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The Problem isn't the prefunding, it's the suddenly being expected to prefund for half a million employees in 10 years. A private company accrues those costs one employee at a time over several decades.

There is the question of whether, in 2017 once this has been sorted out, what (if anything) they'll change to remain profitable with the increased employee costs going forward but they were quite profitable before this happened so I don't see too much of an issue.

Although the federal government DOES HAVE special economic status so I'm not sure how you think that's particularly weak unless you think reality is pretty weak.

The USPS was not actually profitable. They simply seemed profitable because they were hiding the cost of retirement benefits. Forcing them to prefund is nothing more than forcing them to acknowledge the debts they already accrued. If that tips them into the red, they were not profitable before. They were simply pretending to be profitable via accounting tricks.

$100 in revenue - $75 in costs - $50 in off balance sheet debt is not profitable.

The special economic status of the federal government simply means that the taxpayer is on the hook for the USPS's hidden debts. No one disputes this. What's under dispute is whether the USPS should be allowed to incur hidden debts on behalf of the federal government (PAYGO accounting), or whether their debt should be transparently included in the federal debt (ERISA accounting).

If anything, it's the change from not-funding to pre-funding. It's not new money that has to be conjured from thin air, it's money that is already owed.

USPS is NOT put in a worse situation than private companies. It had a privilege that put it in a much, much better situation revoked.

The fact that future governments can (probably) be relied on to make good on promises made today is a "weak argument" for just kicking the can down the road instead of funding the liability immediately.

In 2017, USPS's costs will go down, significantly, because they no longer have the backlog of pensions to fund, they will just to funding pensions on an ongoing bases. Exactly like private companies. At that time, USPS will be in a situation where it can be reformed, because it no longer carries around a glut of unfunded liabilities that will be dumped in the government's lap if something goes belly up.

The weakness comes not from the unreality of the special economic status, but from the improbability that that status actually changes whether it's a good idea.

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