The Right Wing’s Assault on the Post Office – Smashing the Myth That It’s in Financial Trouble

Yves here. we’ve run posts on the issue of the manufactured Post Office budget “crisis,” but this bogus idea has been touted so widely that it apparently needs to be said, again and again, that the Post Office is more than able to pay for itself.

By Zaid Jilani, an AlterNet staff writer who you can follow at @zaidjilani on Twitter. Originally published at Alternet

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.
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.”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.

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 inl 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.

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  1. NCCaniac42

    Heard this morning, FedEx and UPS are increasing their ‘fuel surcharge’ even though their fuel costs have gone down 35% over the last few months. The companies are doing this before the ‘holiday shipping season’ because they are delivering to more residential addresses. THIS IS WHY YOU SHOULD USE THE US POSTAL SERVICE for all your shipping needs.

  2. Sam Kanu

    “..:Congress has a simple path to eliminating the worst fiscal problem plaguing the post office: end the burdensome prefunding requirements imposed in 2006…”

    Sorry, but in my eyes this is completely wrong.

    The proper funding of pension plans is not a burden – it’s a necessity

    Workers in this country have very little savings to count on. A major element in the development of a precarious workforce in this country is the stripping away of any element of certainty in retirements savings. It’s not just about 15 dollars an or temp jobs. It’s also about the fright of being homeless on the street at age 65.

    Anyone who is campaigning on this issue should be putting pressure on congress to rule that not only must the USPS refund their pension plans, but also so should their competitors in that sector: UPS, DHL, Fedex and so on.

    Then from there use that as a platform to get pre-funded pensions back on the agenda across ALL the private sector.

    By doing so, you also remove a key element of the “self-funding” of venture capital raiders. Part of their MO is to come in, raid workers pensions to pay for the debt they load on the target companies, gold-plate the executive pensions – and then demand that workers agree to cut salaries in order to make ends meet.

    So on the contrary no – hurrah for pre-funded pensions at the post office. Now pressure on congress to make what is good for the goose, good for the gander.

    Note by the way their pensions in congress are most certainly pre-funded and gold plated.

    1. Left in Wisconsin

      1. But the USPS is the federal government. What does pre-funding even mean? It’s like pre-funding Social Security. It’s all theater.
      2. Single-company defined benefit pension plans are going the way of the dodo. Congress will never get to parts 2,3, and 4 of your plan.

      1. jrs

        I suppose in theory such a proposal is one way to solve the problem though and I kind of like that businesses have to pony up! And I assume under such a regime all businesses would be forced to have pensions. Though the more obvious way is expand social security. But prefunding pensions in just one company (the post office) puts them at a ridiculous disadvantage and it’s not a step to anything but the destruction of the post office.

    2. flora

      Prefunded for 75 years in advance? 75 years? For workers not born yet? What other pension plan has that requirement? Prefund at a reasonable timeline, not a bogus 75 year schedule that was a setup to lead to privatization.

      1. flora

        From Salon, March 2012:

        “But even so, in the first quarter of this fiscal year, the post office would have made an operational profit, if not for a 75-year healthcare “pre-funding” mandate that applies to no other public or private institution in the United States.

        “Warren Gunnels, aide to Sen. Bernie Sanders, calls that mandate “the poison pill that has hammered the Postal Service … over 80 percent of the Postal Service deficit since that was enacted was entirely due to the pre-funding requirement.” ”

    3. Vatch

      The requirement isn’t that the pensions are to be prefunded. The requirement is that health plans for retirees be prefunded for generations in advance, and that requirement is designed to create the illusion of financial problems.

      1. Vatch

        Previous Naked Capitalism articles pointed me (directly or indirectly – I can’t remember which) to this government document:

        U.S. Postal Service Office of Inspector General
        Risk Analysis Research Center
        Report Number: RARC-WP-10-001

        January 20, 2010

        Here is a crucial quote from the document:

        The following paper demonstrates that the current system of funding the Postal
        Service’s Civil Service Retirement System pension responsibility is inequitable and has
        resulted in the Postal Service overpaying $75 billion to the pension fund. If this amount
        were returned to the Postal Service, it would create a pension surplus that could be
        transferred to the Postal Service’s health benefits fund. The transferred amount would
        fully meet all of the Postal Service’s accrued retiree health care liabilities and eliminate
        the need for the required annual payments of more than $5 billion. Also, the health
        benefits fund could immediately start meeting its intended purpose — paying the annual
        payment for current retirees. This payment was $2 billion in 2009.

        For the third time, the Postal Service has been overcharged for its pension obligations.
        In 2002 it was determined the Postal Service would overfund CSRS by $78 billion.
        Legislation in 2003 corrected this overfunding. Then it was determined the Postal
        Service was overcharged $27 billion for CSRS military service credits. In 2006 these
        funds were returned to the Postal Service by Congress and the surplus was used to
        fund retiree health care liabilities.

        Ralph Nader summarizes the salient point:

        A January 2010 report reveals that from 1972 to 2009, the U.S. Postal Service overpaid the Civil Service Retirement System (CSRS) by about $75 billion and proposes that this be paid back to the Postal Service immediately. On top of this, an August 2010 report projected that the USPS had overpaid the Federal Employees Retirement System (FERS) by about $6.8 billion by the end of FY 2009. Combined, these overpayments amount to about $82 billion.

        Basically, the Postal Service is in fantastic financial shape, and the government owes the Postal Service billions of dollars.

    4. trinity river

      I do agree that the private sector should have the same rules. But the 75 year prefunding rule is more than any organization can manage and that would be abundantly clear once if we leveled the playing field. It is a step too far in our austerity run environment for people to understand that the federal government does not need to prefund pensions. Yet it would uncover the hypocrisy and real purposes of those trying to privatize the post office and, to boot, stabilize the pensions in this country.

  3. paulmeli

    “Workers in this country have very little savings to count on”

    Maybe that’s because they don’t have enough income to be able to save. Workers need more income.

    Pre-funding pensions will end up lowering worker’s spendable income (demand) while at the same time increasing a business’ operating expense.

    Do you think businesses will just eat the difference and not take it out of their employee’s pay?

    This looks like disaster to me at the aggregate level. A better solution is to increase SS benefits without increasing FICA taxes.

  4. Rhondda

    Nearly ten years of this ridiculousness and yet I haven’t heard hardly any cries from Dems or seen any movement toward repeal. Like a public option, this could’ve been taken care of during the Dem majority. But no. Tells you everything you need to know.

  5. curlydan

    The following paragraph needs to go after “It goes” and before “That year”…

    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.

  6. TarheelDem

    The proper policy is to bring the US Postal Service back into the federal government as an independent agency, which was its status before Richard Nixon was out to bust the postal employees unions.

    The pension is a separate matter. To deal with it, require all legal entities with pension plans to put their pension plans on the same basis. Then listen for who shrieks the loudest.

    Then, out for federal appropriations, fund the amount that should have been there for a defined benefit pension plan for all current and former postal employees and pay them a reasonable pension. Advisors have gotten in the habit of thinking that pension plans are slush funds or even personal piggy banks.

    Do what’s right for the employees. It’ll wind up cheaper in the long run that all the Rube Goldberg systems that are really ripoff schemes.

    1. Yves Smith Post author

      Yes, and it’s ridiculous When I lived in Oz, the post offices all had basic office supplies on sale: copy paper, envelopes of various sizes, tape, pens, backup disks, and so on. All pleasantly displayed. The bigger post offices would sell a limited line of note cards and near Christmas, Christmas cards. It was a great time saver to be able to snag stuff I needed on those occasions when I had to make a trip to the Post Office. And in a lot of neighborhoods, the post office was the local stationery store.

  7. Elliot

    My business does a lot of mail order, and the USPS is always cheaper, hugely reliable, and super convenient for me as a shipper; so I can save customers money and me headaches. The other services charge way more, are rigid and obfuscatory on rates (and tack on surcharges to boost their take, I predicted to a friend last week they would call it something holiday related, since fuel prices are dropping), and of course, would kill off letter delivery in a heartbeat if they got their mitts on it.

    Plus of course we need mail delivery, cheap letter delivery, to keep communication flowing.. it’s the paper version of net neutrality.

  8. craazyman

    Personally I find paying bills by check and US mail is so much easier than online. Dealing with passwords, typing forms, navigating web pages, redoing it all after typos make me have to start over. I mean man oh man.

    Once it took me 15 minutes to pay a utility bill online. The cable bill, that was half an hour. I think it took me 7 separate attempts before it worked. It might have been 45 minutes of typing and moving a mouse around while sitting in a chair. That’s efficiency?

    Now I think I’m going back to checks for everything. Paypal won’t work for me anymore. They say I need to “confirm my identity” with them by sending a copy of a utility bill or some idiotic gesture that would take me at least 35 minutes to figure out. They never even met me the first time so I’m not sure what there is to confirm. It’s complicated. The Post Office is never complicated. Even standing in line to buy stamps, that’ about as complicated as it gets.
    its true sometimes that takes 35 minute, but you can meet some wierd dudes in the line and at the counter too! weird dudes that you just think “holy smokes, this is one weird dude”. And sometimes there’s very hot women in line. And they look at you seeking empathy for the pain of waiting, like they can’t believe they have to endure thi sort of torpid and sullen personal affrontery. If you’re not a klod, you can take advantage of the situation. You can’t do that trying to pay bills over the internet.

  9. RBHoughton

    There has been at least a century’s clandestine warfare between post offices under political control and central banks under capitalist control. As a rule the banks have been winning hands down due to bribery or stupidity of Treasury officials.

    One of the great blows for freedom and democracy that a people can make is to demand the provision and continuance intact of a Post Office with its banking service. It can lead to municipal banking under the control of the authorising town(s) and to trusts and savings banks under their co-operative owners.

    We have had this in the past until the money usurer raises his head and, acting through the Treasury, requires the alleged infrigement of central bank monopoly be ended.

    Enough already. When will we stop these awful people playing with the value of the means of exchange. Do we need a guillotine in front of the Fed?

  10. Bearpaw

    Politicians who get elected on a stance of “government is the problem, not the solution” have a strong incentive to make sure this is true, even if they have to actively sabotage any government solutions.

  11. blert

    If you look further under the hood, you’ll discover that ALL of the USPS’ losses are concentrated in REPUBLICAN states in the heartland… because it’s slowly being depopulated.

    The USPS is denied the ability to shutter scarcely used zip codes — as these are often nothing more than retirement packages for loyal Republican campaign workers.

    We’re describing Post Offices that handle as little as twenty pieces of mail per day.

    The GOP in 2006 wanted to establish a retirement stash that could not be snatched back by some future Democrat president.

    The way this is playing out, Congress is lending money to the USPS… which then invests the proceeds into US Treasury securities — the very same ones that Congress issued to find the money to fund the short fall. Cute.

    The key thing is that this retirement chest can’t be grabbed back.

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