USPS owes $5.5 bil. to the government and can't pay. What happens next to the USPS?

[steviep24]

What could happen to the postal service if they can't pay the $5.5 billion to the federal government?

Story here

Note to moderator: Please edit dollar amount in title to $5.5 bil.

[friedo]

A bailout, a reorganization of some kind, receivership. Basically, whatever Congress wants to happen to them.

It is unlikely that the government will permit the mail system to fail entirely.

[Procrustus]

Beats me. But that story is almost a year old, so i guess they worked it out. Got my mail delivered today as usual.

[Dewey Finn]

Note that a big reason that the USPS is having problems is because unlike any other government agency or company, it is forced by law to prefund its retiree health benefits and pension. The reason is that this prefunding makes the federal deficit look smaller. In other words, a big chunk of the financial problems at the USPS (although certainly not all of its problems) are artificial. See this article by Joe Nocera in the New York Times about this.

[steviep24]

Originally Posted by Procrustus

Beats me. But that story is almost a year old, so i guess they worked it out. Got my mail delivered today as usual.

Ooops! I posted a link to an old story by mistake.

Since I just saw this on the news today I'll post a new link.
story

[The Second Stone]

The US government doesn't have the money to pay Social Security or its other creditors all the trillions it has borrowed? What happens? Same thing. Congress votes for approval to borrow the money. The Constitution requires that the US not default on its debts and pensions.

[Hari Seldon]

Originally Posted by The Second Stone

The US government doesn't have the money to pay Social Security or its other creditors all the trillions it has borrowed? What happens? Same thing. Congress votes for approval to borrow the money. The Constitution requires that the US not default on its debts and pensions.

And if congress chooses to ignore the constitution? Leaving the default aside, apparently the USPS will run out of operating cash sometime next winter or early spring. I gather that will be fine with the tea partisans. I assume AMTRAK will be shutting down soon for similar reasons.

[md2000]

Originally Posted by The Second Stone

The US government doesn't have the money to pay Social Security or its other creditors all the trillions it has borrowed? What happens? Same thing. Congress votes for approval to borrow the money. The Constitution requires that the US not default on its debts and pensions.

Originally Posted by Hari Seldon

And if congress chooses to ignore the constitution? Leaving the default aside, apparently the USPS will run out of operating cash sometime next winter or early spring. I gather that will be fine with the tea partisans. I assume AMTRAK will be shutting down soon for similar reasons.

So what? I don't have the hundreds of thousands to pay my mortgage either. But I do make enough money to pay the interest and a bit of principal, so nobody is coming after me... (yet).

The government will have to make a decision - do they need a post office or not? Nobody in the civilized world has decided to abandon their post office yet that I've heard of. Likely, the government will assume or forgive the adequate amount of debt, the PO will do some belt tightening (no Saturday delivery?) and the PO will carry on.

For example, if there are Saturday deliveries, or places where there are 2 deliveries a day (business districts?) that might be stopped.

In Canada, for the last 20 years or so, any new subdivisions have superboxes; instead of door-to-door delivery, there are large multi-mailboxes by the curb about every block. This speeds the delivery, the whole block can be delivered out of a truck with one stop.

The Canadian PO has also done a lot of out-sourcing. many offices have been replaced by contract locations (cheaper labour), a counter in a corner of a drug store or other place.

[Sunspace]

Not that the Canadian post office isn't pondering its future also...

[Bryan Ekers]

Originally Posted by steviep24

What could happen to the postal service if they can't pay the $5.5 billion to the federal government?

"The check's in the mail, I swear!"

[Diceman]

Seriously, people. Nobody wants to see the Postal Service collapse. Odds are probably better than 90% that Congress will pass a measure providing some sort of bailout or relief. The odds that the government will force a bankruptcy over the unpaid debt are only barely above 0%.

[SCSimmons]

I find the political wrangling over the USPS to be always entertaining. One month, it's "The USPS is losing money and needs a bailout," and everyone's outraged and demanding efficiency improvements. Then, the next month the USPS comes out with their analysis of how to make ends meet, canceling Saturday delivery and closing 20% of the post offices, and now the torch-and-pitchforks are out again: "How dare you reduce services? My local office has been open all my life, you're not allowed to close it!" Nobody seems to want to pay for it, but nobody wants to settle for the services that they can economically provide either.

[Bryan Ekers]

Originally Posted by Diceman

Seriously, people. Nobody wants to see the Postal Service collapse. Odds are probably better than 90% that Congress will pass a measure providing some sort of bailout or relief. The odds that the government will force a bankruptcy over the unpaid debt are only barely above 0%.

There was a time when a debt-ceiling raise was pro forma, too. These days, though....


Of course, that's delving into GD territory.

[dtilque]

Originally Posted by md2000

In Canada, for the last 20 years or so, any new subdivisions have superboxes; instead of door-to-door delivery, there are large multi-mailboxes by the curb about every block. This speeds the delivery, the whole block can be delivered out of a truck with one stop.

That's also the case in the US, and I expect in many other countries. But they aren't retrofitting any older neighborhoods with those, so there are still many places with individual mailboxes.

[voltaire]

Originally Posted by Dewey Finn

Note that a big reason that the USPS is having problems is because unlike any other government agency or company, it is forced by law to prefund its retiree health benefits and pension. The reason is that this prefunding makes the federal deficit look smaller. In other words, a big chunk of the financial problems at the USPS (although certainly not all of its problems) are artificial. See this article by Joe Nocera in the New York Times about this.

You beat me to saying this, but at least I can add an essential detail that illuminates the absurdity of the whole thing.

So, to add to your sentence:
Unlike any other government agency or company, it is forced by law to prefund its retiree health benefits and pension for a period of 75 years.

Think about that and let it sink in for a bit. 75 fucking years is a loooong time to prefund the health benefits and pensions for a shitload of employees.

[friedo]

What exactly does it mean to have pension benefits prefunded? Does that mean "figure out how much we'll have to pay in pension benefits over the next 75 years, and have that amount of cash sitting in a bank account right now?"

If so, that's pretty dumb.

[rogerbox]

Originally Posted by friedo

What exactly does it mean to have pension benefits prefunded? Does that mean "figure out how much we'll have to pay in pension benefits over the next 75 years, and have that amount of cash sitting in a bank account right now?"

If so, that's pretty dumb.

That's exactly what it means. If Republicans did not force this onerous regulation (which they CLAIM all the time to hate), then USPS would be profitable this year instead of facing budget shortfalls, and post offices would not have to close in rural areas.

The Post Office has to have cash in hand NOW for retirement for PEOPLE WHO HAVEN'T BEEN BORN YET. Think about that for a second.

[DrDeth]

Originally Posted by Diceman

Seriously, people. Nobody wants to see the Postal Service collapse. Odds are probably better than 90% that Congress will pass a measure providing some sort of bailout or relief. The odds that the government will force a bankruptcy over the unpaid debt are only barely above 0%.

Yes. UPS and Fedex, both big GoP supporters, do.

http://www.irregulartimes.com/fedexupsbush.html

In fact this is one of the reasons the GoP came up with this new crap regulation.

[Flyer]

Originally Posted by voltaire

You beat me to saying this, but at least I can add an essential detail that illuminates the absurdity of the whole thing.

So, to add to your sentence:
Unlike any other government agency or company, it is forced by law to prefund its retiree health benefits and pension for a period of 75 years.

Think about that and let it sink in for a bit. 75 fucking years is a loooong time to prefund the health benefits and pensions for a shitload of employees.

I have mixed feelings about this. Yes, it's absurd--and yet, on the other hand--the last 20 years or so have shown us that if entities of any stripe have the option of putting off payments to a pension fund, they will almost invariably do so. After all, the pension obligations seem a long way in the future, whereas that money "needs" to be used now for roads, teachers, etc.

Corporate and public pension funds across the country are seriously underfunded, threatening the retirement security of workers and straining the financial health of state and local governments, according to a pair of independent studies.

http://articles.latimes.com/2012/jul...falls-20120718

http://online.wsj.com/article/SB1000...888092422.html

http://www.cbo.gov/publication/22042

http://www.clevelandfed.org/Forefron..._winter_08.cfm

[Dewey Finn]

That's true, but according to the NYTimes column I mentioned, the USPS pension plan is currently over funded by $11 billion. In 2002, it was overfunded by $71 billion. And according to this USPS report, the Postal Civil Service Retirement System Funding Reform Act of 2003 "also created another challenge for the Postal Service: it transferred to the Postal Service from the Department of the Treasury the responsibility for funding military pensions of current and former postal employees, amounting to $27 billion in costs transferred from taxpayers to postal ratepayers."

In other words, underfunding of the USPS pension plan is not an issue here.

[JackieLikesVariety]

Originally Posted by friedo

What exactly does it mean to have pension benefits prefunded? Does that mean "figure out how much we'll have to pay in pension benefits over the next 75 years, and have that amount of cash sitting in a bank account right now?"

If so, that's pretty dumb.

it IS dumb, unless your goal is to destroy (I mean privatize) every thing the federal government does because you are stupid OR you know your buddies will make a lot of money this way and they will share it with you.


I wish everybody knew about this!

[Martin Hyde]

The USPS wouldn't be in such dire straits if not for the pre-funding requirement, which is clearly asinine. (I think that's fair even in GQ.) But they'd still be hurting, every year from basically the beginning of the USPS up until I believe the late 1990s or maybe even early 2000s total mail volume increased.

It increased so much that not only did the USPS have to become massive, they had to basically invent new technologies and process improvements to handle the never-ending increase in mail volume. It's pretty impressive they did all of this while typically turning a "profit" and mostly on postage rates that are literally cheap as dirt compared to any private sector competitor. (The other day I shipped something UPS, and it was $17.50, a USPS flat rate box would have shipped the same thing for 30% that price.)

But with the reality of decreasing mail volume the USPS pretty much has to change. Something a lot of other countries have done is substantially dial back or even privatize physical post offices. One approach that has been done internationally is the government will basically sell postal franchises to places like gas stations or supermarkets. The owner of these businesses will then dedicate a small portion of their floor space to doing postal stuff, and depending on how busy they are they may not even have to keep a full time staff member that (but instead have someone work the station "on demand" as necessary.)

This really fixes a lot of the problem with physical post offices. On one hand, in many places now it just plain doesn't make sense to maintain a full post office with a full staff of clerks. However, if you close post offices everywhere it doesn't make sense to have them, you end up putting some people in a situation where they may have to drive 20 miles or more to get to a post office, which isn't ideal either.

If you just outsource these low volume post offices to private businesses then the service would still be there but you wouldn't have to staff the whole place. A very low volume rural post office could probably be operated as a counter in a gas station that the regular cashier works whenever someone needs it, and it costs the business owner a little bit more but he is making more money from the postal business, and it costs the USPS a hell of a lot less to not have to maintain that physical location and staff it with potentially 5-10 people.

[voltaire]

Originally Posted by Martin Hyde

The USPS wouldn't be in such dire straits if not for the pre-funding requirement, which is clearly asinine. (I think that's fair even in GQ.) But they'd still be hurting, every year from basically the beginning of the USPS up until I believe the late 1990s or maybe even early 2000s total mail volume increased.

It increased so much that not only did the USPS have to become massive, they had to basically invent new technologies and process improvements to handle the never-ending increase in mail volume. It's pretty impressive they did all of this while typically turning a "profit" and mostly on postage rates that are literally cheap as dirt compared to any private sector competitor. (The other day I shipped something UPS, and it was $17.50, a USPS flat rate box would have shipped the same thing for 30% that price.)

But with the reality of decreasing mail volume the USPS pretty much has to change. Something a lot of other countries have done is substantially dial back or even privatize physical post offices. One approach that has been done internationally is the government will basically sell postal franchises to places like gas stations or supermarkets. The owner of these businesses will then dedicate a small portion of their floor space to doing postal stuff, and depending on how busy they are they may not even have to keep a full time staff member that (but instead have someone work the station "on demand" as necessary.)

This really fixes a lot of the problem with physical post offices. On one hand, in many places now it just plain doesn't make sense to maintain a full post office with a full staff of clerks. However, if you close post offices everywhere it doesn't make sense to have them, you end up putting some people in a situation where they may have to drive 20 miles or more to get to a post office, which isn't ideal either.

If you just outsource these low volume post offices to private businesses then the service would still be there but you wouldn't have to staff the whole place. A very low volume rural post office could probably be operated as a counter in a gas station that the regular cashier works whenever someone needs it, and it costs the business owner a little bit more but he is making more money from the postal business, and it costs the USPS a hell of a lot less to not have to maintain that physical location and staff it with potentially 5-10 people.

Well, that's the thing you didn't address - the USPS has to provide service to everyone, sometimes at unprofitable prices. Private carriers are allowed to refuse to deliver to remote areas, or else charge an arm and a leg to deliver there. USPS can do neither; they must deliver everywhere while often charging a set, money-losing price.

And that's the other thing - you talk about a drop in revenues due to the internet bringing email and electronic bill-paying, but you also have to consider the huge increase in internet shopping that has greatly increased parcel delivery. There, too, the private carriers can deliver where they want, and charge what they want, while the USPS has to deliver everywhere at set prices, even if they're losing money.

The result of that is an indirect subsidy of the private carriers, since they can choose from only the profitable business and leave behind the unprofitable scraps for the USPS. Either the USPS should not be expected to be self-sufficient/profitable (be partially funded by taxes), or they should be run like a business and allowed to set prices that ensure self-sufficiency/profitability. You can't have it both ways - specially when you also impose onerous employee benefit prefunding mandates.

[RaftPeople]

Aside from the pre-funding thing, why not just price your product such that you can pay your bills?

No need for any elaborate schemes...if the price to send a letter needs to be $1.00, then charge that price.

[voltaire]

Originally Posted by RaftPeople

Aside from the pre-funding thing, why not just price your product such that you can pay your bills?

No need for any elaborate schemes...if the price to send a letter needs to be $1.00, then charge that price.

Congress won't let 'em. The prices are set so as to make it affordable for those in rural areas. In the telecommunications industry, the telcos are mandated by law to essentially operate at a loss in unprofitable rural areas. In the delivery business, the USPS picks up all that slack, then is also expected to be self-sufficient.

[RaftPeople]

Originally Posted by voltaire

Congress won't let 'em. The prices are set so as to make it affordable for those in rural areas. In the telecommunications industry, the telcos are mandated by law to essentially operate at a loss in unprofitable rural areas. In the delivery business, the USPS picks up all that slack, then is also expected to be self-sufficient.

Yes, I get that, but it doesn't change the formula:
price per piece(assuming letter)=((Total cost to deliver all pieces)/(number of pieces delivered))

[BigT]

Originally Posted by RaftPeople

Yes, I get that, but it doesn't change the formula:
price per piece(assuming letter)=((Total cost to deliver all pieces)/(number of pieces delivered))

It does when half of the Congress is in a party that wants you to fail so they can privatize what you do.

[Martin Hyde]

Originally Posted by voltaire

Well, that's the thing you didn't address - the USPS has to provide service to everyone, sometimes at unprofitable prices. Private carriers are allowed to refuse to deliver to remote areas, or else charge an arm and a leg to deliver there. USPS can do neither; they must deliver everywhere while often charging a set, money-losing price.

And that's the other thing - you talk about a drop in revenues due to the internet bringing email and electronic bill-paying, but you also have to consider the huge increase in internet shopping that has greatly increased parcel delivery. There, too, the private carriers can deliver where they want, and charge what they want, while the USPS has to deliver everywhere at set prices, even if they're losing money.

The result of that is an indirect subsidy of the private carriers, since they can choose from only the profitable business and leave behind the unprofitable scraps for the USPS. Either the USPS should not be expected to be self-sufficient/profitable (be partially funded by taxes), or they should be run like a business and allowed to set prices that ensure self-sufficiency/profitability. You can't have it both ways - specially when you also impose onerous employee benefit prefunding mandates.

I don't think there's a problem with subsidizing delivery to guarantee service. But what I mentioned was specifically post offices, there is no reason I can think of it wouldn't be better to get rid of 4-5 people sitting doing nothing at a very underused rural post office and licensing some local convenience store that is open at appropriate hours to do the same functions.

If you privatized delivery and left it to itself, businesses wouldn't deliver on unprofitable routes and people would lose out on service. So if you privatized delivery but wanted guaranteed service, you would have to subsidize the system somehow with either government funds or some mandatory fees that all users of the system have to pay, which are then used to make the overall system profitable. That's basically what we do with telephone service where a small part of everyone's bill is basically a fee that is used to keep people living out in the boondocks connected. If you're going to subsidize it such I don't know that it's as big a concern as to whether you privatize it at all.

However with physical post offices, if you have a rural post office that gets 10-15 customers a day, it's a huge waste of resources. However if you close it, it could mean that a few thousand people now can't easily get to a post office. The private market could actually step in here, low volume post offices could easily be replaced by self-service kiosks and a counter at a convenience store that might require 20-30 minutes a day of work. The owner of the store makes money off this, and his costs don't really go up very much at all by having that service ran out of his store. If anything they could go up as people would come in to do post office stuff and might buy a candy bar or soda while they're at it.

[Bryan Ekers]

Originally Posted by rogerbox

The Post Office has to have cash in hand NOW for retirement for PEOPLE WHO HAVEN'T BEEN BORN YET. Think about that for a second.

The employees are in the male!