Pete Buttigieg Was Part of McKinsey Team That Pushed Postal Service Privatization

Buttigieg's campaign insists he had nothing to do with the McKinsey report's cost-cutting recommendations.

The United States Postal Service has been reporting billion-dollar losses annually for more than a decade. In 2010, the agency hired private consultants who advised it to cut back operation days, increase mail delivery times, automate postal services and replace unionized labor with non-unionized labor.

Pete Buttigieg was on that team of consultants as an employee with McKinsey & Company.

Buttigieg, who spent three years at McKinsey, is now the mayor of South Bend, Indiana, and is seeking the Democratic nomination for president. On Tuesday he released his client list from 2007 to 2010, which included the Postal Service. Since then, Buttigieg, who has seen a significant bump in recent early state polls, has faced scrutiny for what he did at McKinsey, a company known for prioritizing corporate profits.

The outcome of that 2010 Postal Service project was a report, drawing on suggestions from McKinsey and two other consulting groups. It was fairly critical of revenue-raising ideas supported by union workers, like expanding financial services through the post office, warning they would be “limited by high operating costs and the relatively light customer traffic of Post Offices compared to commercial retailers.”

“Any objective observer would have to say McKinsey had a real and negative impact.”

- Mark Dimondstein, president of the American Postal Workers Union

But in a statement to HuffPost, the Buttigieg campaign distanced the mayor from that report, insisting he didn’t work on cost-cutting but rather focused on raising revenue through products like greeting cards.

“Pete was part of a team tasked with generating ideas to increase revenue like selling greeting cards and increasing the use of flat rate boxes, and exploring new products to get more people to use the postal service and help make it profitable,” Buttigieg’s campaign said. “He never worked on cost-cutting or anything involving staff reorganization or the privatization of essential post office services.”

The Postal Service implemented a number of recommendations from the 2010 report — decisions that are now widely regarded as failures. The Postal Service closed 141 processing plants in 2012 and 2013, after adopting a proposal to increase delivery times. A 2018 audit from the Postal Service’s regulatory body found the decision only reaped 5% of the savings the private consultants projected it would.

Another of McKinsey’s proposals, to cut costs by establishing public-private partnerships, replaced unionized Postal Service workers with staff at retail stores like Staples. In 2014, that swap ran into legal trouble with the National Labor Relations Board, which ruled it in violation with the collective bargaining agreement between the postal workers’ union and the USPS.

“Any objective observer would have to say McKinsey had a real and negative impact,” said Mark Dimondstein, the president of the American Postal Workers Union, which endorsed Sen. Bernie Sanders (I-Vt.) for president in 2016. “These are corporate consultants and corporations are generally not about the public good and the public commons.”

The Buttigieg campaign said it could not specify which products the South Bend mayor worked on, but noted that Buttigieg left McKinsey before the March 2010 report was finalized. Buttigieg has criticized McKinsey’s more recent clients, calling its work with U.S. Immigration and Customs Enforcement “disgusting” in an interview with CNN. In an interview with The New Yorker, he said he found the company’s decisions “infuriating ... especially in years since I left the firm.”

Buttigieg has downplayed his role at McKinsey on the presidential campaign trail, saying he was just a junior employee. However, during his run for mayor, Buttigieg leaned into his time in the private sector, saying that dealing with multibillion-dollar budgets in part qualified him to be mayor.

As the youngest candidate in the race for president, Buttigieg’s experience in the private sector makes up a significant chunk of his overall resume. And the Postal Service’s financial situation is an issue any president will likely have to confront in the coming years.

The Postal Service’s financial turmoil is well documented. In 2019, USPS reported $8.8 billion in operating losses, despite increasing revenues by more than $1 billion. The Postal Service is government-run, but doesn’t get taxpayer dollars like other government agencies. It is subject to the partisan whims of Congress, however.

Democratic presidential candidate and South Bend, Indiana, Mayor Pete Buttigieg speaks during a campaign stop at the Danceland Ballroom on Dec. 7, in Davenport, Iowa.
Democratic presidential candidate and South Bend, Indiana, Mayor Pete Buttigieg speaks during a campaign stop at the Danceland Ballroom on Dec. 7, in Davenport, Iowa.

Republicans have long called for severe cost-cutting measures and for the system to be turned over completely to private companies. Democrats point out, however, that much of the financial turmoil is attributable to a 2006 law requiring the Postal Service to pre-fund retirement benefits, unlike any other government pension system. USPS is currently $150 billion in debt, in large part because of the mandate to pre-fund retirement payments.

There are two schools of thought on how to get out of this debt. The Trump administration has called for major cost-cutting, which the union warns will hurt workers and put consumers — particularly seniors who rely on the Postal Service for timely access to prescription drugs — at risk of worse service. The McKinsey report, which acknowledges the detrimental pension system, strongly errs on the side of privatization and cost-cutting; their proposals amounted to reducing hours, consolidating processing facilities, offering kiosks and potentially charging more to send mail and packages to difficult-to-reach locations.

On the other end of the spectrum, politicians like Sanders and Sen. Elizabeth Warren (D-Mass.) have been strong supporters of expanding postal services far past greeting cards — into financial services like banking. The Postal Service already does some of this, issuing money orders and cashing some checks.

Buttigieg’s campaign has said the candidate is considering a form of postal banking that would expand access to financial services and credit, and work against predatory lending practices. Those policies would be a departure from the McKinsey recommendations his former employer supported, and would get likely serious pushback from corporate banking interests.

“It gets to the role of government,” said Donald Cohen, the executive director of In the Public Interest, a think tank that promotes democratic control of public services. “What do we think we should be doing together?”

Should the post office expand its services in the community? Should it become a bank? Provide more census services? Notary?

“Folks that McKinsey work with would say that’s not the role of government,” Cohen said.

Clarification: Language has been amended to note that the American Postal Workers Union endorsed Sanders in the 2016 election, not 2020.

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