The US Postal Service is losing billions of dollars per year. It’s been said that their business model must be updated. According to critics, these losses must be addressed by either increasing the Postal Service’s efficiency, cutting costs, or privatizing it. But before we go too far down this road, we need to stop and question some of the assumptions that are being made about the USPS.
For starters the post office is still an agency of the US government, and one of the few agencies authorized by the US Constitution. And while the Postal Service is not monopoly it is important because it is obligated to serve all Americans, regardless of where they live, at uniform price and quality, while at the same time competing against private package delivery services, such as UPS and FedEx who do not face the same stringent requirements.
We’re familiar with government services such as national parks and defense. Notice that while each of these services is used and valued by the public only the US Postal Service is expected to be self-supporting. The defense department generates no revenue. The National Park Service does generate revenue through park admission and other fees, but these fees in no way cover the entire park service’s budget. Using the standards applied to the Postal Service, the Department of Defense and the National Park Service are losing billions of dollars each year.
The 2006, Bush administration’s postal reform law required the US Postal Service to pre fund its future retirees’ health benefits 75 years into the future at a cost of $5.6 billion annually. No other government agency is required to pre fund future health care expenditures. In 2007, when the Office of Personnel Management (OPM) transferred the Postal Service’s overpayment in the Civil Service Retirement System pension fund to the new Postal Service Retiree Health Benefit Fund, OPM grossly undervalued the size of the Postal Service’s surplus by as much as $75 billion. If these funds were returned to the postal retirees’ health fund, they would fully fund the Postal Service’s 75-year liability for future retiree health benefits, and, the $5.6 billion in pre funding requirements would not be necessary. Over the past 11 years, this unreasonable mandate has accounted for 88.3% of the Postal Service’s $65 billion in reported losses, over the past five years (2013-2017), in the aftermath of the Great Recession, prefunding accounts for 100% of the agency’s losses.
In 2017, President Donald Trump criticized the postal service’s relationship with Amazon. In a post on Twitter he stated, “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon so little to deliver their packages, making Amazon richer and the Post Office poorer?” But according to a New York Times, parcel shipping is a growth area for the Postal Service and not a factor in the agency’s overall lack of profitability.
As we move into 2020, the USPS needs an infusion of money, but Trump threatened to veto the $2 trillion Coronavirus Aid and Economic Security Act, if the legislation contained any money directed to bail out the USPS. According to a senior Trump administration official, “The President was not going to sign the bill if money for the Postal Service was in it.”
In response to Trump’s threat, Senator’s Gary Peters (D-Michigan) and Ron Johnson (R-Wisconsin) added a last-minute $10 billion Treasury Department loan to the Cares Act to keep the agency on firmer ground through the spring of 2020. Lawmakers originally agreed to a $13 billion direct grant the Postal Service would not have to repay but that effort was blocked by Treasury Secretary Steven Mnuchin who warned such a move could blow up the relief bill.
Without the loan, which awaits approval by the Treasury Department, the Postal Service would be financially illiquid by September 30. Advocates for the Postal Service worry the agency is in a vulnerable position. As its main funding source declines during the recession, the Postal Service could be seen as ripe for a make over as conservatives have long talked about privatizing the mail delivery in the United States.
The Postal Service projects that it will lose $2 billion each month through the coming Coronavirus recession while at the same time maintaining the nationwide service of delivering essential mail and parcels, such as prescriptions, food and household necessities. In the end we must decide if we’re going to allow the Trump administration to damage the USPS (an agency believes that “neither rain, nor sleet, nor COVID -19 keeps them from their appointed rounds”)
beyond repair all in the name of “profit standard” that is unreasonable and applies to no other government agency.
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