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.