According to the article, the USPS was required by a congressional mandate to prepay $5.5 billion annual payments over ten years to fund health care costs for future retired employees. The article also states that these payments are largely responsible for the USPS’s losses. My question is: why did Congress pass such a mandate? Was it politics? Or was there a legitimate reason behind it?
Thanks.
Politics.
There are elements in the country that want the USPS gone. Hence forcing it to continually pre-fund retirement for people who may not yet be born - they have to pre-pay 75 years worth of retirement funding - is a means by which to put a truly great agency on the ropes. It’s a scandal, to my eyes.
Especially since the USPS doesn’t get a DIME of tax money (which is why they’re still operating under the shutdown). It’s all politics…the USPS is a government program that works wonderfully so it must be killed.
The questions shouldn’t be why only the USPS is doing this, but rather why isn’t the rest of the US government.
That’s a ridiculous description of the USPS financial states. The reality is this:
http://about.usps.com/news/national-releases/2013/pr13_051.htm
The USPS is in debt, losing money, and barring a miraculous turnaround will need to be bailed out at some point. Like GM, the USPS has a ton of outstanding obligations to its workers and shrinking revenue. It doesn’t take a crack accountant to see the problem.
As to the health insurance prepayments, it is and is not about politics. USPS is obligated to pay pensions and health insurance for retired workers. Some of that money is expected to come from future profits. If there are no future profits to be had, then that money will have to come from the government. By forcing the USPS to pay money into a fund, then there are assets to cover future obligations instead of relying on general tax revenues. Of course this prepayment makes the USPS look less profitable, but that is a more accurate picture.
The reality of the USPS is that it employs too many workers, pays them too much money, and has too many locations to be profitable. Drastic changes are needed to restore teh USPS to profitability and that won’t happen until a crisis comes along. Forcing prepayments makes that crisis come earlier. I suppose that is politics or a legitimate reason depending on your view.
I hear one of the reasons why the USPS is in such dire circumstances is that third party carriers like UPS and Fed Ex, etc, use them whenever it becomes to expensive for them to deliver to a particular location.
Anyone know how true this is?
Very true.
(Disclaimer: I formerly had the USPS as a client.)
The USPS recognizes these things, I believe. They’ve made some efforts to get out from under at least some of them – in recent years, they’ve proposed phasing out Saturday delivery, and closing some very small post offices, among other things. They’ve also tried to get bigger increases in postal rates. The problem is that they can’t do any of those things without the approval of their Congressional oversight committee, which has, time and again, refused to let the USPS make any of those sorts of changes.
Again, that’s just a ridiculous interpretation of the situation. FedEx, UPS, et al pay the USPS to deliver some items the last leg because the USPS can do it cheaper. Conversely, the USPS pays FedEx to deliver some items because FedEx can do it cheaper. That’s a partnership, not a subsidy.
Sounds a bit like the situation here with Royal Mail. The whole business is shortly to be sold off but to make it happen, the multi billion pension liability is staying with the taxpayer.
State owned businesses like Royal Mail have, over many years and all shades of government, given in to union demands, so the PO workers have great holidays, and a gold plated pension scheme, among other benefits.
It’s true that UPS uses USPS sometimes, but it’s a little more complicated than simply “whenever it becomes too expensive”.
For example, I live in the San Francisco Bay Area. Very easily reachable from anywhere in the country. I get UPS packages all the time. But UPS offers a service called UPS Surepost, which I guess is a little bit cheaper for the sender in some circumstances. When that is used UPS delivers to my local post office and USPS delivers it the rest of the way to my house. But UPS will gladly deliver it all the way if that’s what the sender wants.
The pension situation with the USPS is not only that they’ve funded pensions for postal workers who aren’t even born yet, they also heavily overpaid into the system beyond that and aren’t allowed to have any of that overpayment back. Between that and the lack of permission from Congress to offer any additional services, increase revenue at all, or close up on Saturdays, they are being forced down the drain. There’s no denying that they could improve things; they aren’t being allowed to do it.
This is more or less correct. Postal Workers Unions donate to the Democratic Party. FedEX and UPS donate heavily to the GOP. By killing the USPS, the GOP gets a two-fer.
I don’t want a profit-model postal service. The whole point is to give us something that isn’t a profitable enterprise. I want every small town to have a post office, because I want to be able to send and receive mail reliably throughout my country at modest rates. It is good for the country, in myriad ways, to have this.
^This.
Which is why the Constitution specifically charges the federal government with establishing a post office.
Flag on the play.
Not that I disagree with a bit of your analysis, Doc. But the info about UPS and Fedex isn’t quite so cut and dried.
UPS top recipent by donation (last election cycle):
Fedex top recipient by donation (last election cycle):
Now, the data for Fedex is clearer, but it’s not entirely skewed to the red side. Both are doing what any reasonable donor at that level should do: keeping their options open. It was clear early on (to me, at least) that Obama would win in 2012 so you see that even Fedex - with a strong R lean - wanted to at least make sure to get a few calls returned from OFA over the next four years.
To say that UPS is a heavy R donor simply isn’t true. They appear to be very ecumenical.
You are, however, damn straight skippy about the American Postal Worker’s Union. They money they give goes to their friends. However, they funnel most of it through three campaign committees: AFL-CIO Workers Voices, House Majority, and the oracularly named Majority PAC. Still, I wouldn’t doubt your take on it.
Of course, that could be a sense that the guys on the other side aren’t just rivals or opponents but enemies. That’s the sort of pattern that’s shown when the lines are truly drawn.
This is also important to note. I’ve long believed that most things - if they can be done for a profit and could be allowed to fail - should be private. On the other hand, tasks and missions that either can’t be run at a profit and are mission critical or would present a serious issue if they failed are the province of government. The USPS is an amazing thing and laid out in the constitution. To attempt to privatize it is a near-equivalent to privatizing the military.
I think it is a correct description, and that the only reason a deficit exists is the pension requirements.
From your link:
If it were not for the political requirement imposed by Congress, the USPS would be running in the black. And all of their operating revenue must come from operations rather than tax money.
Obliging the USPS to take on prepayments not required by any other department and of a magnitude that is unique - 75 years! - and not used by any private businesses is a political decision. I cannot figure out any reason for putting impossible and unique burdens on an operation unless they are designed to break it.
Remove the prepayments and the USPS is profitable. It has worked to improve its internal operations, despite the active opposition of Congress whenever it tries to cut services like an ordinary business. You cannot simultaneously blame it for not being sufficiently lean while keeping it from doing so. The concept of equal access to mail delivery by every person in the country is a marvelous example of what government can and should mean. What do you gain from actively impeding that? I don’t know, but I know that there is no rational reason so it must be political.
Why?