeJoy banned extra trips to ensure on-time mail delivery. If mail arrived late to distribution centers, or was not sorted in time for a carrier to take out to the street, DeJoy ordered the items sit behind for a full day

The policies dovetailed to cause days-long backlogs in localities across the country, postal workers said in interviews. Some processing facilities are still up to a week behind.

In parts of Philadelphia, Detroit and Los Angeles, among other cities, customers have gone without mail for days – sometimes weeks – at a time, the workers say.

Dimondstein met with DeJoy in his office for an hour in the last week in July.

“We voiced our vehement opposition to the cuts,” the union leader recalled. “Did he listen to me? He didn’t throw me out of his office.” After the meeting, “Our fundamental concerns had not changed,” he added.

Partenheimer, the Postal Service spokesman, referred inquiries to a new fact sheet that says the agency’s inspector general will soon release an audit showing that more than 4,000 postal workers received more overtime in 2019 than their base salary, a 400 percent jump from fiscal 2014.

The fact sheet also said DeJoy’s directive to require trucks to run “on-time and on-schedule” had improved their performance to 97 percent from 89 percent in weeks.

The mail delays burst into the open as Trump took further aim at mail-in ballots, seen to be increasingly important to the upcoming election as the coronavirus pandemic failed to recede.

At one point, Trump said he didn’t want to give more money to the Postal Service to starve it of resources to deliver all ballots. DeJoy also met with Trump in the Oval Office. That inflamed Democrats and watchdog groups suspicious that the president and a top political ally might be trying to undermine the election.

According to a person close to DeJoy, he went to the White House only after the president learned he was going to be in town and asked him to, a person close to him said. According to people familiar with Postal Service discussions, DeJoy has recoiled at Trump’s statements, and told associates that Trump’s comments were undermining his efforts at reforming the agency.

Privately, DeJoy had secured the $10 billion loan from Treasury by agreeing to turn over copies of the contracts the agency has with Amazon, UPS, FedEx and other firms that use its “last-mile” services. They are subject to confidentiality agreements.

That loan, plus the overall strengthening of the Postal Service’s finances, has alleviated any short-term cash crunch. DeJoy has insisted to people close to him that he is not doing the president’s bidding.

The board, which had met only once a month, began holding daily conference calls, concerned that the Postal Service was being dragged into an escalating partisan fight.

On Friday, DeJoy defended his efforts to find efficiencies in the long term, but promised senators he would do everything in his power to ensure the timely delivery of election mail.

“I’d like to emphasize there has been no changes of any policies in regard to election mail for the 2020 election,” DeJoy said, saying a new election task force deploy “processes and procedures to advance the election mail, in some cases ahead of first-class mail.”

“We will scour every plant each night leading up to Election Day,” he said.

In this April 8, 2020 file photo, a City of Milwaukee Election Commission worker processes and sorts absentee ballots for Wisconsin’s primary election, in downtown Milwaukee, Wis. (Mark Hoffman/Milwaukee Journal-Sentinel via AP, File)

Still, skeptical Democrats say the Postal Service is sending mixed signals.

As he was testifying Friday, the Postal Service launched a website on the election that reiterated an earlier warning to state election officials that some of their deadlines may not give the Postal Service enough time to deliver mail-in ballots to voters or process them once they’re filled out.

“This is not going to go away,” said Rep. Gerald E. Connolly (D-Va.), chairman of a House panel responsible for postal oversight. “When you go out with blunderbuffs like this, it creates a cauldron of anger. Who else has taken on the post office in 244 years?”

As for the Postal Service’s deal with Amazon, it no longer appears to command the attention of DeJoy or the board. The review launched by the board concluded there was nothing untoward about the relationship with Amazon and other companies, and that Postal Service was making money on the contract.

Asked by Sen. Rand Paul (R-Ky.) about the contracts, DeJoy avoided contradicting the president directly, but left the strong impression he didn’t think the business relationship was problematic.

“Do we charge your competitors enough when they get a package shipped to an area and then they use the post office for the last mile?” Paul asked.

“I’ve looked at that,” DeJoy said. While the Postal Service is studying the issue and could raise prices, on the whole the rates appear to be “reasonable,” he said.

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