Dismissing the Facts Won’t Save the USPS

Posted: Jul 21, 2017 11:09 AM
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The U.S. Postal Service is in steep decline. Today, the U.S. Postal Service fails to meet even their own watered-down standards for letter mail delivery service and management has run up over $121 billion in debt and unfunded liabilities.

A recent column by Fredric Rolando, president of the National Association of Letter Carriers, makes three claims that misrepresent the facts about the beleaguered government agency. The column argues that the U.S. Postal Service does not depend on the federal government for funding; that the Postal Service is actually making a profit; and that Congress is to blame for the agency’s ills.

Rolando says the poor financial standing of the U.S. Postal Service is due to prefunding retired Postal employee’s health benefits – a program that would benefit the very letter carriers that he represents.

The idea of prefunding retiree health benefits was originally proposed by the U.S. Postal Service over a decade ago and adopted by Congress in 2006. Through this proposal, USPS was able to divert funds that had been overinvested into their pension fund and point them towards payment of retiree health benefits, which at that time was underfunded. The proposal provided significant financial incentives for the USPS including over $50 billion of additional cash and a credit line with the U.S. Treasury totaling $15 billion at a below market interest rate.

The proposal was strongly supported by the leadership of the U.S. Postal Service from the beginning. Then-CFO H. Glen Walker called it, “a farsighted and responsible action” and one that “augurs well for our long-term financial stability…”

Since that time, USPS has squandered the increased financial incentives provided, maxed out their $15 billion credit line with the U.S. Treasury, and failed to make a payment to the Postal employee’s retiree health benefits account since 2011.

As the head of a labor union, Rolando should understand the importance of benefits like a secure pension during retirement and healthcare benefits during employment and beyond. His ire towards the idea of ensuring that these accounts are funded is a real head-scratcher.

What he fails to address is the gross mismanagement of the U.S. Postal Service in recent years. First-Class mail service, which every American relies on, has not been fulfilled in a satisfactory manner. In fact, USPS failed to meet on-time delivery targets for every single First-Class mail product. Additionally, according to the Postal Service’s regulators, USPS has failed to meet performance goals for Standard Mail letters for five consecutive years.    

Despite declining volumes since the dawn of the internet age, letter mail delivery remains one of their most profitable services. First-Class mail covered costs by $21 billion last year. As these government-protected monopoly products continue to be profitable, there are many doubts about the financial viability of other new offerings.

Delivery services like Amazon packages, flowers, and fish deliveries in New York City are all part of its recent marketing campaigns and unfortunately the USPS is less transparent about revenue and costs associated with these competitive product lines. All we know for sure is, the more these services increase in volume, the more their debt increases.

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As for Rolando’s other claims, the USPS’s $121 billion of debt and unfunded liabilities clearly counters any assertions about profitability. For other famous bankruptcy cases, like Enron, the company went under due to deceptive accounting schemes. One thing we know is, there are always two sides to a ledger and unless you take all costs into account, you aren’t really calculating profit.

Additionally, the idea that the USPS does not depend on the federal taxpayer and funds itself through the sale of Postal products simply overlooks the $18 billion in subsidies they benefit from as an agency of the federal government through tax breaks, below-market interest rates, and structural business advantages not enjoyed by competitors.

Failure to address the real problems ailing the U.S. Postal Service will hurt the American taxpayer, Postal consumers, and past, current and future Postal employees.

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