Post Office Financial Woes

US Postal ServiceIt’s a little after the meaningless default but I wanted to talk today about the financial situation the U.S. Post Office finds itself in and, more importantly, the political dividing line that it has created.

Basically, the Post Office owes the Federal Government $5.5 billion and they are unable to pay it. What’s important to understand is that this is not money they owe to their employees for work, or money they owe contractors for building, repairing, and working on existing post offices. This is money they owe the federal government. That in itself should cause you to raise a few questions.

Why does the Post Office owe the federal government anything?

First lets examine what they do. They employ half a million people (including many veterans), deliver over 600 million pieces of mail to over 140 million places. They operate 31,000 post offices and over 218,000 vehicles. Suffice it to say that it’s a big operation. These operations are funded by stamps. People pay to have packages and letters delivered. The Post Office is not funded by the Federal Government or taxes collected by that entity.

Now, why does the Post Office owe the Federal Government? We have to put on our time travel hats back to the mid 1980’s in order to fully understand this situation. After the Carter presidency the United States was in a recession and the Reagan administration’s solution to this was stimulus. We spent money and this in turn raised our national debt from $800 billion to $2.4 trillion in eight years. This dramatic increase caused a great deal of concern, well-deserved I might add. In order to mask this precipitous increase the Federal Government instructed the Post Office to start to pre-pay their pension rather than deducting salary from worker’s checks.

As the debt rose the amount of pre-pay increased until it reached $115 million a week. This represents a 75 year in-advance pension payment. 75 years. That’s not a typo. The post office fully funds retirement for employees who won’t be born for 3 years, that is, if they work until they’re 72. All this to mask the true debt.

The pension payment was based on the growing employment of the Post Office and the growing U.S. population which seemed to go hand in hand. But then something important happened. Email.

The ever-increasing prevalence of email and instant messaging has reduced the Post Office’s workload, and revenue, by about 30%. They responded by eliminating many jobs and increasing productivity. Now, we have a collision here. The Post Office pays pension on an estimate of an ever-growing workforce while shrinking their actual workforce. So, as of now the Post Office has overpaid their ridiculous 75 year pension payments by $75 billion. So, not only is their pension payment insane to begin with but they’ve overpaid that madness by $75 billion and now they are going to default on a $5.5 billion payment to the entity that owes them at least $75 billion. How does that make any sense?

Meanwhile the leaders of the Post Office have repeatedly asked Congress for permission to close post offices and reduce delivery days only to be denied. They are denied for three reasons all of which should anger every small government, libertarian out there. The Post Offices are generally named after Congress members. The Post Offices serve as a place to reward loyalists with a job of Postmaster. And most insidiously, if the Post Office is forced to borrow money from the Treasury rather than work on a break even basis the banking industry makes huge amounts of money on interest on those loans. Yep. Greed, paying off those who finance the campaigns, corruption, graft, massive egos, you name it and it’s part of the problem.

Now, despite the loss in first class mail revenue the post office has offset this loss with increases in package delivery for small businesses engendered by internet shopping.

If the Post Office was allowed to close offices, reduce delivery days, had not been robbed of $100s of billions, and had not been forced to take out loans and pay them back with interest they would be more than solvent. They would likely be profitable. Even if they were not they would have a nest-egg to pay off their debt as they restructured.

My big question is why has the fiscal woes of the Post Office split the electorate with Democrats largely on the side of the Post Office and Republicans against it? It doesn’t make sense to me. The Post Office is not an example of big, wasteful government. It was explicitly authorized by the Founding Fathers in the Constitution of the United States. If it had just been allowed to do its job without Big Government interference it would be delivering mail to your house and making a profit all the time, or at least breaking even.

To me the demise of the Post Office should be a rallying cry to all Americans. It was interference from the federal level that ruined it, a Republican talking point, and it was a shining example of government working well to the benefit of all citizens, a Democratic talking point.

Now, it lies in ruins because of greed.

Don’t write your Congress person. Don’t protest at the mall. Don’t spout off to all your friends. Vote for someone who offers realistic solutions to the issue. That’s how we change things.

Tom Liberman

2 thoughts on “Post Office Financial Woes

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