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Postmaster General Faces Grilling on Capitol Hill. Aired 9- 9:30a ET

Aired August 21, 2020 - 09:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[09:00:00]

ERICA HILL, CNN ANCHOR: I'm Erica Hill.

KATE BOLDUAN, CNN ANCHOR: Hi, everybody. I'm Kate Bolduan.

Moments from now, President Trump's postmaster general, Louis DeJoy, he's facing off with lawmakers right -- very, very soon amid backlash over changes that he led at the Postal Service. DeJoy is testifying before the Republican-led Senate Homeland Security Committee. And we're going to take you there when it begins.

Democrats and Republicans, you will remember, have raised alarm over the policy changes that have gone on at the Postal Service as they have led to delays in mail service and are also raising real questions and fears about what it all means for the upcoming election. These changes led to delivery delays. They also coincide with the president's attacks on mail-in voting.

DeJoy has since paused all of those changes he has said, but critics say the damage is done. We're going to bring that again to you live once it gets under way.

HILL: Also today the country is seemingly stuck at this very sobering plateau of more than a thousand coronavirus related deaths a day but there is some encouraging news from the head of the CDC who says that deaths could start to decline by next week.

New cases across the U.S. of course have been falling. Dr. Robert Redfield, though, does have a critical warning this morning for middle America, and we'll bring you that as well.

BOLDUAN: We, we're also watching this, the most important speech of his 50-year political career. Joe Biden last night accepting the Democratic presidential nomination. Striking a tone of optimism and hope, promising he will be, in his words, an ally of the light, not the darkness. Promising to overcome the season of darkness he says that the country is currently in.

Biden largely avoided mentioning Donald Trump by name but did condemn the president and his leadership throughout.

HILL: There is a lot to get to this morning. Let's begin in Washington with CNN's Kristen Holmes as we stand by for what could be a very consequential hearing on Capitol Hill.

So, Kristen, this as we know is going to be first time that the new postmaster general will publicly answer questions about the changes at the Postal Service. What went into those decisions? Just this morning, though, you're learning a little bit more about those changes and whether they've actually been halted as he promised they had. What have you discovered?

KRISTEN HOLMES, CNN NATIONAL CORRESPONDENT: Good morning, Erica and Kate. Well, that's exactly right. So CNN has obtained an e-mail that is time stamped just hours after DeJoy announced that all of these changes would be suspended, and among those suspended changes would be halting the removal of these high-volume letter sorters.

But in this e-mail, a director of maintenance operations tells managers across the country this. That, quote, "They are not to reconnect or reinstall machines that had been previously disconnected without approval from headquarters.

And likely, this is going to become a Democratic talking point. We had already heard from these Democrats including Speaker Pelosi who said that suspending the changes was simply not enough, that DeJoy would actually have to reverse them. And now of course here you say they're stopping them from actually reversing them.

And I want to give our viewers a little bit of a backgrounder on how exactly we ended up here, because it is not every day that the postmaster general is in the limelight, that we're talking so much about the Postal Service. And this really started a few weeks ago when Postal Service workers started sounding those alarms over the changes that DeJoy made that was delaying delivery times.

And you started hearing from lawmakers who were raising concern that the delayed delivery times could affect the November election. Now where it all breaks down is these allegations of whether or not this is intentional. The Trump administration is -- are they or are they not working with the Postal Service, using the Postal Service to impact the election?

And Kate, as you said, I mean, there are a lot of concerns about this, given President Trump's rhetoric and given his relationship with DeJoy. I mean, here's what we know about the postmaster general. He is -- was appointed in May. He is a prominent Republican donor and millions of those dollars have gone to Donald Trump, the Trump campaign, the RNC.

He is a former CEO of a USPS contractor. One thing to note there is that there are going to be questions about his finances because it appears he did not divest stock from that company. Again, still a current contractor. And then he was the chair of the 2020 RNC. The finance chair in Charlotte. So a big job there. Lots of questions about their relationship.

Remember, this hearing comes just a day after we heard from a former board member who essentially said that he resigned, was briefing Democratic lawmakers, that he resigned because he was concerned that the Trump administration was trying to politicize the Postal Service. He also said that he raised concerns about DeJoy taking on this role as postmaster general, but that they fell on deaf ears.

BOLDUAN: Let me also bring in CNN's Phil Mattingly on this. He's on Capitol Hill.

So, Phil, this is a Republican-led committee, obviously. It's in the Senate.

[09:05:02]

You've got the Democrats who are going to be leading a similar hearing in the House next week. What are you hearing from lawmakers? What are they expecting going into this today?

PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Yes, Kate, I'm going to shock you when I tell you this, but I think today is largely going to be a tale of two parties, where you have Democrat, as Kristen really laid out, with a series of very serious and significant questions, significant allegations of what Louis DeJoy has done in his short time atop the Postal Service about what the Postal Service is doing in regards to the election itself.

You also have lawmakers who have made very clear that they are -- this is largely being driven by what they're hearing from constituents. Gary Peters, the top Democrat on the committee, said he's received more than 7,000 notices, e-mails, communications from constituents who raised concerns about delivery delays. So you will see whether it's about operational changes, whether it's about machinery, whether it's about how DeJoy got the job, Democrats will lay into him throughout the course of this hearing.

On the other side of things, you have Republicans, guys, keep in mind, this hearing was scheduled by the Senate Republican-led committee precisely to give DeJoy friendlier ground to talk on before that hearing on Monday in the House which is expected to be very, very critical for him.

Senator Ron Johnson is the chairman of the committee. He will defend DeJoy but he will also, and many Republicans on the committee, will take great pains to try and separate the election from what's going on at USPS right now.

Johnson, in his opening statement that we obtained, says, quote, "According to Democrats, the postmaster is trying to sabotage the postal system to disenfranchise voters in the upcoming election. Notices that were sent before he was sworn in meant to inform election officials to factor in normal postal capabilities in settling their ballot deadlines are being used as evidence of this conspiracy theory."

And that's what you hear from Republicans, both Senate and House, as it pertains to what Democrats are saying about the implications for the election that this is made up, that this is a conspiracy theory. One thing to keep an eye on, Republicans have constituents, too. They care very deeply about how the U.S. Postal Service operates.

While Republican will move to separate this from the election, it'll be very interesting as it goes down the dais, whether you hear from Republicans who say, look, we don't believe this has anything to do with the election, however, service delays are very problematic. They're hearing from their constituents, too. How DeJoy handles those questions if they come will be very interesting to watch -- guys.

BOLDUAN: Absolutely. The U.S. Postal Service in some rural areas is the only way to get deliveries. It's the -- no matter what -- how things are sent, the final mile if you will is sometimes often the U.S. Postal Service. This matters to Republicans and Democratic states and constituencies alike.

Guys, stand by. Let me also bring in CNN's Abby Phillip and John Harwood, as well as attorney Ross Garber, professor of impeachment law at Tulane University.

Abby, Phil was hitting on it. Ron Johnson also said that the way -- what Democrats are trying to do here is character assassination. So you have that on one side of it. But you also -- you cannot separate or overlook the role that the president is playing -- will play in this hearing. From DeJoy's ties to the president, to the president's public attacks on mail-in voting. It really all is intertwined here and it also I think we need to remind folks of what is at stake.

This isn't just a hearing with the postmaster general that folks in a normal day might not want to be tuning in for. This is democratic institutions at stake. And democratic election that is now in question. Accusations of voter suppression. All wrapped into one.

ABBY PHILLIP, CNN POLITICAL CORRESPONDENT: Yes. That's exactly right. And one of the arguments against this conspiracy theory that I think you are going to hear from a lot of Republicans, this idea that Democrats are just making this all up and that all of these changes are normal.

The argument against that is the president's own words. He has repeatedly said that he does not want the post office to be able to handle mail-in ballots. He has attacked the post office for political reasons by accusing them of treating Amazon differently.

He's attacking Amazon because of the coverage in "The Washington Post," which is not even owned by Amazon. It's owned by the owner of Amazon. So the president himself has inserted himself into this conversation and so that's why we're at this point. But there are some real questions about whether or not these changes that are being made are in fact typical or have they been made by Louis DeJoy who is a political appointee, an ally of the president, in an effort to restructure the Postal Service.

And I mean, you can argue that the restructuring needs to happen, but I think what you're going to hear from Democrats is what is the logic of doing it three months before an election and what is the logic of making these changes if you know that it could have an effect of slowing down the mail before we get to a point where we need to handle millions of mail-in ballots? That's I think going to be the tension.

There is a legitimate case to be made that some of these changes perhaps even preceded Louis DeJoy, but at the same time, you have to look at what the post office knows is coming down the pike and are they prepared to handle that.

[09:10:01]

HILL: And that's sort of what we've heard as a preview from Senator Gary Peters. Right? That's what he wants. He wants the information, he wants the data, he wants to hear the analysis that went into these decisions that were made.

Ross, as we look at this and we know how Democrats are setting it up, we know what the pushback is going to be from Republicans, how they're setting it up as well, how difficult really would it be for lawmakers as they're asking these questions to prove that this was in fact somehow orchestrated? Actually, I'm going to leave you on that because it has just started and let's listen in now. Senator Gary Peters is speaking.

SEN. GARY PETERS (D-MI): -- directly. And I'm still not satisfied with those explanations. You have brushed off these delays, calling them inevitable, a side effect of your vision for the Postal Service. But let me tell about the people who are forced to bear the brunt of your decisions. Beth from Ada, Michigan, works for a company that produces educational materials for health care workers.

Beth's company started seeing serious delivery problems and switched to overnight shipping which is almost doubled their shipping costs and between these delays and the pandemic they have had to lay off multiple employees to help absorb these costs.

Mary from Redford said her daughter has been getting her epilepsy medication through the mail, usually in three to four days. But because of changes you ordered, her latest refill shipped on July 20th and it took nine days -- nine days to be delivered. When Mary's daughter realized the medication wasn't going to arrive on time, she tried to ration what few pills that she had left. And as a result, she suffered seizures and was transported to a hospital.

These are just a few of my constituents who shared their stories as part of my investigation. I have received more than 7500 reports of delays from people across Michigan and across the country. In just two weeks. They have written to me about skipping doses of their medication that wasn't going to arrive on time. She tried to ration what few pills that she had left. And as a result, she suffered seizures and was transported to a hospital.

These are just a few of my constituents who have shared their stories as part of my investigation. I have received more than 7500 reports of delays from people across Michigan and across the country. In just two weeks. They have written to me about skipping doses of their medication and their small businesses losing customers or having to lay off employees. All because of the changes that you directed.

Mr. Chairman, I move to enter into the hearing record an update on what my investigation is finding.

SEN. RON JOHNSON (R-WI): Without objection.

PETERS: Mr. DeJoy, your decisions have cost Americans their health, their time, their livelihoods and their peace of mind. I believe you owe them an apology for the harm you have caused and you all -- all of us need some very clear answers today. The country is anxious about whether the damage you have inflicted so far can be quickly reversed and what other plans you have in store that could further disrupt reliability and timely delivery from the Postal Service.

If you plan to continue pursuing these kinds of changes, I think my colleagues and many of our constituents will continue to question whether you are the right person to lead this indispensable institution. Thank you.

JOHNSON: It is the tradition of this committee to swear in witnesses so, Mr. DeJoy, if you'll raise your right hand. Do you swear that the testimony you will give before this committee will be the truth, the whole truth and nothing but the truth so help you God?

LOUIS DEJOY, POSTMASTER GENERAL, U.S. POSTAL SERVICE: I do.

JOHNSON: Thank you. Mr. Louis DeJoy has served as the postmaster general since June of 2020. Unanimous his selection and appointment by the bipartisan Postal Service Board of Governors. He spent more than 35 years developing and managing a successful nationwide logistics company as chairman and CEO of New Breed Logistics.

Beginning in 2014, Mr. DeJoy served as the CEO of XPO Logistics supply chain business in the Americas. After his retirement in 2015 he joined the board's -- company's Board of Directors where he served until 2018. Mr. DeJoy.

DEJOY: Good morning, Chairman, Ranking Member Peters and members of the committee. Thank you, Chairman Johnson, for calling this hearing. I'm proud to be with you today on behalf of the 630,000 dedicated women and men of the United States Postal Service.

On June 15th, I became America's 75th postmaster general. I did so because I believe the Postal Service plays a tremendously positive role in the lives of the American public and the life of the nation.

I also welcomed the opportunity to lead this organization because I believe there is an opportunity for the Postal Service to better serve the American public, and also to operate in a financially sustainable manner.

[09:15:05]

Congress established the Postal Service to fulfill a public service mission to provide prompt, reliable and universal Postal Services to the American public in an efficient and financially sustainable fashion. Our ability to fulfill that mandate in the coming years is at fundamental risk. Changes must be made to ensure our sustainability for the years and decades ahead. Our business model, established by the Congress, requires us to pay our bills through our own efforts. I view it as my personal obligation to put the organization in a position to fulfill that mandate. With action from the Congress and our regulator and significant effort by the Postal Service, we can achieve this goal.

This year, the Postal Service will likely report a loss of more than $9 billion. Without change, our losses will only increase in the years to come. It is vital that Congress enact reform legislation that addresses our unaffordable retirement payments.

Most importantly, Congress must allow the Postal Service to integrate our Retiree Health Benefits Program with Medicare, which is a commonsense practice followed by all businesses that still offer retiree healthcare.

It also must nationalize our function pay -- our -- our pension- funding payments. Legislative actions have been discussed and debated for years, but no action has been taken. I urge the Congress to expeditiously enact these reforms.

I also urge the Congress to enact legislation that would provide the Postal Service with financial relief to account for the impacts of the COVID-19 pandemic on our financial condition.

The Postal Regulatory Commission began a mandated review of our pricing system four years ago. It has been three years since the commission concluded that our current system is not working. We urgently require the PRC to do its job and establish a more rational regulatory system for our mail products.

Had the Congress and PRC fulfilled their obligations to the American public concerning the Postal Service, I am certain that much of our $80 billion in cumulative losses since 2007 could have been avoided, and that our operational and financial performance would not now be in such jeopardy.

The Postal Service must also do its part. We must adapt to the realities of our marketplace, generate more revenue and control our costs. I believe we can chart a path for our business to -- that accomplishes these goals.

In my 67 days as postmaster general, I have also had the chance to observe the many hidden strengths of the organization and appreciate our critical mission of service to the American public.

Despite our deep, long-standing financial problems, there was an incredible, strong base to build upon, and a tremendous desire of the public for the Postal Service to succeed.

As we head into the election season, I want to assure this committee and the American public that the Postal Service is fully capable and committed to delivering the nation's election mail securely and on time. This sacred duty is my number one priority between now and election day. Mr. Chairman, women and men of the Postal Service have been -- have demonstrated extraordinary commitment for our mission throughout the COVID-19 pandemic. In every community in America, we continue to work to keep our employees and customers safe as we fulfill our essential role delivering medications, benefit checks and financial statements the public depends upon.

Since the beginning of the pandemic there has been a public outpouring of support for postal employees as they perform their essential service throughout the nation. This is a well-deserved testament to their dedication.

Mr. Chairman, Ranking Member Peters, I look forward to working with you and this committee and our stakeholders to restore the financial health of the United States Postal Service, and to improve the way we serve the American public. This concludes my remarks, and I welcome any questions that you and the committee may have.

JOHNSON: Well, thank you for that opening statement, Mr. Postmaster General. I just want to kind of go through and give you a chance to respond to some of these false narratives.

First of all, let's talk about that election notice that was sent out by I believe the Postal Service's general counsel. One notice before you became postmaster general, one notice, I think, after you assumed your duties.

Talk about what that notice was about and you know, from my standpoint, how important it was that the Postal Service does inform election officials of what your basic capabilities are so they can factor that into their deadlines?

[09:20:04]

DEJOY: Yes, sir. Thank you for the opportunity to speak about this. First, I'd like to emphasize that there has been no changes in any policies with regard to election now (ph) for the comfort of 2020 election.

As you stated, the -- this letter was sent out before my -- before my arrival, simply to help educate state election boards and eventually the American people.

There was a plan put together to eventually make this a broader statement so the American people had awareness on how to, you know, how to successfully vote. This letter pretty -- very similar letter was sent out in the 2016 election by the former deputy postmaster general.

We recognize that during -- during this pandemic, when I arrived, there was great concern about the increase in volume so we -- we further emphasized the -- the interaction. We had over 50,000 contacts before my arrival with state election boards to help -- help them understand the mail processing procedures of the Postal Service.

Since my arrival, we have -- I have -- we've established and expanded a task force, we have put up a website -- or putting up a website within -- within a day -- and we are diligently working to -- to ensure the American public and to ensure a successful election.

JOHNSON: In my opening statement, I remarked that 150 million pieces of -- or ballots would represent about 6 percent of weekly volume. I think in your written testimony, you said, in terms of what's actually expected in terms of mail-in ballots, about 2 percent.

Can you just talk about and assure the American public and this committee that the postal system has more than enough capacity to handle the number of ballots? It's really a matter of election officials understanding what delivery capabilities are?

DEJOY: Yes. So we have more -- to -- we delivered two (ph) -- 433 million pieces of mail a day. So 150 million ballots, 160 million ballots over the course of a week is, you know, a very small amount. Adequate capacity. Plus mail volume is down, as you said, 13, 14 percent this year.

Plus, as I identified earlier in the week, we will have additional resources on standby. Should -- I mean, if everyone complies with the -- with the mail process that we've been identifying, there will be absolutely no issue and we are -- we -- there's slack in the system and additional processes that we will deploy in and around the election that will carry a good part of any deviations to -- you know, to get through.

We are perfectly -- the Postal Service stands ready, our board of directors stand ready. We -- with the expansion of the task force that I -- that I identified earlier in the week, yesterday, we made the decision to establish a board, a bipartisan board commission -- committee to -- to stand over the -- over the postal -- to interact with us as we move forward. We are very, very comfortable that we will achieve this mission, sir.

JOHNSON: Something else I think that has been blown way out of proportion is -- is the retirement of some of the blue boxes. Can you speak to how that is just a normal procedure that we have literally -- because, you know, first-class mail is down over the decades, almost -- the volume's almost been cut in half, I think, you know, if (ph) I have the numbers (ph) right (ph) off the top of my head.

But any time you have a business where your volume is declining that dramatically, you would be starting -- you'll take out different capacities. So can you address the issue of the normal retirement of -- what the history of that has been, not only the blue boxes but also some of your sorting machines?

DEJOY: Yes, sir, thank you for the opportunity to speak about that. Over -- there's -- today, there is about 140,000 collection boxes out -- out in the -- in the United States. Over the last 10 years, about -- average is about 3,500 a (ph) year (ph), so 35,000 of them have been removed and it's a -- a data-driven method, I haven't reviewed it.

But every year, they look at utilization of -- of post boxes, they look at where they place new post boxes, they look at where communities grow. So 35,000 over 10 years. Since my arrival, we removed 700 -- 700 post collection boxes, of which I had no idea that that was a process.

[09:25:00]

So I've been -- that that was a process. When we found out -- when I found out about it, we -- we socialize (ph) it here, (inaudible) leadership team and looked at what they're -- what, you know, what the -- what the excitement was -- it was creating. So I decided to -- to stop it, and we'll pick it up after the election.

But this is a normal process that's been around for -- since -- you know, it's been around 50 years. And over the last 10 years, we got -- we have -- we pulled back about 35,000.

On the machines, the machines we are speaking about, again, mail volume is -- is dropping. This is a process that I -- I was unaware about. It's been around for a couple of years now.

We evaluate our machine capacity. These machines run about 35 percent utilization. The mail volume is -- is, you know, dropping very rapidly and especially during -- during the COVID crisis.

And package volume is growing and we need -- and when I -- when I spoke with the team when this too became -- got a lot of air play, we really are moving these machines out to make room to process packages. No -- we still have -- we have hundreds of these machines everywhere and still, not any kind of drain on capacity.

And I repeat, both the collection boxes and this machine close-down, I -- I was -- I was made aware when everybody else was made aware. Was not a critical issue at -- you know, within the -- within the Postal Service. This has been going on in every election year, in every year for that matter.

JOHNSON: So this isn't some devious plot on your part.

One final question here -- I'm just going to go a little over time -- I think it's important you describe the change -- the operational changes you are making to try and start curbing in some of these excess costs. You know, $4 billion of overtime and overtime penalties, about making sure that the system adheres to its time deadlines and -- and what effect that has on -- on mail delivery.

DEJOY: Thank you, Senator. When I arrived - when I was ordered to be the position I spent the first three weeks even before I joined here really studying the organization.

Trying to get an understanding of what - what was driving - how decisions were made and what the network looked like and how the mail moved through the process. I spent - I spent hundreds and hundreds of hours before I arrived and then when I got here; working with the management team.

And one of the first things - the first big change I embarked upon is how do I get the organization, the management team, the structure to align with what we - and my analysis I felt there - that we had 600,000 people reporting to one person and other executives so assessorial (ph) types - important but not integrated into the operation (inaudible).

So I worked with the management team both collectively and individually to look at our - look at our functional lines and we together reorganized the organization to move forward on process improvements, improving service and garnering new business, new revenue and costs.

So that was the one big change I worked on when I got here. The other change when I was - the day I was sworn in I received a report from the OIG that spoke about the things that you were talking about; late deliveries, late dispatch, extra trips and all the time and costs associated around this that approximated $4 billion.

We were phrasing (ph) this was before we had the note. We were phrasing (ph) - I had $13 billion in cash and $12.5 billion of payments to make in the next nine months.

And no help in sight, we didn't have - we had no help in sight. So I need to look at a positive impact on cost savings that did not - that improved the business. The transportation schedule - I'll (ph) tell we run about 35, 40,000 trips a day and 12 percent of those trips were late. And we were running another 5,000 trips a day in extra - in extra trips.

FedEx, UPS everybody runs their trucks on-time. All right that's what glues the whole network together; our collection process to our delivery process.

If that is not running - and that was not my Louis DeJoy schedule, that was the Postal Service's schedule that was connected to all of the delivery points; the 161 million delivery points that we deliver to each day.