Reality Check: Is Congress The Real Source Of Postal Service Problems?

Posted by on August 2, 2012 in Economy, Politics with 0 Comments
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Without help from Congress, the U.S. Postal Service (USPS) will not only default on payments for retiree health care benefits, but it could be short of cash for operations by mid-October.

As of midnight Wednesday, the Postal Service was in default — for the first time in its history — on a $5.5 billion payment owed the federal government to prepay health care benefits for retirees. By Oct. 15, the agency’s cash crunch could result in a $100 million shortfall, according to David C. Williams, the service’s inspector general.

Many believe that the Postal Service is in big financial trouble due to fewer people sending mail, opting instead using email and online bill pay.  While that is factor, it’s only part of the story.  It turns out that Congress is largely responsible for the financial situation that the Postal Service is in today.

The Postal Service knows that it has to make cuts and is offering to do so: cutting 220,000 positions or 30% of its staff by 2015.  100,000 would disappear through attrition, and 120,000 would be eliminated through layoffs. They also propose closing down 3,700 locations and 300 processing facilities by 2014.

The biggest problem with the Postal Service is not the Internet or the lack of snail mail being sent, nor is it the shortage of postage stamps.  Their biggest problem is Congress, who has the power to control what the Postal Service can and cannot do.  When the Postal Service wants to close centers and offices, members of Congress intervene.  They want branches closed, but not in their communities. When the Postal Service suggested ending Saturday services, lawmakers have said no.

Congress also mandates that the Postal Service fund retirement for employees who haven’t even been born yet. The Postal Service is the only single entity that is required to fund pensions 75 years into the future.

The Postal Service believes that it has been overfunding the pension fund by $75 billion dollars.  But, they can’t get the money back.  Why? Because the money paid into these plans has been invested in treasury notes, bonds, and bills.  In other words, Congress has been borrowing all of that pension money and spending it.

So, to be clear: Congress blocks every attempt to cut costs.  Congress requires pension funding.  Congress borrows that pension money and spends it.  Perhaps Congress should get out of the way and see what the Postal Service can do without Congress involved.

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