Mail Call

You are required to deliver the nation’s mail, but absent extraordinary circumstances, you cannot raise rates beyond the rate of inflation, you have to pre-fund your retiree benefits and you have a pile of collective bargaining agreements that require all kinds of benefits for postal employees. Welcome to that governmental corporation, the United States Postal Service. Emails have preempted much of the profitable first class mail traffic (which has fallen 2% just in the last quarter!), and the USPS seems to be mired in the delivery of snail-mail spam – third class crap that most of us use to enhance the local landfill. Companies like UPS and FedEx have also hurt the Postal Service’s profits by taking away a huge amount of that lucrative overnight mail and bulk-item shipping.

Over the last few years, the USPS has cut about a quarter of its staff, but it is still lumbering under a set of outdated rules and burdensome Congressional mandates… with insufficient access to cash or the ability to raise rates high enough to cover actual costs. The Postal Service’s efforts have been insufficient to stem the hemorrhaging of red ink. They expect to post an $8.3 billion loss for the fiscal year ending this September 30^th. Under current rules, the USPS would also have to pre-fund $5.4 billion in retirement benefits and cover a further $1.2 billion to reimburse the Dept. of Labor for worker’s compensation insurance at that time. The Postmaster General, Patrick Donohoe, is telling Congress that unless they come up with additional funding sources, the USPS simply lacks the ability to pay that $5.4 billion, and it will default.

Donohoe testified at a Congressional hearing: “The Postal Service is committed to satisfying our core mission — delivering America’s mail… That is an imperative. To do this, we must pay our employees and our suppliers. But it must be understood that, absent legislative action, the Postal Service is certain to default on these substantial payments. This is clearly not the outcome we would choose, but without congressional involvement, the result is unavoidable.” Simply put, Donohoe is telling us that the USPS is incapable of meeting its statutory obligations… it needs new statutes and new funding to continue operation. The USPS is going broke. “USPS is on the verge of exhausting a $15 billion line of credit with the U.S. Treasury, with only $2.5 billion left to use, Donahoe said. The remaining funds would cover only payroll obligations and supplier payments at the end of the fiscal year, according to aides who were not authorized to speak publicly.” Washington Post, May 17^th.

In addition to the above competitive factors and the shift to electronic communications, the USPS is further burdened by legal requirements that it pre-fund retirement and health benefits, which has resulted in the anomaly that this virtually bankrupt structure has over-funded its future obligations by significant amounts: “Donahoe urged senators to quickly pass a bill reintroduced Tuesday by Sen. Thomas R. Carper (D-Del.) that would permit USPS to use billions of dollars it has overpaid to the federal worker pension funds in the last 30 years to make the $5.4 billion payments…The Postal Regulatory Commission and the Postal Service Inspector General have estimated that USPS has over-funded the Civil Service Retirement System by $50 billion to $75 billion since the 1970s.” The Post. Think you could live without third class mail? Think you might accept a bigger rate hike on packages and first class mail? Believe that the Postal Service should be sold into the private sector and simply operate under true market conditions? Can you imagine a country without a governmental postal system?

I’m Peter Dekom, and I guess we are watching the Postal Service…er…. go postal!