The U.S. Postal System Crisis: Product of Conservative “Reform”

September 27, 2011  |   Politics and Policy

Today, the postal unions representing America’s postal workers is organizing a nationwide “Day of Action” to save the US Postal Service (USPS). National news media have reported extensively on the budget crisis facing the USPS, but has done a typically abysmal job of explaining why the crisis exists. These are the facts…

Republicans, with the support of the Postmaster, are demanding service cuts and layoffs due to the U.S. Postal Service’s (USPS) inability to fund $5.5 billion due on September 30 to its federal retiree health fund. The expected 100,000 layoffs, in addition to exacerbating an already grim unemployment picture in the U.S., will hit African-Americans and veterans particularly hard – two groups that already have much higher unemployment rates than the national average. But apart from the employment issue, we need to be asking why the USPS is in such dire straits in the first place.

The biggest budget problem by far facing the USPS is the mandate placed on it by an outgoing Republican congress in 2006, requiring USPS to pre-fund, over a decade, its employee pensions for 75 years. The USPS is among a handful of employers still offering a defined benefit pension plan that provides real security to retirees after a lifetime of work. The pre-funding requirement, never asked for by the postal unions, was and remains a poison pill for a federally run postal delivery service. No other pension plan, either public or private, is required to pre-fund pension obligations for 75 years into the future in order to be considered solvent. Without this burden, the USPS would be in the black today. The cost of pre-funding has exceeded $20 billion over the past 4 years – an amount that about equals USPS losses for the period.

There are a number of ways to solve the budget crisis in the postal service, but certainly the continued pre-funding required under the 2006 postal reform law should be curtailed. It is unreasonable. But even barring this, there are other options. The Inspector General has determined that USPS overpaid into a number of other funds – between $50 and $120 billion! Those funds could be redirected to the USPS pension fund, allowing it to meet the extreme pre-funding mandate. That, of course, would require commonsense action by a current congress in thrall to Tea Party conservatives bent on decimating government services, including the delivery of mail.

The shuttering of 4,000 mostly rural Post Offices and proposed reduction of service will create real hardship for small-town residents across America. Unlike FedEx and UPS, the USPS has a mandate to serve every American, wherever they live. The private delivery services do not have to deliver to rural regions where it is not profitable, unlike the USPS. In fact, the private companies use the USPS to deliver to some rural areas, because it is cheaper for them to pay the Post Office than to deliver to these areas themselves. Clearly, the private sector will not rush in to provide service when the USPS pulls up stakes in small-town America.

Republican calls for the USPS to “operate like a private business” is undermined by the pre-funding mandate they forced on the agency in 2006, and is unreasonable given the longstanding and laudable USPS mandate to serve all Americans regardless of where they live. Instead of calling for layoffs, reductions in service, and the shuttering of thousands of Post Offices, we ought to be talking about repealing the pre-funding requirement and even subsidizing the Post Office for providing the public good of rural delivery to areas that the private sector find unprofitable to serve.

The current USPS crisis is a wholly manufactured one brought on by conservatives who have wanted to bring down the USPS for decades, allowing private companies to pick up the profitable parts of the service while leaving the rest. We must not let that happen.