February 01, 2013 by Justin Roczniak
The U.S. Postal Service raised the price of a first-class stamp Jan. 27 by a penny to a full 46 cents to increase revenues and offset an increasingly large deficit in the USPS budget. Postal volume has dropped from its high delivery rate of 213 billion parcels per year to 140 billion parcels. Needless to say, the volume of mail being delivered is decreasing rapidly, and the postal service can’t survive without the possibility of downsizing.
But the postal service has already downsized. In 1990, when mail volume was similar to now, the postal service employed 825,000 people. Today, that workforce has declined to 425,000 people while handling the same amount of mail. Meanwhile, distribution centers have been closed and consolidated, delivery hours have been reduced, sorting systems have been upgraded to be more efficient and cheaper, and the USPS is now even considering ending Saturday delivery. Yet the post office is still losing money to the tune of $15 million per day. How can this possibly be?
One significant factor in the post office’s financial insolvency is its pension plan. The Republican Party, of course, frequently argues that “public employee pensions are ruining America’s finances,” but in this case it’s actually true.
In 2006 the Postal Accountability and Enhancement Act was passed. Along with several reforms to postal regulations, Congress mandated that USPS dump $5.5 billion per year into an employee retirement health benefits fund for the next 10 years, to fund health benefits for employees for the next 75 years. The USPS is also not allowed to raise postal rates to cover the cost of the health benefits fund (a 15-cent increase in the price of a first-class stamp would easily cover the contribution) and is no longer allowed to cover postal debts using end-of-year surpluses; all that money has to go into the health benefits fund.
The USPS has now paid nearly $46 billion into this retirement health benefits fund, which will fund benefits of employees who haven’t even been born yet. They are $8.5 billion in debt but have a $6.9 billion yearly surplus in the benefits fund, which they are not allowed to touch. The money is there — it just can’t be used.
Why would Congress write such an obligation into law? The pension fund was ostensibly created to avoid future financial insolvency from future health benefit payouts, but it is important to remember that the USPS was completely financially solvent and experienced no problems paying health benefits until 2006. The act has, in an attempt to avoid future insolvency, caused immediate and extreme insolvency now. Our elected officials surely cannot be passing legislature that blindsighted, right?
The real reason for passing the pension obligation could be more nefarious than providing for the future at the expense of the present — it is a move to kill the USPS and hand its services over to private companies.
Look at it this way: Having deliberately crippled the finances of the USPS, Congress can say, “Well, the post office is insolvent because of the incompetence of government. Look at how private industry is able to manage an effective parcel delivery system! Let’s give the USPS to FedEx/UPS/DHL/Two Guys and a Truck Moving Co./some other company that donated a lot of money to my campaign!” and then give lucrative postal routes to said company that donated a lot of money to their campaign.
It could also be a move to neutralize political opponents such as the AFL-CIO by targeting smaller affiliated unions like the American Postal Workers Union, which comprises around 425,000 of the 11 million AFL-CIO members. If the USPS is eliminated or sold, the APWU goes down the drain along with a significant percentage of the AFL-CIO’s membership and political clout.
The APWU has actively campaigned against the PAEA’s retirment health benefits obligation since the act was passed in 2006. Postal workers want to keep their health benefits, certainly, but to fund health benefits for workers who haven’t even been born yet is ridiculous, especially if it is going to bankrupt the USPS. When even the union is campaigning against the health benefit fund, you know something is seriously wrong somewhere.
Some may ask, “Well, while barring all this political mumbo-jumbo, why not just privatize the USPS altogether? Just give it over to UPS or FedEx or something. They’re pretty good at deliveries and make a bunch of money doing it.”
This may not prove to be a viable solution. FedEx and UPS both rely heavily on the USPS infrastructure for delivering packages. However, neither is likely to consider acquiring the Postal Service altogether, and for good reason: most USPS routes are not profitable. Charging a flat rate for all shipments, from ones that require a simple truck trip across town to ones that require multiple transfers from truck to ship to train to truck to airplane is, in real terms, simply bad business sense, but it is what we expect from the USPS and have expected for more than two centuries. The Postal Service has historically (since 1980, when USPS subsidies ended) been more than able to cover losses from unprofitable routes with money from extremely profitable high-volume routes.
Covering these losses with other routes becomes less attractive in the free marketplace. Publicly traded companies have an obligation to turn maximum profits for stockholders. This gives two options to whichever private company takes over the USPS:
1. Kill unprofitable routes entirely. This would require rural postal customers to drive out to the nearest city to get their mail.
2. Jack up rates on low-volume routes until they are profitable or cease to be needed (because no one can afford postage!)
If you lived in Deadhorse, Alaska, and wanted to send a letter to your friend in Toad Suck, Ark., you’d likely to have to pay a significant premium to send that letter compared to, say, someone sending a letter from Philadelphia to Los Angeles. Furthermore, you would likely lose daily delivery. The mail plane might come only once a week, if that. Daily low-volume shipments to the middle of nowhere will never make money, so private companies are unlikely to even try. Republican legislators would do well to make note of this because rural American voters and small businesses will be the most heavily affected by these inflated rates.
There is also the constitutional argument against privatizing the USPS: the Postal Clause gives Congress the explicit power “To establish Post Offices and post Roads.” Quite simply, putting the Postal Service outside the control of Congress is unconstitutional, and any privatization efforts would face serious challenges from the Supreme Court.
The USPS can still be saved; it will just take a tiny bit of legislating to remove health benefit fund obligations. This historic institution, which has cost the taxpayer nothing since the 1980s, shouldn’t be allowed to go bankrupt just because of some terrible, poorly thought-out legislation. The USPS keeps the country connected because even in this age, there are still some things that can’t be emailed. Do we really want to hand this trusted public institution into the hands of private industry, where it can be curtailed, altered and eliminated without the consent of the public? I hope not.
Justin Roczniak is the Op-Ed editor of The Triangle. He can be contacted at [email protected]