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The War on the Postal Service

We’ve all seen reports of the impending bankruptcy of the US Postal Service (USPS). How they need to stop Saturday home delivery, close post offices, and lay off 120,000 employees (18% of their workforce).

But what you haven’t heard is why this is happening. Well, you will hear that it is the fault of the Internet, that people are sending email rather than sending letters. But that is utter bullshit.

In fact, the three busiest years for the USPS, when the volume of mail was the highest in its history, were 2005, 2006, and 2007. What caused the volume of mail to drop after that was not the Internet, but the economy going south starting in 2008, brought on by the popping of Wall Street’s derivatives bubble. And over the last decade, the USPS has already shed 100,000 employees from attrition, so they should be able to deal with a reduction in the volume of mail.

Furthermore, the prices that the USPS can charge for mail are mandated by Congress, and since Congress doesn’t want them to compete against private companies like UPS and Fedex, what they are allowed to charge for packages is kept high while rates for first class mail (on which the USPS has a monopoly) are kept low. Rates for “bulk rate” junk mail are even lower. Reducing the amount of bulk rate mail actually saves the USPS money.

And the number of packages being mailed has been going up, due to people shopping on the Internet. At least until Amazon figures out a way to email that T-shirt you just ordered.

An statement in US News and World Report gives a clue to the real problem at the USPS:

Cash flow is so tight that unless Congress steps in, the postal service won’t be able to make a big payment due to its retiree healthcare plan at the end of September. That would be the equivalent of a default on its obligations.

The real culprit is the insane USPS retiree healthcare and pension plans! In 2006, Congress passed the Postal Accountability Enhancement Act (PAEA), which requires the USPS to fully fund retiree health care benefits 75 years in advance. They have to pay for health care benefits for future retirees who have not even been born yet.

No other government service, agency, corporation, or organization in the US has to do this, only the USPS. Every other entity uses a pay-as-you-go accounting practice. Instead the USPS has to cough up $5.5 billion every year and give it to the US Treasury to fund retirement packages in the distant future.

At the same time, the USPS has been required to overpay worker pension funds by an estimated $57 billion to $82 billion. If that money were available to fund other obligations through a return to normal accounting practices, the currently projected USPS deficit of $9 billion for 2011 would vanish.

So why is Congress trying to kill the USPS? Well, we’ve seen in Wisconsin what conservative politicians will do to kill public employee unions, and the postal union is one of the largest in the country. And as much as they would like to privatize the USPS they can’t because it is part of the constitution. So it is easier to destroy it.

Furthermore, the cuts they are proposing to the USPS will disproportionately hurt — you guessed it — the poor. Not just the rural poor, who depend on the USPS to deliver mail in remote areas private companies like UPS and Fedex won’t serve because they are not profitable enough, but also urban poor. It is no coincidence that of the 34 post offices the USPS is considering closing in New York City, 17 of them are inside the poorest Congressional district in America.

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15 Comments

  1. Arthanyel wrote:

    Political insanity. Undoubtably the Republican House will use this excuse to force the USPS to restructure their health care and pension systems (ala all the Republican governors attacking those same issues) and lay off workers which will hurt the economy in a subtle way so they can blame Obama for that too.

    Why don’t Democrats have the discipline to hammer home their points as well as the Republicans? It’s clear they have PLENTY of ammunition to fire.

    Thursday, September 15, 2011 at 9:40 am | Permalink
  2. PatriotSGT wrote:

    By the wway that bills sponsor was a Republican and of the 3 co-sponsors 2 were Dems, most notably Henry Waxmen from California. That bill also relieved the USPS from the obligation to pay 27 billion in retiree benefits contributed to its members military service.

    “It is no coincidence that of the 34 post offices the USPS is considering closing in New York City, 17 of them are inside the poorest Congressional district in America.”

    Where’s your proof that this is fact. I’m sure it could not have been based on any business analysis of viability, becuase that wouldn’t be so political.
    Even so, is this not a poster child example of why congress or the government should not be trying to run any business?

    Thursday, September 15, 2011 at 9:43 am | Permalink
  3. TENTHIRTYTWO wrote:

    It isn’t trying to run a business. It is trying to provide a service. When you send a letter, do you go to the post office for a few cents? Or do you send it via private business for upwards of several dollars?

    “Government doesn’t work. You might think otherwise, but when we make it not work, you’ll understand that it doesn’t work.”

    Thursday, September 15, 2011 at 10:05 am | Permalink
  4. PatriotSGT wrote:

    I get that and I’m for the Post Office. Actually, I do my bill paying electronically for the most part. Letters I now send via email. Packages it depends on the weight/size/contents as to whether I use USPS or another carrier (I cost it out). At least the USPS workers will get their retirement. :)

    But here’s the thing, the USPS is touted as a shining example of a no cost government service. Specifically, one that has not adapted to the change in times, is an aging dinosaur and headed down the road of another taxpayer bailout. They need to make changes, things cannot stay the same. Cut out saturday delivery, close slower offices. Cut out any costly bulk mail, please (or raise the price). Change is the constant, not status quo.

    Thursday, September 15, 2011 at 10:39 am | Permalink
  5. Dan wrote:

    Not everyone has the internet, the point was also made that it is, by design, not competitive as to not compete with the private sector, again, it seems, we’re back to campaign finance.

    Thursday, September 15, 2011 at 10:56 am | Permalink
  6. starluna wrote:

    IK – thank you for explaining the underlying reasons for USPS’s debt situation. As usual, it’s Congress’ fault. While I do think it is a good idea to pay into pension and retiree health benefits in advance, 75 years is a bit extreme. I would need to know more about their retirement rules before even venturing a guess about what would be the best way to ensure benefits are paid for. But it does seem like Congress has set it up to fail.

    PatriotSgt – it seems like USPS would be a no-cost service if the kinds of rules that IK describes had not been imposed upon the service. I’m not clear on what your specific criticism is of the USPS. What hasn’t it adapted to that would make you call it an “aging dinosaur”?

    I can get stamps online, through the mail, and even at some ATMs. I can even pay for stamps online, print out the mailing label and tape it to my parcel. I can buy packaging materials online or at my local post office. I can request parcel pick up at my home, pay for it online, and get a chance to chat with my postman. I can even have stamps made with my own picture on it. I can request that parcels being sent to me be diverted to an alternate address. I can pick it parcels up by walking to the local USPS office (neither UPS nor FedEx will do this – I’ve asked and they don’t have warehouses in places with public transit access). What do UPS or FedEx do better or more “modern” that the USPS does not?

    Thursday, September 15, 2011 at 1:06 pm | Permalink
  7. PatriotSGT wrote:

    I agree actually with IK that congress has imposed rulle and regulation on it that put it into the mess it’s in currently. But, I don’t believe congress and the insinuation that reps in congress are intentiionally sending it south. Its clearly been bi-partisan meddling that has brought it to this point.

    Like any money making enterprise profit or non, they have to make business decisions. The junk mail rule for one should be adjusted, also do we really need Saturday delivery? The service itself works wonderfully and it always amazes me how quickly they can get a letter or package from point A to B.

    I just don’t think there is any link to politics and a purposeful targeting of poor citizens.

    Thursday, September 15, 2011 at 1:54 pm | Permalink
  8. TENTHIRTYTWO wrote:

    So the service works wonderfully, and it amazes you how fast it runs. And it is also a poster child of why the government should not be doing it??

    Thursday, September 15, 2011 at 2:14 pm | Permalink
  9. PatriotSGT wrote:

    Come on, don’t become a Tea Partier and be defiant to anything someone else says now. :) The postal employees and system work fine, it’s broke however because of congressional meddling. They need to raise rates on certain types of mail, but can’t. They need to restructure how their pension system is funded, but aren’t allowed. It’s really not that hard to understand, is it?

    Thursday, September 15, 2011 at 3:07 pm | Permalink
  10. NotJunkMail wrote:

    “Rates for “bulk rate” junk mail are even lower. Reducing the amount of bulk rate mail actually saves the USPS money.”
    Bullshit. Rates are lower because of the work share that mail production companies bear. For $.44 the USPS will pick up a hand addressed envelope at your door and deliver it, in 3 days, across the country. In order to get bulk mail rates, mailers must print a barcode, present the mail to a central processing facility, withstand stringent verification that the mail is prepped/sorted correctly, and meet minimum number of pieces requirement – and then wait 5-10 days for it to be delivered. Without bulk mail, actually known as Standard Mail, the USPS would be losing it’s ass even quicker than it is now.

    Thursday, September 15, 2011 at 3:43 pm | Permalink
  11. geepop wrote:

    it is true we don’t make much on “junk” mail. but we do make some and the volume of it does make it more profitable than first class. raise the price much and you won’t be clipping coupons on sunday.

    Friday, September 16, 2011 at 5:56 am | Permalink
  12. ZIP-ZERO-NADA wrote:

    I for one would like to see the end of junk mail. As much as I hate spam, the crap in the mailbox at the end of my driveway is worse, and it goes straight to the recycling bin without even going inside, not to mention the poor innocent trees being killed.

    I do like my mailman though – he’s a very cool guy. Maybe he’ll add me to his entourage when he retires.

    Friday, September 16, 2011 at 7:52 am | Permalink
  13. Michael wrote:

    Patriotsgt, that was some fantastic back-peddling you just did. You called USPS a “no cost government service…that has not adapted to the change in times” and “an aging dinosaur,” then you got called on it and immediately sung the praises of USPS. 1032 and Starluna weren’t being defiant, they just called you out for your disparaging comments in post 4 where you implied that USPS was a piece of crap compared to the modern services of UPS and FedEx.

    As for Saturday service, why should USPS cut it out? Both FedEx and UPS deliver on Saturdays.

    Saturday, September 17, 2011 at 8:22 pm | Permalink
  14. NotJunkMail wrote:

    Fed-Ex and UPS charge a substantial premium for Saturday delivery – another apples to oranges comparison. There can be NO true comparison between the USPS and those others – for the most part, they don’t do even remotely the same thing

    Wednesday, September 21, 2011 at 1:42 pm | Permalink
  15. sarah wrote:

    Hello, I am researching information on the Postal Service and came across your website.
    They are considering closing our processing facility in Stockton, CA and consolidating it with Sacramento ( almost an hour from here) The processing facility operates out of San Joaquin County ( 650,000 people) but is one of the poorest in the county. Stockton, was #1 on forbes most miserable cities. We are ground zero for the housing crisis. As a samplee a home of 180,000 could now be worth 65,000. – just thought id share.

    Sunday, December 4, 2011 at 1:55 pm | Permalink