Insufficient postage: the fight over America’s mail service

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Hello and welcome to the Intelligence on Economist Radio. I'm your host Lane Greene, filling in for Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Microfinance is known for its infancy in Bangladesh, but it's grown to a healthy adult size in Cambodia, where it provides small loans to millions. But growth brings its own problems, which are now being exacerbated by the COVID 19 pandemic. And not so long ago, the Airbus A380 looked to be the future of air travel. Now production has been scrapped and many of the existing jets are sitting idle. That's left owners with a super jumbo problem. Just how much is is a used a 380 worth? But first, The United States Postal Service is at the center of a political tussle in Washington. In recent months, mail delivery has slowed, leading to fears that mail in voting could be compromised in the upcoming election. Yesterday, speaker of the House Nancy Pelosi called Congress back from its summer recess to investigate changes made to the US By Postmaster General Louis Dejoy, an appointee of President Trump.

The actions this administration are taking vis a vis our voting system, our sacred right to vote, are a domestic assault on our Constitution.

Meanwhile, the President has continued to attack the legitimacy of mail in voting without evidence.

I think that mail in voting is a terrible thing. I think if you vote, you should go. You look at what they do where they grab thousands of votes of mail in ballots and they dump it. There's a lot of dishonesty going along with mail in voting.

Concerns are growing that President Trump could be undermining mail in voting in the midst of a pandemic.

In the last few months, mail delivery has slowed noticeably.

John Fassman is our Washington correspondent.

Packages and pieces of mail that used to take two or three days to arrive now take up to a week. Some people aren't getting mail every day and some people aren't getting crucial things like medicines in time. And there are worries that these Issues could lead to problems with the upcoming election.

So what's causing these delays?

Behind the delays appear to be new policies implemented by the new postmaster general that he says are cost saving measures. Among those policies are a restriction on overtime hours and limits on the number of trips the mail carrier can make. So with mail carrier is forced to go out at the exact time that they are scheduled to go out, rather than waiting for all the mail to be sorted, you have mail that sits in the post office for a couple of days instead of going out as soon as it comes in. In addition to that, there are reports that sorting machines have been removed at big mail processing plants and those appear to be causing particular delays in Ohio, Michigan, Wisconsin, Pennsylvania, Florida, Texas, battleground states. There are also reports that letterboxes are being unbolted and removed. Now, that does sometimes happen where you get letterboxes removed from areas with less traffic and moved to places with more traffic. But again, there's been no explanation of the changes from the post office. And given all the sort of comments that Trump has made about mail in voting, people have good cause to be suspicious that this is not business as usual, even though the USPS says it is and it might be.

So tell me about the new Postmaster General you mentioned.

The new Postmaster General is named Louis DeJoy, and he was installed in May. And Dejoy, unlike the past few Postmaster General, he has no experience working for the usps. In fact, he ran a logistics company of his own in which he still holds some shares. And some people say that's a conflict of interest. He also has been a generous donor to Republicans generally and to Donald Trump in particular. And these operational changes that he's implemented seem to be behind the delays that people are reporting.

So why was the Post Office struggling so much even before all of this?

Well, the Postal Service in America has faced cash problems for a long time, and there are a few causes for that. One cause is a law passed in 2006 with bipartisan support that requires the agency to prepay retiree health benefits decades in advance. No other federal agency has to do this. Another problem is that people are just sending less mail. And the third problem, the acute problem, is Covid. I think around 2,400 postal workers have taken sick and had to quarantine. The dozens of them, unfortunately, have died. And so the Postal Service has been operating with a skeleton crew. And when you're operating with a skeleton crew and overtime isn't authorized, then you're just going to get less work done.

What about these concerns that The Post Office is intentionally being hindered in advance of the election. What evidence is there of that?

Those concerns exist. Joe Biden raised them in June. Barack Obama more recently said that Donald Trump is trying to actively kneecap the Postal Service. And President Trump really hasn't done himself any favors. He went on TV on August 13 and said that if the Postal Service doesn't get the money, that means you can't have universal mail in voting because they're not equipped to have it. President Trump's comments are not a smoking gun, but he does seem open to the possibility of not funding the usps. And the USPS will then not be able to get ballots to where they should go as quickly and as efficiently as possible.

Is there any truth to Trump's claims that mail in voting won't work?

There is no truth to those claims. America has regularly held election with mailed ballots. People vote absentee all the time. Some of the primaries this year have been mostly vote by mail, and there's been no noticeable uptick in voter fraud. He seems to be raising these concerns over voter fraud less as a genuine worry than to sort of sow seeds of doubt for an election that he may lose.

And has there been any effort to fund the Post Office to help it deal with this shortfall?

House Democrats included money for the Post Office in their version of the CARES act, which is a Covid relief bill that they passed in March. But after Steve Mnuchin, the Treasury Secretary, said that President Trump would veto USPS funding, it was cut out of the final bill. Money for the Post office is also in the $3 trillion relief bill that House Democrats passed, but that hasn't passed the Senate either. The only relief the Postal Service has received so FAR is a $10 billion line of credit from the Treasury. Now, over the weekend, Mark Meadows, President Trump's chief of staff, said that the President might be open to a standalone bill funding the usps and and has even said that if you include USPS funding in some sort of final relief bill, that's no longer a non starter. So President Trump has backtrack and it looks possible that the Postal Service might get some of the money it says it needs.

And how is the public reacting to all of this?

Well, the Postal Service is the most popular government agency in America. In a survey that came out this April, 91% of Democrats and 91% of Republicans viewed her favorably. What the administration may have belatedly realized is that if they try to starve the Postal Service, the that will have a disproportionate impact on rural voters. And of course, President Trump's base of support is disproportionately located in these rural states. We've also seen some elected officials from rural states, Republicans, who are usually lining up behind President Trump, start to voice some concern over the post office shutdowns. So the political blowback appears to be forcing the president to rethink his strategy.

And what are the Democrats doing about it?

Well, Nancy Pelosi has curtailed her chambers recess. The House was supposed to be out until September 14, but the house Oversight Committee, which has jurisdiction over the USPS, just announced an emergency hearing for August 24th at which they've asked Postmaster General Dejoy to appear. So we'll see what he says at that hearing.

And so where do you see this heading? Do we need to be worried about mail in voting in November?

The concern is that because the pandemic is making people nervous about gathering in crowds in public places, people are going to rely more on the mail for voting than they have in years past. But this seemed like a surmountable problem. I think the concern now is that these operational changes, the removal of sorting machines, the removal of mailboxes, the refusal to authorize overtime trips, and do the things that the Postal Service generally does around Christmas, for instance, to deal with a predictable uptick in the amount of mail, that all these things will hinder the delivery of mail in ballots. And unlike Christmas, where if a present arrives late, your nephew's nose is at a joint, if a ballot arrives late, that person may be disenfranchised. So I think that's what's driving the concern. It's that these cost saving measures, even if we accept that's what they are, even if we accept they're necessary, I'm not sure there's a reason to implement them in the weeks and months before an election. That's going to depend on the US Postal Service.

John, thank you very much for speaking with us.

Lane, great to talk to you. Always a pleasure.

For a lot more analysis like this, subscribe to the Economist to find the best introductory offer wherever you are, just go to economist.com intelligenceoffer Bangladesh may be the homeland of microcredit, but no country is keener on it than Cambodia. The industry has been growing in popularity since the 1990s, but now, as the pandemic hits Cambodia's economy, there are concerns over the state of lending in the country.

Microfinance in Cambodia has grown in a manner which we've seen replicated throughout the world and where we're at now is that it's big business.

Miranda Johnson is the Economist's Southeast Asia correspondent.

It turns out that some 2 million Cambodians have a microloan in a population of 16 million people. And by 2016, there were roughly 160,000 branches of microfinance institutions in Cambodia, which is one for almost every square kilometer of the country.

How did the industry come to be so big in Cambodia?

Microfinance in Cambodia started in the 1990s, and many of the first groups handing out tiny loans to people were actually related to donor organizations or charities who were trying to rebuild Cambodia in the wake of the Khmer Rouge regime. And now it has grown massively in tandem with Cambodia's economic expansion.

What's been the impact on ordinary Cambodians?

So, in simple terms, Cambodians throughout the country, even if they live in quite rural areas, are now able to access financial services so people can get loans when they need them for things like health care costs or to help pay for education. Average debt in Cambodia per person, though, is pretty high. It's $3,320 per person, which is very roughly about twice the country's annual GDP per capita. Some, you know, microfinance providers and those in the industry make the argument that provision of such financial services can in some way be linked to poverty reduction. And there's been really quite amazing poverty reduction in Cambodia in recent years. The percentage of Cambodians living under the national poverty line dropped from nearly 48% in 2007 to less than 14% in 2014. But it's extremely difficult to attribute precisely how people manage to clamber out of poverty.

But now, of course, with the world in the grips of a pandemic and with the growth of such a high level of debt per person, is there any concern that this is unsustainable? Are there any alarm bells ringing in the country?

Yes. So there have been concerns for a while that the market is saturated, that it's overheated, that people are taking on unsustainable levels of debt at the moment. Industry analysts I spoke to and people both working at and investing in MFIs and academics don't think that the MFI industry is going to topple or be too adversely affected by the coronavirus. Of course there will be an increase in non performing loans in Cambodia. Overall, the share of loans seriously in arrears is pretty low, but of course they're expecting that to creep up a bit. Fortunately, Cambodia does have some good regulation to try and help consumers. And the other thing to say in Cambodia's favor is that it has a very strong credit bureau. So it's quite difficult for someone to take out many, many loans with many different providers without that raising some eyebrows and perhaps triggering an alarm of sorts.

You mentioned the inevitable rise in non performing loans, especially as the economy is gripped by the coronavirus. What is the government doing to try to help people who are caught in a difficult situation?

The Prime Minister, Hun Sen, who has been leading the country for 35 years, has introduced tax breaks for the garment industries and the tourism industry. And those are among the most important ones. Those garment Factories provide some 740,000 jobs in Cambodia. So very important that the Prime Minister introduce measures to help those industries. He's also promised to spend about $25 million a month to help around 600,000 families who've been classified as in need of help. But there's a brewing political fight over debt in the country and over sort of microloans. In particular. Activists have called for loan payments and interest accrual to be suspended. They call for that in April. The government hasn't done that. And indeed one opposition politician came out and recommended that people struggling with their debt should not sell their homes, should not sell their land in return. The Prime Minister's advice was pretty stark. He said confiscate properties of those who follow the opposition's appeal not to pay back the loans. So you can see that things are heating up.

So Miranda, overall, do you think microfinance will help or hinder the Cambodian economy?

So that's a question which I think lots of countries are actually asking about their own microfinance industries. Microcredit is incredibly helpful to people who for some reason or other are meeting a bit of a cash crunch. Perhaps a harvest has failed or somebody suddenly lost their job and a small loan can just get you through to the next month or the next paycheck. On the flip side, in the pandemic, if you are indebted going into it and then perhaps you lose your job, perhaps you're a garment worker in Cambodia and your factory has shuttered, it's going to make things difficult and even more difficult for you if you are burdened by debt already and then you lose your job. So I think if there is forbearance on the part of microfinance institutions in Cambodia, which does seem to be the case already, the Cambodian Microfinance association has restructured some 245,000 loans already. So I think that it may help people as they try and recover and as the country recovers, but it's going to be on a case by case basis.

Miranda, thanks very much for your time.

Not at all, thanks.

For those looking to travel in style, an Airbus A380 was the plane of choice. It had showers, double beds and waterfalls. But with over 500 seats and four engines, the planes couldn't be made profitable. In 2019, Emirates canceled orders for almost 40. Airbus announced that it was winding down production. Now, as air travel struggles to restart, airlines are asking, what do you do with a superjumbo jet and no passengers?

So the A380 had flown into heavy weather even before commercial aviation came to a standstill earlier this year.

Stanley Pinal is the Economist's European business and finance correspondent, based in Paris.

But gradually, even as aviation has come back, the A380 has been notable by how few of them are flying. So best we can tell, fewer than 1 in 10 of the A380s that were ever made are currently flying. If you look to the medium term, the prospects aren't that much better. The volume of passengers that go through airports is not expected to recover before 2024, probably at the earliest. And so that's why we've seen airlines starting to retire their A380. So Air France in May said that they were scrapping the entire A380 fleet. That's nine planes. Lufthansa has gone from 14 planes to eight planes. Singapore Airlines has announced a review. And even Emirates, which is kind of by far the biggest fan of the A380 at one point seemed to be saying that they were really not seeing it as a very long term prospect.

Presumably they don't just haul them down to the junkyard and they'll be trying to sell these on some kind of secondary market. Is there an A380 fire sale going on and how much does one of these go for?

Well, the problem with the A380 as far as trying to sell them is twofold. The first one is one of the tactics you can do if you have too many passenger jets is turn them into cargo jets. But the A380 never had a full on kind of freight version. And converting it is basically very fiddly and nobody's really tried. The second problem is not any airline really can take on the A380. It's not convenient for a low cost carrier, for example. It's not convenient for an airline in Africa, for example, where a lot of older planes end up. It's a big investment for an airport to be able to Take these enormous double deckers. So as a result, kind of nobody really wants them.

Okay, so what kind of numbers are we talking about here?

I presume this is because you're looking to upgrade your personal aviation needs lane. So, to be helpful, a new A380 fully kitted out, is going to be $250,300,000,000. Now, typically, as a rule of thumb, after 12 years, planes have lost half their value, so you would expect an A380 at that age to be worth 125 million or so. Assessing the cost of a plane is a bit of an art rather than a science. There are not a lot of sales that go on, but when the planes come off their leases in a few years time, the market is ascribing a value of something like 10 to 15 million dollars, which is really not a.

Lot, especially given what everyone paid for them not that long ago.

Yeah. So really the way that you reach that valuation is not because somebody's going to fly that plane, but because somebody is going to strip it for parts. There are some analysts saying that 10 to 15 million dollars prices is too low. The reason being that the engines and the landing gear, amongst other things, are worth something. But really the conclusion that you reach is that the airframe itself, the thing as a plane that is going to fly passengers, is maybe worth nothing at this stage. The old adage in aviation was that if you couldn't fly the planes, at least you could make Coke cans out of them. That used to be true for the old aluminium models. If you take a modern airliner like the A380, there's a lot of alloys, there's a lot of carbon fibre and stuff.

Stuff.

It's tricky even to recycle. So already we're seeing some of the older A380s headed to the scrap heap. That was before even the pandemic. And the expectation is we're probably going to see a few more of those in the years to come.

Thank you very much for speaking with us, Dan.

Thank you, Elaine.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple Podcasts. See you back here tomorrow.