Today’s New York Times reports that unless the postal service gets some help from Uncle Sam, mail delivery will cease entirely this winter.
What about those TV commercials sponsored by the postal workers union claiming that no taxpayer money is needed to deliver the mail?
Nonsense as it turns out. “Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, told the Times. “If Congress doesn’t act, we will default.”
Delaware Democrat Thomas R. Carper says,
If we do nothing, if we don’t react in a smart, appropriate way, the postal service could literally close later this year. That’s not the kind of development we need to inject into a weak, uneven economic recovery.
Fannie, Freddie, GM, AIG, and now the U.S.P.S. Keeping another zombie alive with tax dollars or money from nowhere, is exactly what the economy doesn’t need.
The most urgent $5.5 billion that’s needed is to finance retirees’ future health care. So we’re not talking about the post office needing the dough to gas up the trucks or even pay current employees. Taxpayers are needed to pay the cost for mail that was delivered years ago.
But, it won’t be long (early next year) before the agency will run out of money entirely.
Mail volume has dropped 22% from five years ago, and it won’t be coming back. However, trimming the labor bill at U.S.P.S. is problematic. “We’re going to fight this and we’re going to fight it hard,” said Cliff Guffey, president of the American Postal Workers Union, which represents 207,000 mail sorters and post office clerks. “It’s illegal for them to abrogate our contract.”
Labor costs amount to 80% of the U.S.P.S. expenses, while at UPS labor is 53% of expenses and at FedEx labor is only 32% of expenses. If either of these companies were having trouble paying their bills, it’s doubtful Congress would lend a sympathetic ear.
Instead of winning customers by offering better service, the postal service is lobbying Congress for approval to discontinue Saturday mail delivery. This just continues a trend that began years ago. No matter what technological innovations are developed, the U.S.P.S., as James Bovard explains,
still delivers mail roughly the same way it was delivered in ancient Greece, when Herodotus coined the phrase, “Neither snow, nor rain, not heat, nor gloom of night stays these couriers from the swift completion of their appointed rounds.” The service downplays this motto these days since a few inches of snow or a frowning schnauzer can stop delivery for days. As postal expert John Haldi has concluded:
Despite the many advances in . . . mechanized handling technology, the Post Office’s chief accomplishment over the last 200 years has been limited to the introduction of durable, lightweight, colored nylon bags for use with airmail.
Before 1950 the mail was delivered twice a day, or a dozen times week. Soon postal customers can look forward to just five deliveries a week. Unless there is a holiday, of course.
Bovard describes the postal service as “probably the worst managed and one of the least honest corporations in America.”
A perfect candidate for a Federal bailout.
{ 78 comments }
“If either of these companies were having trouble paying their bills, it’s doubtful Congress would lend a sympathetic ear”… ha… ha… ha…
(See General Motors, Chrysler, AIG, Bank of America, et al.)
When I was growing up, the mail was delivered to a box mounted beside the front door of our house. Where I live now, the mail is delivered to a box at the end of my driveway. One day, parking requirements caused the box to be less accessible than usual (I had to park so close to it that, in order to drop the mail in, the postman would have had to drive up to it, deposit the mail, and, gasp, back up a bit before he could pull back out). I was met the next day with a nasty note signed by the local postmaster threatening non-delivery if the box situation wasn’t rectified immediately.
So, in my 26 years the post office has gone from walking the mail to the door six days a week to driving the mail to a spot near my house, but only if it is of absolutely no inconvenience to the driver whatsoever, and that is soon to drop to only five days a week. All this for a service that delivers about 90% trash to the house for me to deal with disposing of. When the UPS or FedEx truck shows up, they always bring stuff somebody at the house actually wants.
Sell it off and allow competition.
totally misrepresents the po’s financial woes. the prefunding of retiree health benefits was mandated by congress, no other business in the u.s. is required to do this. a 2003 accounting error which transfered billions to civil service has yet to be returned to usps. the post office does not need a bailout to solve its financial woes. it needs congress to rescind the prefunding mandate and return the money misappropriated in 2003. sorry this doesn’t jibe with your right wing ideology, but the truth has a way of trumping ideology.
not really, congress making a serious error in financial priorities pretty much continues to validate the problems of govt. run services. the fact that that error can be fixed does not solve the fundamental problem though as there are several other reasons listed both in the article and by other commenters as to why the PO is losing money rapidly, not the least of which is the rapid decline of people paying to directly use the service.
> right wing ideology
Gesundheit!
We’re fortunate to have the U. S. Postal Service carrying our mail, it’s the best government postal service in the world – bar none. And no, I’m not a postal service employee or a family member of a postal employee. I have, however, lived in several foreign countries and do know from first hand experience how good our postal system is compared to others. I’m also very confident that the people of the United States would be gouged severely if the service was ever turned over to an American corporation. Shouldn’t we all know that by now?
Yes, the USPS is so amazing that no one would ever try and compete against them. What a black hole that would be, who could do the same job better and more efficiently!? Unheard of…
Mail service in New Zealand is apparently excellent since open competition in delivery was allowed some decades back. Street corners have a number of competing mail boxes available and service is excellent. Why wouldn’t it be? If you don’t like Company A’s delivery service, you can always pick company B or C and go to the exact same location to get the service.
“I’m also very confident that the people of the United States would be gouged severely if the service was ever turned over to an American corporation. Shouldn’t we all know that by now?”
Sarcasm or severe delusion? It’s so hard to tell the difference sometimes.
It must be sarcasm.
uh huh.
Let’s see.
My mom sent a card to my nieces. It was delivered to an totally different state.
My mom sent a package to my brother. It was delivered late, and crushed.
I mailed a card to my parents. Across our state (a 2 hour drive). It was delivered months later.
So this is best service???
Not “gouged severely”, but simply charged enough to actually make a profit and not need a bailout.
By “gouged” you must mean “provided with better service at a lower cost,” because that’s the difference between coerced government monopoly and market-based competition.
Chas, You’re an idiot! I am waiting for mail, right now, this minute, that has been in Houston for 4 days now. Today, we got no mail delivery at all! At a business park! They just dont even bother to show up but every other day. The mail carrier will place a “Sorry We Missed You” in our mailbox, even though we are here 16hrs a day, 6 days a week, and we are the CLOSEST to the mailboxes… approx 30 feet. They used to be the public servants from hell, now they’re just spoiled, lazy, incompentent morons from hell. I remember when I was a kid, if you told someone, “I dont know, it must’ve gotten lost in the mail.” You were called a liar! They never lost ANYTHING. Now they dont do anything right. I wish they would just go ahead and shut down and let FedEx and UPS take up the slack. I am really tired of randomly getting stuff I order.
Yeah I especially love the way I get to pay for a post office service I never use. What a great benefit to me! This system is the best in the world @ redistributing my wealth to overpaid union workers who make more than me! Awesome job! Bar none!
The internet is your friend. Learn to use it to do a little research. The post office is entirely funded by selling its services. If you do not purchase any of its services you are not paying anything. Not a single red cent is being redistributed. Perhaps it is time to take a long hard look at why you are paid less than the average postal worker. Clue: It has nothing to do with overpaid union workers.
I’d love it if the government could enforce a top-rate monopoly for the services I provide…
Except every now and then when the USPS comes up short in its finances. And I’m sure the Postal Workers’ Union is offended by your comments!
Cutting jobs, is of course a place to be looked at in any industry, in the case of the USPS, there is a obvious very high ration of management to workers. When that ratio is at nearly 8 to 1, surely that would be a very sensible place to look at for cost saving reductions. It would be very unsurprising to know that in private industry, the more likely ratio, of management personnel to workers, is close to 20 to 1. This is where independent auditors, would find very substantial savings, which would help alleviate the future debt that USPS officials are predicting the end of the USPS, as the public, and business world has relied on.
Your figures are bogus. You are comparing EAS/PCES and PS pay scales and claiming those categories are the same as management and labor in the private sector. It is simply not true. Do you want to compare the earnings of a level 11 EAS secretary with a level 5 PS desk clerk? The EAS secretary doesn’t get time and a half for overtime, COLA, step increases, or annual contract increases. The “worker” desk clerk makes more money and has a far better deal than the “management” secretary. Many EAS employees do not perform work that would be considered “management” is the private sector. Don’t believe everything that Congressmen tell you – as often as not they are lying.
It would be a relief if the USPS died and went away. I’m tired of the daily ritual of going to the mailbox and cleaning all the junk mail out of it and listening to the mail carrier lecture me on the importance of emptying the box so he can stuff even more coupons and credit card applications into it the next day. This is also an endemic problem – a business that thinks that customers exist to serve it, not the other way around. The UPS guy doesn’t lecture me, he goes out of his way to make sure he delivers packages to my specifications.
The person emptying the mailbox of the advertising mail is not really the “customer” of the postal service. The “customer” is the advertiser who is paying the postal service to deliver its message. Advertising through the post is similar to advertising through television: The advertiser, i.e., the “customer,” pays the medium, i.e. the TV industry or post office, to deliver its message to the potential customer, i.e. the TV audience or the guy emptying his mailbox.
Your analogy to television is flawed.
With a television you can simply change the channel, no harm, no foul to the “potential customer.”
If your mailbox is filled with unsolicited advertisements and “let’s make a bill” letters(credit offers), you cannot avoid it. This is simply annoying, and a complete waste of paper.
Nice strawman. Care to address the point, which is the buyer/seller relationship? I’m sure the analogy is not perfect but there is probably no such thing as a perfect analogy.
Liam,
let’s assume public (as opposed to private) TV. You might need to pay for it through taxes and fees, but you don’t have to watch it. With mail, you don’t have this choice. In both cases, the advertiser needs to pay something to the public provider, but less than the market price, because the service is subsidised. In both cases, the system redistributes money from the recipients of the advertisement to the senders of them, but TV you can turn off.
Your argument is fatally flawed because the mail is NOT subsidized. The advertiser pays 100% of the cost of delivering the material to the potential customer. As the potential customer, advertising mail costs you nothing (to receive). It might cost you to dispose of it and the cost of it it certainly passed on to the individual who purchases whatever is being offered for sale.
Liam,
According to Wikipedia:
I’m not sure what was the case before 1980, but I can imagine that the founding and operations of the USPS were not privately funded. Also, USPS holds certain monopoly powers, which means that if you want these types of services, you have no choice. You can interpret this monopoly as an indirect subsidy.
His status as advertiser does not change the rates he pays. The USPS is not allowed to charge him more than other customers. This is also a form of indirect subsidy.
The costs of the unwilling recipient are not passed on to anyone.
I admire your national pride here. First, we should break our word on promises for goods already received. Let the USPS go bankrupt and take its messed up pensions with it. That is a great foundation for future contract law. Second, we know that industrialized nations thrive with an ineffective or non-existent mail system, just look at the economies of the Middle East, or Eastern Europe. You Austrians are such ideological purists that you ignore connected systems. You are also calling for significant damage to numerous drop ship companies, e.g. Netflix, eBay, Amazon. Just be honest, you really want to kill the present economy in the hope you can resurrect it in your Platonic ideal form.
Pull the funding and let USPS deal with it themselves. They are the ones that made the promises, not me. There is no reason why I need to pay for their stupidity. If you feel bad about it then YOU be the one that donates your retirement. No need to force anybody else to pay for what you want.
We already have a ineffective postal service. That is why we need to eliminate it. So we can actually have something that is useful and inexpensive.
Horseshit. Your the one that doesn’t understand connected systems. Because if you did you would understand the destruction it creates for the economy and why it needs to be eliminated. Austrians understand this precisely because they understand the connections, far better then you do.
If you eliminate the monopoly on first class postage then there would be a large number companies chomping at the bit to provide that service. Much cheaper and much better then USPS does.
You are happy to see fat, corrupt, inefficient, bureaucracies continuing to suck the life out of their competition through the use of threat of violence.
We want freedom, open competition, and a healthy economy.
George and Nate, you are both badly misinformed on this issue. The USPS pension and retiree heath benefit funds are not experiencing shortages. USPS intends to default on a statutory (and actuarially unfounded) prepayment into a fund that will pay the health benefits of retirees up to the year 2181. Many of the benficiaries of these payments are not yet hired and many not yet even born. That fund is already at least 100% prefunded for the next 35 – 40 years. USPS pensions are 100% prefunded by the contributions of the employer and employees and its retiree health benefits are funded by the employer – not a cent of this money comes from taxes.
A word of advice, Nate: It is possible that a credibility problem may arise when one loudly accuses others of stupidity in a statement that so clearly demonstrates one’s own.
Another word of advice to everyone, including myself: Remember never to engage in spelling or grammar flames or you will surely include a misplet word or split infinitive and go down in flames yourself.
The year above should be 2081 – not 2181.
“misplet”
Yup.
If it’s based on solid actuarials (not the joke that most government pensions use like establishing 12% annual return assumptions like Calipers did), then it shouldn’t be a problem since it can stand on its own long after the USPS dies a painful death, leaving existing beneficiaries untouched. If this is the case, then the entire discussion is to subsidize ongoing USPS operations, and there is little reason to do so. UPS had no problem delivering packages to my doorstop overnight when I was living out in the middle of the endless farmland 11 years ago, and I seriously doubt they’ll “neglect” the rural areas should they elect to start delivering the rapidly declining stock of useful physical mail.
I agree that the ongoing operations of USPS are what needs to be examined. The declines in volumes and revenues are undeniable as is the magnitude of the fixed costs associated with USPS maintaining its logistical network at its current capacity. As the volumes decline, USPS’ operational capacity, and the fixed cost associated with it, becomes excessive and must be reduced. There is some lag time in the process of reducing both complement, partially because of labor contracts, and physical plant, partially because of a depressed real estate market and a limited market for excess supplies and equipment specific to the task of delivering mail. USPS has been successful in reducing its complement and capacity to some degree but it must always chase the declining volume as over-reductions would result in an inability to deliver the mail during surge times. I believe that the most important change USPS must make, if it indeed is going to continue, is to reduce fixed costs by introducing flexibility into its work force by ending craft specialization and workhour guarantees.
Correct me if I’m wrong, but wasn’t the postal monopoly on first class mail deliveries a result of the crushing competition from Lysander Spooner’s company?
If not, when and why/how was the monopoly granted?
Regardless, one of the financial insanities of the PO is how first class postage is used to subsidize ‘junk mail’. Fix that and see what difference it might make… Two birds with one stone — reduce the amount of junk/trash produced and recoup monies for the important job of the PO, actual delivery of first class mail.
no hugs for thugs,
Shirley Knott
The monopoly is part of the constitution, but Spooner’s business was doing so well they went after him and bankrupted him with legal proceedings.
The monopoly predated Spooner’s mail company. Spooner’s strategy of skimming the cream from the profitable markets and not serving the unprofitable markets is very likely the same strategy envisioned by the organizations today that would be interested in taking parts of the mail delivery market.
At the risk of interjecting truths and fact to the heaping pile of dung initiated by Douglas French and rejoined by the legions of the misinformed, I would like to point out that there is nothing whatsoever wrong with any of the pension or retiree health benefit funds of the USPS. The funds contain around $313 billion in US Treasury securities, all contributed by USPS and its employees and not the taxpayers – far more than they will ever need to meet their obligations to those civil servants of our nation who have funded and earned them. In fact, as enormous as the US debt to China may be, its debt to USPS pension and retiree funds is nearly a quarter as large.
“Nonsense as it turns out,” Mr. French? Perhaps a little research on your part using primary sources rather than unfounded internet rumors might spare you the embarassment of future misstatements.
Oh, TREASURY securities, so the US taxpayer is on the hook for the entire USPS pension plan and is likely underperforming given the low returns from Treasuries. It’s important to understand that any government agency, or pretend corporation that’s really a government agency (ie the USPS) has Treasuries as a “trust fund”, then it basically has nothing.
Since the entire investment strategy of the pension fund is “buy US government debt”, it’s pretty much nonsense as it turns out.
Rubbish. USPS and its employees have tendered real dollars to the US Treasury and have been issued US Treasury securites in exchange for them. US Treasury securities are the safest investment in the world (or they were before the Teabillies started joking that they wouldn’t honor them). Where else would you invest your pension funds – Lehman Brothers? Try to keep it real. The taxpayer is not “on the hook” for a single red cent of the USPS pensons because they have already been prefunded by USPS and its employees who have bought nearly a quarter as much of the US government’s debt as has China. The taxpayers may be “on the hook” for Congress’ spending but USPS pensions are not part of it. It is ridiculous to claim that these investments are “nothing” both for the fact that it is not true as long as the fiat dollar holds up and for its irrelevance if the dollar does not.
Don’t blame the Tea party guys for pointing out reality and causing the house of cards to fall down. Blame the people that build the house of cards who fooled gullible people like you into believing it was the safest investment in the world.
It takes two to have a victim. They are volunteered victims because they believed in the state system they served. They were _wrong_. There are penalties in life for being wrong. When you are wrong you pay. And they will continue to be victims until they realize their mistake.
Sorry. That is life. It’s not our job to keep the delusions alive.
The delusion is your belief that the US Treasury is about to fold its tent and leave town. It isn’t going to happen. If it does, even the gold and diamonds buried in your back yard are going to worthless, too. The only things that will have value are things you can eat and drink.
What is going to happen is that the US government is going to take out the US Treasury right about the time it finishes destroying the dollar.
Which is going to happen.
Since we abandoned the last vestiges of the gold standard the dollar has already lost 80-90% of it’s value. Since the early 1970′s we have seen 500-600% inflation. So much so that in inflation adjusted dollars that the current US average wage is actually less then it was in 1970. Although it costs 800-900% more to buy a house or a car. Meaning that while previously a single person could provide a house and two cars for a family, it takes two people and deep debt to accomplish the same things.
This is just the beginning.
We have seen in the past year the prices for certain raw capital goods rise 30-40% _in_a_week_ due to inflation. Food prices are starting to rise. Pretty soon you’ll start hearing rumblings about the need for price controls and other such self-destructive rubbish.
Look at any index you care for the stock market. Nasdaq, Dow Jones, S&P 500… They have all peaked almost 4 years ago.
All this is due to the fact that the American public is falling for politics of bullshit. It’s about making a select few rich (and keeping them rich), not about protecting the economy.
We are currently involved in no less then 4 foreign wars and we are depending on selling our financial soul to China in order to pay for it.
It’s going to continue to suck until people like you realize the real problem isn’t people wanting lower taxes. Is the people standing with their boots on the back of your neck holding a gun to your head saying: Pay up or you go to jail.
Oooh….. you sent real dollars and the govt replaced them with Treasuries? So the govt took your money, spent it and replaced your money with debt instruments, and you are saying that no one is on the hook to pay you back your money? Ignorance is bliss, they say…
OTOH, if you love your Treasuries so much, you wouldn’t mind if the govt were to give you the Treasuries instead of paying you money, right? That would please us all (and the Teabillies would be pleased most of all – pure win-win)
Then put your Treasuries where your proverbial mouth is. USPS has offered to withdraw from all the government pension and health plans and there can no longer be any claim, no matter how specious, that the USPS employees are or have any chance to be a burden on the taxpayers. USPS would use use its Treasury securities to establish it own programs and would manage them itself. The Teabillies blanched at the offer.
“US Treasury securities are the safest investment in the world”
Really? Assuming this isn’t a joke, you should open your mind to the possibility that you don’t understand the real cause or extent of the current problems.
Yes, reminders to keep the mind open are always welcome. Thank you.
I believe I have a good grasp not only of the underlying cause and extent of the current economic problems but I do not agree with the pure gloom and doom predictions that the Keynesian revolution necessarily will end in complete worldwide economic collapse. An open mind must always consider that the US economy is a big ship and turning it around in a bathtub might best be accomplished by a series of small turns.
You may believe you have a good grasp not only of the underlying cause and extent of the current economic problems, but you may as well believe that you are a ham sandwich. Both are equally true.
nate-m September 6, 2011 at 10:40 am: “It’s going to continue to suck until people like you realize the real problem isn’t people wanting lower taxes. Is the people standing with their boots on the back of your neck holding a gun to your head saying: Pay up or you go to jail.”
“People like you,” eh? I was wondering how long it would take for your argument to collapse and you would be forced to resort to childish ad hominems. You actually lasted longer than I thought you would. Congratulations. Your understanding of this issue and its relation to larger issues seems limited by a self-imposed ideological purity. You don’t seem to notice that your facts are laughably incorrect and you don’t seem to care when that is pointed out. These are big league issues that do not call for minor league “solutions” like shouting predigested slogans and incorrect factoids. Honestly, nothing is gained by uniformed arguments. Many individuals, including those to whom you refer as “people like you” are informed on a professional level on this issue and that is where the meat is. Master the problem first, then try to develop a solution.
Oh yes, the appeal to authority and experts. Considering the professionals’ and experts’ record of late, I would seriously consider refraining from paternalistic pedantism. And I love the metaphors. A big ship. I guess here in Germany, we are a slow train crash on a one-way track. Hard to turn that bad baby around. But I’m quite certain some well-trained, knowledgeable, insightful, sagacious, wise Wunderkind expert with perfect knowledge of every rational and irrational variable will help save the day.
You might want to brush up your logical fallacies. There has been no appeal to authority, only an admonition to nate-m that his own unfamiliarity with the issue does not mean that there are not others much better informed. Perhaps you misunderstood or perhaps I communicated poorly. My apologies if I have miscommunicated.
No, you communicated perfectly. It’s just that when you argue, you do so in a very paternalistic manner, which is very antithetical to open debate and causes resentment. It’s similar to the tone of an ad hominem. Trying to come off as super educated is not an argument. And saying “there are people that know” is also not an argument. The point of Austrianism is much like that of Socrates’ famous line about wisdom. No matter how intelligent one is or how many facts one has, it is insufficient for the organization of society. There are too many variables. People who think otherwise assume some sort of static society made of clay that can be molded to the designs of experts. It is similar to the belief in God. But I do sympathize with your search for facts. However, you cannot assume that the other side is just manipulated into delusion by misleading dogma. This is a logical mistake. It’s like assuming the other side has bad intentions. There’s no need for that. Mostly, it’s a disagreement about the interpretation of the very same facts.
Just curious, from where did those disagreeing with Austrian positions arrive here? Did this post get picked up somewhere?
For my part, I generally agree with Austrian positions and followed a link from the CSM to French’s unresearched puff piece. I was happy to find such an informative site but somewhat surprised by the low quality of discussion and tribalism.
“The delusion is your belief that the US Treasury is about to fold its tent and leave town. It isn’t going to happen. If it does, even the gold and diamonds buried in your back yard are going to worthless, too. The only things that will have value are things you can eat and drink.”
“For my part, I generally agree with Austrian positions…”
Really?
Yes. I just don’t believe we already have both feet over the precipice.
You know, I’m skeptical of this. If you google “Liam Skye USPS,” you can find a history of comments on various blogs going back to February, at least. Add that to your obscure knowledge of USPS management, and I have to ask, do you work in USPS PR?
No. I used to work for USPS but in a mundane operations capacity. I have followed its travails for more than 40 years.
I followed the link to clear up the misinformation about USPS which, surprisingly, is even worse on this blog than I encounter elsewhere.
Liam!
If you are happy that USPS has a pension fund of $313 billion in US Treasury securities, then you might seriously consider what the Keynesian “revolution” (some might call it hard junkie trip) will do to that.
You might also consider that all the small turns of the Big Ship are lying in the past, not the future.
James Shadle writes:
“a 2003 accounting error which transfered billions to civil service has yet to be returned to usps. the post office does not need a bailout to solve its financial woes”
That doesn’t make sense. If you have 300 billion in securities (a long time and 2.7 trillion ago, the projected max of the Iraq war, btw.), then you have enough pull to get that error corrected pronto. What’s the deal here?
Yeah. It might cost $313 billion for a loaf of bread by the time they are done, but the point is that USPS has funded all its retirement programs based on today’s actuarial studies.
It might help to provide some historical perspective on that so-called “error.” The Postal Reorganization Act of 1970 created USPS and required it to operate without any public funding. This included funding all of the pension and benfits programs for its employees. It established a schedule of payments to build up the funds necessary to accomplish this. Around the early 2000′s it became apparent that the payment schedule was requiring USPS to pay more into the pension funds than was necessary to cover its pension costs. Just as USPS was not to receive any federal funding, so also was it not to subsidize other government programs (because all its revenue came from selling its services and milking it like a cash cow would amount to an unfair tax on the mailing industry). The amount of the overpayments was determined to be about $5.5 billion per year.
So what could be done? The first thing that was done was to stop the overpayments and escrow the $6 billion in a special Treasury account set up for that purpose. Over the next couple of years a slightly longer term “solution” was developed that permanently adjusted the contributions to the pension plans and still allowed Congress to continue borrowing without restraint and it was codified as the Postal Accountability and Enhancement Act of 2006. It took the balance in the escrow account and required USPS to continue making the excessive payments for another 10 years but they would now be credited to a new fund that would prepay retiree health benfits up to 75 years in advance. That account currently holds a balance of around $42 billion – enough to pay all the retiree health benfits for the next 35 years or so. Since USPS’ position related to its retiree funds is enviable by any measure and since it is experiencing “shrinking pains” related to its fixed costs and declining revenues, it is asking Congress for relief from the $5.5 payments.
Unaddressed in this “solution” is the matter of the overfunding of the pension plans – $50 to $75 billion in its CSRS fund, depending on whose actuarial analysis you accept, and $6.9 billion in its FERS account that is not disputed by anyone. USPS wants to have access to it – Congress does not want to give it up. USPS has already stated that it will stop making payments into the FERS account until it reduces the $6.9 billion surplus. This can also be considered a default.
The ironic part of this issue is that the statute requires USPS to increase the nations debt by $5.5 billion per year and the Congressperson who claim loudest to want to stop the borrowing are the most adament that it continue!
Thank you!
What!?
You’ve stated…
“The amount of the overpayment was determined to be about $5.5 billion per year.”
and then…
“The ironic part of this issue is that the statute requires USPS to increase the nations debt by $5.5 billion per year”
So USPS is mandated by Congress to consume 5.5B/year of federal budget (taxpayer dollars) and it considers that money to be it’s excess pension money?
I think he means that transforming the 5.5 billion cash into treasuries increases the debt.
I thought about this a bit more after I wrote that and came to the same conclusion.
The government sells securities creating future debt obligations that it promises to pay back by selling more securities, raising taxes, or just printing more money. Ron Paul recently reiterated the point that the Fed purposefully inflates the money supply so the past debt is cheaper. The problem of course is that you cannot destroy the value of the dollar to save a system that relies on the value of the dollar to generate future revenue. There is a tipping point. It is obviously unsustainable.
Yes, that is what I meant. Congress is actively attempting to disguise the true size of the deficit by reporting the $5.5 billion as revenue and offsetting it with non-marketable Treasury securities. It is another form of debt monitization. It may not be that easy for Congress to stop the practice either. Congress’ self-imposed revenue-scoring rules require that reductions in revenue must be replaced either by new revenue or reduced spending.
“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, said in an interview. “If Congress doesn’t act, we will default.”
I think that says it all. The Postmaster General is evidently either lying or Liam, your just wrong.
Nate, I am 100% correct. The PMG is referring specifically to “defaulting” on making a statutorily required prepayment into a fund that will fund retiree health benefits up to 75 years in the future. Since all those health benefits are already prepaid for around the next 40 years and USPS is strapped for cash today for the reasons everybody mentions, i.e., shrinking volumes/revenues due to electronic diversion, inability to react quickly to the reduction due to the enormous overhead in complement and facilities, the PMG has decided not to make the next $5.5 billion payment into that fund, opting not to pay today for costs that will be incurred at least 35 or 40 years and up to 75 years in the future. If USPS doesn’t make that prepayment it is a default because it is required by the Postal Enhancement and Accountability Act. PMG is asking Congress either to change the statute that required the aggressive prepayment (after all, many of the beneficiaries of that fund have not yet even been born), or to use the overages in its pension accounts to pay for it.
You seem to know more about the details of this USPS default than anyone else here. When I read that quote, what I heard was…If Congress doesn’t act (give us money) we will not pay our obligations because we don’t have enough money because we are a huge wasteful government monopoly. We have too many employees that we’re forced to pay because of union contracts who are filling an ever shrinking market demand. We also have to meet the demand of the compounding debt of retirement requirements that Union clout suckers out of the taxpayer.
OK, so not every gut reaction is always spot on. I admit it. This case is more complex than what I initially believed.
Although your catching some grief here, it seems there are some points where you and I meet. You mention that the government has placed overly burdensome regulations on the USPS and without those regulations the USPS would be better off. I agree (although it’s not a private sector company we’re talking about so obviously there are differences). A business needs to have the freedom to choose for itself how to allocate its resources. Most people here would agree that the government regulations restrict business (or at least squelch competition). Certainly less regulation in this case could make the difference between default and not. I know that at one point in the 70′s the postal service was subsidized by taxpayers but that has not been the case for quite some time. I’ve read that they fund themselves via stamp sales etc. I for one do not want the USPS to crash and burn and cease to exist. I want it to learn from the market feedback and adapt as a private sector company would be forced to in this situation. I want it to modify itself to become more competitive and more efficient. Unfortunately these are traits that are not typically present in monopolies. If there was a bailout of the postal service it would only serve to prop up another failing business on the backs of the taxpayer. I fear that scenario.
Liam….. you sound like a fairly intelligent person,especially if your viewing this site. However,despite your verbal gymnastics the fact remains that the USPS is a bankrupt,miss managed monopoly with a generally overpaid and overcompensated work force that’s still stuck in the year 1935. If the average semi-skilled postal employee’s position could be phased out and replaced with part time semi-skilled employees, based on a competitive hourly wage with little or no “benefits,”not only would this help with the unemployment picture but offer opportunities for teens,college students,seniors, and stay at home moms to earn some extra money. The problem is a government monopoly and a government union that instead of competing,in a free market environment,want to keep the status quo because the “system” has been good for them. The fact is if the USPS is so well run,why are they afraid of competition? I guarantee that under a free market system of competition,rural areas would be served and all areas would have a lower cost of 1st class mail delivery. In the end if I could get better service at a lower price from a post office competitor,why not? Let’s try it. If the free market system fails,we could always go back to the State run monopoly system. Liam,The Iron Curtain fell over 20 years ago and the Eastern Europeans are generally better off today then 20 or 30 years ago. Why can’t USPS iron curtain fall also?
If the USPS is so financially independent, then why should it have any ties to government in any way? Privatize it, open it up to full competition, and for gosh sakes let me have my mailbox again–it is NOT federal property.
Liam, I hope you stick around. If you actually have sympathies to Austrian economic analysis, keep up on the blog, and comment when you have something good to add. I can’t guarantee you won’t get a hostile response, but keep trying. Maybe leave out comments about piles of dung
You have to understand, most defenses of gov’t here come from people like Chas or james schadle, who think the left-right paradigm has any meaning, and then say things like “you didn’t mind the war when your guy bush was fighting it.” So please, stay, listen, read, discuss, and try to let the uncivil comments roll away. And everybody else, quit being dicks to our guests, even when they’re dicks, too.
Thanks Mike in MI. I came here to rebut the misinformation in the original article so I expected some acrimony. As expected, some read and discussed while others just circled their wagons and didn’t read a word I wrote. That’s not a problem, but it led them to incorrectly assume I was unaware or unaccepting of the Austrian models of macroeconomics.
I see Liam’s point to some extent. I don’t want to put words in someones mouth but I think what he is saying is that the USPS is self sufficient, in that it has, for some time, been able to raise the funds to pay for it’s operation and it’s retirement obligations by selling it’s goods and services. It has not needed to be subsidized by taxpayers to operate since the 80′s (I think). It is not correct to assume that they cannot meet they’re retirement obligations into the future for all past workers up to this point. It can however become a problem if the workforce is not cut to match the current low demand. Revenues are dropping and the USPS is currently not able to make the demanded payments (Security purchases) to fund it’s future obligations that have been determined during periods of higher demand (revenues) in the past. If Congress would oblige the USPS and recant on it’s demand that it continue to pay into retirement funds that are already running a surplus, the USPS would have no problem moving forward, cutting staff to maintain profitability and paying all outstanding obligations without taxpayers bearing the burden.
But, the problem exists that the Government has spent the money that the USPS has payed for Securities. The money that the Government will owe to the USPS into the future when their securities mature will be payed by the taxpayer, the sale of more securities/bonds, or by printing more dollars to make the payments. We know that around the world there is a move away from the dollar as the reserve currency and that there will come a day when China and Japan will not be willing to buy our debt and the system will collapse. Then we’ll have government workers rioting in the streets demanding that they be repaid all the money they’ve worked for and spent on securities. Not realizing that upon repayment those dollars will be worthless thanks to inflation. Then all the people who understood this will go dig up they’re diamonds, gold and silver they buried in they’re backyards and be far better off than those who trusted in the fiat dollar and all it’s derivatives. They will be able to eat and purchase goods, trade and barter for they’re necessities and hopefully, most importantly, help those sorry fools who called them every nasty name in the book get back on they’re feet and get this country moving again with a sound currency, respect for individual liberty, and limited government interference into the markets.
The government pension situation will become very ugly. As Nate points out, ultimately either the taxpayers will have to pony up or the government will have to borrow more money to redeem the Treasury securities that Congress has required USPS to purchase. USPS is the only government agency that has actually prefunded most of its retirement liability. Even the military has not funded their massive retirement liability by a single red cent. So who should get paid first, USPS employees (around 25% of them veterans), or the general population of military retirees. Does anyone believe the government, as long as it continues to exist, can screw the veterans?
The percentage of the world’s reserve currency that is dollars has indeed been creeping downward for some time. The US has taken some action to stem this tide, though. Shortly after Saddam Hussein announced that he wanted Euros and not dollars in exchange for his oil he became no longer an ally but a depraved psychopath who had to be destroyed at any cost.
What’s happened to USPS is the same thing that’s happening across the country…sooner or later you’re going to have more money going into your pensions than you can afford. This is a major problem in corp. America today. Combine this with a drop in mail usage and competition from UPS and FedEX…and we may be witnessing the end of USPS. We may even be reaching a point where we have no use for USPS. If it dies..something will fill the void….. and it may even be better.
Here is a comparison of the rates to mail a 8 ounce book which I have taken from the Mises.org bookstore.
Method Rate
USPS Media Mail (allow 10 days) $3.41
USPS Priority Fixed Rate Envelope $4.95
USPS Priority Mail $5.25
UPS Ground $10.37
UPS 3-Day Select® $14.83
UPS 2nd Day Air® $19.60
UPS Next Day Air® $51.20
UPS Next Day Air® Early AM® $93.98
Here are the rates from the FedEx website for the same parcel:
FedEx First Overnight® 101.64
FedEx Priority Overnight® 65.84
FedEx First Overnight® 84.32
FedEx Priority Overnight® 48.51
FedEx Standard Overnight® 44.76
FedEx 2Day® A.M. 22.44
FedEx 2Day® 19.92
FedEx Express Saver® 15.48
FedEx Home Delivery® 10.37
USPS’ niche is at the low end of the shipping/delivery market while UPS and FedEx concentrate on the more remunerative elite services. I’m not sure if they would want to move into the downmarket niche. This is why I always laugh when people who should know better (like Douglas French) cluelessly parrot the hackneyed slogan that 80% of USPS’ costs are personnel related (which includes the billions per year it is required to contribute to the debt monitization scheme as discussed above), while UPS’ and FedEx’ are 53% and 32%. Why in the world anyone would grant crediblility to the comparisons of corporate cost profiles between a manual delivery service and the two largest cargo airlines in the world is beyond my comprehension. Why don’t they also point out that the cost of the cargo airline divisions of UPS and FedEx are presumably around 47% and 68% while that of USPS is 0%?
I doubt any company will fill the void once UPS goes. Less competition means other services will rise prices thus making the market go stale. Looks like other companies have had it handed to them on a plate unfortunately.
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