The Right Wing's Assault on the Post Office - Smashing the Myth That It's in Financial Trouble
The Washington Post recently published an article asking if the post office should “be sold to save it.” It begins with an explanation of what the author sees as an unsustainable postal service:
The U.S. Postal Service, which has been losing customers for almost a decade, is still struggling to right itself. Everyone understands its basic problem. The electronic age has pushed first-class mail into an unstoppable decline. To stay afloat, the post office needs to get its costs under control, by closing post offices, eliminating Saturday delivery, downsizing its workforce. To boost revenue, it could offer banking services and sell lots of stuff besides stamps.
It goes on to advocate for privatizing the agency by selling off parts of it to bidders who could then operate it independently.
The problem with the Post's argument starts in its thesis: that the post office is in some sort of deep fiscal hole of its own making – a result of being left behind in the Internet Age and a shrinking consumer base. The truth is that almost all of the postal service's losses can be traced back to a single change in the law made by the Republican Congress in 2006.
That year, the Congress passed the Postal Accountability and Enhancement Act of 2006 (PAEA). Under the terms of PAEA, the USPS was forced to “prefund its future health care benefit payments to retirees for the next 75 years in an astonishing ten-year time span” – meaning that it had to put aside billions of dollars to pay for the health benefits of employees it hasn't even hired yet, something that “no other government or private corporation is required to do.”
As consumer advocate Ralph Nader noted in 2011, if “the prepayments required under PAEA were never enacted into law, the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion.”
Remarkably, even one of the main sponsors of the 2006 legislation now agrees the pre-funding requirement was a bad idea. In 2014, a writer for the Roanoke Times reached out to former congressman Tom Davis, a Virginia Republican who today works for the accounting and consulting giant Deloitte. Though Davis agreed that the requirement was unwise, he said it was “the cost of getting the bill through,” noting that the Bush administration wanted to use the revenue to help balance the budget (note that the U.S. Postal Service doesn't actually use taxpayer dollars but does have implicit subsidies such as borrowing at a lower rate).
That's why suggestions like selling off the postal service or ending Saturday service are unnecessary. They fulfill the ideological agenda of those who want to undermine one of America's oldest public institutions, but they don't get at the heart of the actual budgetary problem. As the Office of the Inspector General for the service writes, other than this onerous requirement, it is basically fine:
First, let’s look at current funding levels. The Postal Service has set-aside cash totals of more than $335 billion for its pensions and retiree healthcare, exceeding 83 percent of estimated future payouts. Its pension plans are nearly completely funded and its retiree healthcare liability is 50 percent funded — much better than the rest of the federal government. But getting to this well-funded position has been painful. The Postal Service’s $15 billion debt is a direct result of the mandate that it must pay about $5.6 billion a year for 10 years to prefund the retiree healthcare plan. This requirement has deprived the Postal Service of the opportunity to invest in capital projects and research and development.
Congress has a simple path to eliminating the worst fiscal problem plaguing the post office: end the burdensome prefunding requirements imposed in 2006. In 2011, 194 members of Congress sponsored legislation to do just that. Four years later, passing the bill is long overdue, especially in light of efforts to use this manufactured crisis to sell off one of America's oldest public institutions altogether.