
The truth about the US Postal Service - joeyespo
http://www.commondreams.org/view/2012/03/28
======
JumpCrisscross
The retirement prepayment point, if true, is ridiculous and deserves more
scrutiny.

But as someone who rarely if ever uses the postal service, I don't see why
they can't raise stamp prices to 60 cents or so. That would cover most of the
shortfall.

I don't think the nostalgia for a post office argument really holds water,
though. We don't need to keep the post office around for the sake of it.
Fortunately, there is a market for the service they provide. The moment that
demand starts evaporating (at the market price) we shouldn't have an emotional
qualm about amputating inefficiency.

~~~
glenra
> I don't see why they can't raise stamp prices to 60 cents or so. That would
> cover most of the shortfall.

Why do you believe they'll sell the same number of stamps if they raise the
price? When GM was in trouble, would you have posted "I don't see why they
can't raise car prices by $1000 or so to cover the shortfall"?

USPS sells an overpriced product. If private companies were _legally allowed_
to charge less than the post office to stick mail in your mailbox, the post
office would go under in a heartbeat; the only reason they survive at all is
that they have a legally-protected monopoly on non-urgent mail. But even
monopolists can't charge _whatever they want_ because there are _substitutes_
for every good. People who send a lot of mail will notice small price
increases and be ever-more-prone to switch to alternatives (fax, email, web,
phone...) the higher the price gets.

In short, raising the stamp price _might_ raise revenue, but it also might
_lower_ revenue.

~~~
OpieCunningham
_USPS sells an overpriced product. If private companies were legally allowed
to charge less than the post office to stick mail in your mailbox, the post
office would go under in a heartbeat;_

Do you have a citation for that? I fail to see how on the one hand there is
the argument that the USPS can't stay afloat and on the other hand a private
company can succeed in the same business by charging less. Further, what
service would these private companies be offering, exactly? Door to door
pickup/delivery? So Fedex and UPS would ramp up massive infrastructure to
support door to door service, but each would effectively only have 1/2 the
houses in a neighborhood. And that would be profitable for less than 45 cents
a letter? Doesn't seem likely to me.

~~~
glenra
The USPS was losing money on package delivery - especially "priority" delivery
- when private companies were initially allowed to enter the package and
"express mail" business. FedEx and UPS made a profit providing the exact same
service the USPS lost money on, and eventually did it so well that the post
office now subcontracts a lot of that work to FedEx.

As for "ramping up massive infrastructure", Fedex and UPS do door-to-door
already. In fact, in many areas they deliver to the door where the post office
only delivers to a "mail stop" that might be miles from the relevant "door".
One thing they don't do is waste resources cruising the entire neighborhood on
the random off-chance that somebody _might_ have put out a package for
delivery. Instead, you can either drop off a package at the nearest Kinko's or
supermarket or corner drop box, or you can tell them (by phone or over the
web) that you've specifically got a pickup for them to get and they'll come
get it.

They also don't ludicrously overpay their workers. Package delivery should
probably be a minimum wage job, not a career.

The fact that the private companies could do the work with fewer offices -
combining with companies like Kinko's as they do rather than maintaining a
separate office - and fewer workers (due to more streamlined competitive
processes) and cheaper workers (due to it not being a federal unionized
workforce) suggests they could do the job more cheaply. How much more cheaply
is an open question, but I would tend to expect the cost of delivering a
letter to _drop_ over time (relative to inflation) as technology improves and
as the population grows.

~~~
OpieCunningham
All you're really stating is that if the USPS disappeared, everything would be
just fine and FedEx and/or UPS might even start accepting letters with 5 day
delivery times for less than 45 cents instead of $10+ they currently charge
for approx. 3 day delivery times. (Of course, the actual service would be
totally unlike what the USPS provides.)

I remain unconvinced.

I would like to see wage comparisons between FedEx/UPS delivery personnel vs.
USPS carriers. I doubt there is a ludicrous expense difference.

~~~
glenra
We don't need USPS to disappear. We just need it to be _legally allowed_ to
undercut the post office. So long as it is _illegal_ for FedEx to deliver
envelopes to your home _slowly_ (because that would indicate it's not
"urgent") or for less than a price of "$3 or twice the First Class Mail rate,
whichever is larger", it's not fair to criticize them for specializing in the
sort of quick, expensive service _which is the only type of service they're
allowed to engage in_.

<http://en.wikipedia.org/wiki/Private_Express_Statutes>

The last time a private firm was allowed to freely compete on regular mail
delivery was 1844, but at that time the post office charged 12 cents for a
stamp and the new firm was able to make a profit charging 5 cents for delivery
anywhere in the country while providing free local delivery as a bonus.

<http://en.wikipedia.org/wiki/American_Letter_Mail_Company>

------
Lazare
There are two methods for funding pensions: PAYGO (pay as you go) or funded.
With a PAYGO plan, you pay current retirees out of current income, and hope
that future income will be enough to cover future retirees. Public bodies
often use PAYGO plans, in large part because they can always tax (or print)
money in order to cover shortfalls if they have to.

With a funded plan, you put aside money from current income to pay future
retiree claims; current retiree claims are paid from money put aside in the
past. Private companies often use funded plans, in large part because any
shortfalls can lead to pensioners not being paid.

The USPS is a very unusual hybrid of public and private and, in many ways, has
the worst of both worlds. Rather than follow the "normal" rules other
government agencies or other private companies follow, the USPS is "lucky"
enough to get rules written especially for it by Congress. And THAT is the
source of the current controversy.

There's nothing unusual about prefunding retirement benefits, but there are
legit questions about the precise rules that Congress has written for the
USPS. They argue they're being asked to prefund too much; the counterargument
is that they face unique challenges, and the prefunding requirements are
sensible. It's a very very dry, very very complex issue, and honestly, I don't
have a clue who's right. :)

HOWEVER, I can say who's wrong: The linked article. Contrary to the article,
the USPS is not making an operational profit. In FY 2010 it had an operational
loss (NOT counting any pension funding) of $600 million. In FY 2011 that rose
to an operational loss of $2.2 billion (again, before the disputed pension
funding payments). It's projected to keep rising.

The USPS is seeing collapsing mail volume in every profitable category. Their
fundamental market (delivering first class mail) is vanishing before their
eyes, and nobody has the slightest plan to fix it. Right now they're little
more than a government subsidized catalogue delivery service with an eye-
wateringly expensive retail outlet network and legacy staff costs. And THAT is
the real issue.

A normal company would respond by trying to change their cost base, but again,
the USPS is neither fish nor fowl. They can't close post offices or fire
workers the way a private business can, but they can't rely on seemingly
infinite funding from the US government the way a normal government agency
can. They're are, well, going broke.

And that, in turn, is why the pension funding argument is so heated. Is the
USPS going to be around in 40 years to pay worker pensions? If you're
confident the answer is yes, then letting them leave pensions unfunded is
safe, and might help get them through the current crisis. But if you're wrong,
then pensioners will suddenly see checks stop coming. (We tend to think that's
a Bad Thing.) So if you're afraid the USPS might not be around down the road,
that makes pension funding very important. _shrug_ Make your guesses and you
get your policy outcome. :)

~~~
OpieCunningham
_Contrary to the article, the USPS is not making an operational profit. In FY
2010 it had an operational loss (NOT counting any pension funding) of $600
million. In FY 2011 that rose to an operational loss of $2.2 billion_

Do your figures for operational profit consider this part of the article:

 _In addition, due to a 40-year-old accounting error, the federal Office of
Personnel Management has overcharged the post office by as much as $80 billion
for payments into the Civil Service Retirement System. This means that USPS
has had billions of its sales dollars erroneously diverted into the treasury._

~~~
Lazare
Nope, 'cause no matter what the truth (or the resolution) of that particular
dispute is, it won't impact the numbers for the last two years. It might well
change the numbers for FY 1961 or so though. :)

~~~
OpieCunningham
I'm not sure I follow. Are you suggesting that if there was an accounting
error, the USPS lost all $80 billion in 1961?

Perhaps you're simply unfamiliar with the accounting error issue as outlined
in the article.

~~~
Lazare
Okay, first, operating income may or may not include pension expenses; it
depends on a lot of details.

According to reports, there was a historical error, and over some number of
years, back in the 60s, the USPS paid in "too much" (how much? Less than
$80b...how much less, nobody seems to know). If they booked that as an
operating expense, that may have shown up in decreased operating income during
those years.

That means that, if the money was refunded, it might or might not lead to a
restatement of their 60s-era operating income, depending on whether the
original overpayment had been counted as an operating expense.

But everyone seems to be agreed that the issue, whatever it was, ended some
time ago; probably during the 70s when there was a big change in how the USPS
handled pensions. And that leads us to two conclusions:

1) The overpayment is not ongoing, and is not therefore impacting _current_
operating income numbers (assuming arguendo that it impacted operating income
numbers at all.

2) And, as a corollary, if the overpayment is ever refunded, it won't impact
_current_ operating income numbers.

Now, the USPS is saying that, if they got the refund, it would help them
prefund their retirement as required by law. Which would be, obviously, great!
But the operating income numbers don't count the prefunding, so again, this
would have no impact on the operating income figures.

And if we move beyond the technical accounting stuff to the big picture, the
bottom line is that the USPS is currently losing money on their day-to-day
operations, excluding the pension prefunding. So it doesn't matter if they get
a refund, or they mug a leprecaun for his pot of gold - no one-off payment is
going to change their relatively dire financial situation. To change _that_ ,
they need to restructure.

A private company would look to close, consolidate, downsize, embrace new
technologies, and possible use bankruptcy to shed legacy debts and renogotiate
labour contracts. The USPS is either prevented or seriously hampered from
pursuing any one of these - and ultimately the blame for that must be laid at
Congress. (Which is the same bottom line that the people upset about the
pension prefunding and the earlier overpayment have. Everyone agrees that
Congress has almost complete blame and responsibility.)

~~~
OpieCunningham
I looked a bit and at every instance I found, the USPS is operationally
profitable when pension prefunding is ignored. This is contrary to your claim.
So if these other sources are correct, that $75 - $80 billion would go a long
way towards covering the $55 billion prefunding mandate. Might even be able to
take the remainder and modernize for increased efficiency, thereby further
increasing profitability.

~~~
Lazare
Heh. Financial results for organizations like the USPS are not some black
mystery; you don't need to rely on anonymous sources, or conflicting reports.

[http://about.usps.com/who-we-are/financials/periodic-
reports...](http://about.usps.com/who-we-are/financials/periodic-
reports-8k/11-16-2011.pdf)

And now you know. (See, in particular, page 9 of the PDF - the second slide in
the deck. Revenue down sharply, expenses up very slightly, _EXCLUDING_ the
prefunding requirement.)

