Democrats and U.S. Postal Service officials are seeking a $75 billion bailout from taxpayers. Bad idea. They are trying to use the coronavirus to hide the bailout. But the USPS did not wake up yesterday and find itself in need of a $75 billion bailout.
Define the problem
USPS has unsustainable wage and benefit costs. That’s a problem and has been for a long time. It also has unaffordable and inefficient service requirements in light of declining demand. That too is not new and it is not due to coronavirus.
This is not to say reasons for the Postal Service’s financial troubles are not real. It is also not saying that the financial troubles are not real. But USPS needs something other than a bailout. In recent weeks, the Postal Service has seen a reduction in first-class mail revenue. At the same time it has seen an increase in operational costs.
It’s too soon to tell the full extent of the losses this year. It is a good bet however they pale in comparison to the operational losses the Postal Service has racked up over many years. In fiscal 2019 when the overall economy was thriving USPS lost $8.8 billion. It has had an operating deficit for 13 years in a row. All of this predates the new coronavirus.
Forget the bailout… fix the underlying problem
During the debate over the $2.3 trillion CARES Act, House Democrats to toss USPS bailout into the bill. The Democrats sought $25 billion in subsidy, $11 billion in loan forgiveness, and a $15 billion loan for USPS. The final CARES Act legislation provided USPS with a $10 billion loan. That was throwing good money after bad. There are still calls for a much larger handout.
The financial vulnerability of the Postal Service is not new. The Government Accountability Office(GAO) cites USPS finances as a worsening “high-risk”. This has been the case since 2009. In truth, USPS has been a burden on the government since common carrier rights were granted in the 1960’s.
This GAO assessment was based on basic math and obvious trends. First-class mail volume declined due to the proliferation of electronic communications. At the same time USPS labor costs continue to escalate. That means too many people and too high a wage and benefit scale.
Wages and benefits drive operating costs
More than three-quarters of USPS expenses are for employee compensation. The salaries go for mail deliverers, sorters, and post office clerks. Other compensation includes health and pension benefits for retirees. The importance of that final component cannot be overstated. A Treasury Department report from December 2018 showed that USPS faces more than $120 billion in unfunded liabilities for retiree benefits.
Law requires USPS to fund the expected future cost of retiree pension and health benefits. This is to prevent a future taxpayer bailout. The House took a vote to remove the prepayment requirement in February. The argument Democrats posed was it would improve immediate Postal Service finances. The truth is it would mask the organization’s liabilities and increase the financial risk for taxpayers.
Plans to address the issues exist…
The President’s most recent budget includes a USPS reform plan. The plan would save $91 billion over the next decade. Many aspects of the president’s postal reform are similar to other proposals. Heritage Foundation put out a plan in 2013. Part of the solution involves finding ways to potentially increase Postal Service revenue. The most important thing is to reduce costs.
Cost efficiencies for the Postal Service could include consolidating the number of post office locations. The plan would better fit in-person demand, changing delivery schedules to be in line with a lower volume of mail, and responsibly adjusting compensation levels. Congress has failed to act on these long-standing ideas. The reason is largely political. Legislators use post office naming rights as a way to curry favor with constituents. Dozens of laws every year do this.
Most importantly, the American Postal Workers Union (APWU) is vocal. It supports the broken status quo. Too many members of Congress are beholden to organized labor. They place the demands of unions above consideration of what’s fair to taxpaying constituents.
Special interests are blocking the fix for the root cause…
Make no mistake, however. The USPS is in trouble. The solution is not handing it a blank check. We should not enable larger and larger losses of public money. That puts a Band-Aid on a gushing wound. This matter will not go away by itself. Congress should not capitulate to opportunistic demands and catastrophic rhetoric. Congress should work on a plan to lift unsustainable mandates on the Postal Service. It should ensure taxpayers are protected from unfunded liabilities.
What have our Congressional delegation done to make things better?
Congress has ignored the systemic problems hamstringing the Postal Service for too long. Lawmakers should not put taxpayers on the hook for tens of billions of dollars in bailouts. For temporarily putting off politically inconvenient reforms it is too high a price to pay. USPS needs real, structural reforms. Shaheen, Kuster and Pappas where are you? Stop hiding on issues that matter and will last. There are important things and there are urgent things. Do you know the difference? Your voting records say no.