Graeme Jennings/Pool via AP
United States Postmaster General Louis DeJoy testifies during a House Oversight and Reform Committee hearing on February 24, 2021.
A postal reform bill that passed Congress this week could offer another opportunity to install a postal banking system in the United States, according to a review by the Prospect.
While the $107 billion in savings from ending the Postal Service’s prefunding of retirement benefits and moving postal retirees onto Medicare has received most of the headlines, Section 103 of the bill, subsection 3704, restates USPS authority to partner to “provide property and nonpostal services” to federal government agencies, as long as whatever results raises revenue for the Postal Service.
This would appear to supersede one aspect of a ban on non-postal products from the 2006 Postal Accountability and Enhancement Act, and could pave the way to providing services that mirror a bank account for any American who wants one.
Another exception to that 2006 ban comes in subsection 3703 of Section 103, which allows the Postal Service to partner with state or local governments to again provide property or non-postal services. Just like the other provision, this would have to be a revenue-positive partnership for the USPS, but that would be the entire point, to open new revenue streams in an age of declining letter mail.
Programs of this type could include selling hunting and fishing licenses, or bus and subway passes. If a community has municipal broadband, that could be delivered through the Postal Service. If a city has an electric vehicle charging program, they could site it on postal property. Advocates argue that using the post office as a hub for various government-based services could advance a next-generation conception of how the agency can fulfill its mission of binding the nation together.
“Why is it that I can go to a CVS to add money to my Metro card, but not a post office?” asked Porter McConnell, co-founder of the Save the Post Office coalition. “The post office is an agent of the government with more branches than Starbucks and McDonald’s combined.”
But while the state and local partnerships—if actually used—could be powerful, restoring the ability to partner with federal agencies could reach beyond that.
To use an example, the Treasury Department’s Bureau of the Fiscal Service offers a program called Direct Express, which is a Mastercard prepaid debit card that allows users to obtain their federal benefits electronically, be they Social Security retirement or disability benefits, veterans benefits, or Supplemental Security Income payments. There is no minimum balance on the card.
The Direct Express card right now is a prepaid card that gets reloaded automatically. But if the Postal Service were to partner with Treasury, it could install ATM machines at its locations (providing property) so people could withdraw cash from the Direct Express cards. It could also keep a ledger of card balances, and allow customers to add funds to the cards, either on the ATMs or at the postal window.
While currently this card is limited to federal beneficiaries, another payment that the Treasury Department makes to Americans that could be integrated onto this card is the tax refund. That would open up eligibility to millions.
A prepaid card of this type, with the ability to load money onto it, check balances, pay bills and make purchases either at stores or online, is for all intents and purposes a bank account. A partnership between the USPS and the Treasury Department could formalize that, promoting financial inclusion while opening up a revenue stream for the postal service that would be much cheaper that what the unbanked pay for alternative financial services like check-cashing stores, while still contributing to USPS solvency.
Often the federal partner talked about for a postal banking system is the Federal Reserve, which could grant a bank account to everyone in the United States. But this secondary option with Treasury is also viable, according to postal banking expert Mehrsa Baradaran from the University of California, Irvine. “There’s nothing magical about the Fed,” Baradaran said. “USPS just needs authority and a line through Treasury to route benefits and taxes and just maintain a checking account.”
The Treasury Department even has federal credit programs that could be integrated into this partnership, adding lending to the postal system. The initial postal bank was run through a Treasury system, Baradaran noted, with any liquidity balance funneled into a Treasury account.
The Postal Accountability and Enhancement Act of 2006 restricted USPS’s ability to enter into non-postal services like banking, with an exception for grandfathered services that the post office was already engaged in prior to the law’s passage. That’s how the Postal Service is able to sell prepaid cards today, which is what it’s using in an active postal banking pilot program that allows customers to use paychecks to but the prepaid cards. That program has been ineffective, with no customers at one location in the first month and just six customers at the four pilot locations as of January 12 of this year.
But importantly, a Direct Express partnership wouldn’t be a USPS program, but a Treasury program. And the language of the Postal Service Reform Act of 2022, which received broad bipartisan support, clarified the existing authority for such a partnership.
The language was left over from a previous iteration of postal service reform, legislation that was 15 years in the making. According to a House aide, it was found in the 2016 version of postal reform and authored by former House Oversight Committee chair Rep. Jason Chafetz (R-UT), who is no longer in Congress.
Of course, all of these authorities, whether at the state and local level or with a federal partnership, are theoretical. They rely on the USPS to affirmatively take action. And given the muted and inadequate rollout of the postal banking pilot, it’s hard to have a lot of faith that these tools will be used.
DeJoy’s recent defiance of President Biden over the purchase of 150,000 gasoline-powered postal trucks rather than greening the fleet has further enraged Democrats.
That puts a lot in the hands of Postmaster General Louis DeJoy, the Trump ally who liberals have excoriated for the mail slowness that accompanied his entry into the agency, as well as his ten-year plan that would worsen postal performance and raise prices. DeJoy actively lobbied for the postal reform bill, encouraging his fellow Republicans to sign on. But while he has expressed some openness to new revenue streams, it’s not clear he will use the new tools granted to the USPS by Congress.
Of course, DeJoy isn’t postmaster general for life; most Democrats wonder why he is still in charge of the agency. DeJoy’s recent defiance of President Biden over the purchase of 150,000 gasoline-powered postal trucks rather than greening the fleet has further enraged Democrats.
The Postal Service Board of Governors, not Biden, actually has the power to keep or let go DeJoy. Biden appoints members to that board. The board currently has two vacancies, and Biden nominated replacements last November. If filled, Democrats would have a 5-4 majority on the board. But at least one Democrat on the board appears to support DeJoy, and the board’s newly elected chairman is also a DeJoy ally. This makes it unlikely that DeJoy will be replaced.
“By passing The Postal Service Reform Act, Congress has laid the foundation. The next step is to build the house,” McConnell said. “If Congress and the President don’t clear a path for this growth and change, we’ll just find ourselves having the same conversation again in ten years.”
