The Truth About the Postal Service’s ‘Default’

National Association of Letter Carriers

As the USPS is set to miss making another multi-billion-dollar payment toward pre-funding the health benefits of future retirees, it is useful to keep in mind that what NALC President Fredric Rolando said in July about a similar “default” still holds true—that this in fact is a default committed by Congress, not the Postal Service:

The word ‘default’ sounds ominous, but in reality this is a default on the part of Congress. It was Congress that in 2006 imposed a burden on the Postal Service that no other public agency or private company in America faces – the obligation to pre-fund future retiree health benefits. And Congress made this unaffordable by requiring the Postal Service, which doesn’t receive a dime of taxpayer money, to pre-fund 75 years into the future.

It is this unique burden that the USPS is ‘defaulting on’ – but in fact Congress has defaulted on its responsibilities by not addressing the mess it created. How big a mess? According to USPS financial reports, pre-funding accounts for 85 percent of all the Postal Service’s red ink, and 94 percent this year.

Rather than fixing the problem it created, Congress wants to degrade the world’s most affordable delivery network by reducing services to the American people and America’s businesses, which will only worsen the financial problems by driving customers away and reducing revenue.

Besides bringing the Postal Service to the financial precipice, pre-funding also has prevented the agency from doing what it has done for 200 years – adapt to an evolving society. Instead, this artificial political crisis has focused management’s entire energy on a desperate attempt to pay bills that no one else has to pay.

If Congress would remove the sense of panic, the USPS could develop a forward-looking plan to address the structural challenges – and opportunities – that we acknowledge exist. For example, while first-class mail is declining, the e-commerce market is exploding. The USPS chief financial officer announced earlier this year that the agency’s $200 million operational profit for that fiscal quarter was attributable to a sharp rise in delivering Internet-ordered packages. Much more could be done to tap that market.

The ultimate irony about the so-called default is that the Postal Service already has $45 billion set aside for future retiree health benefits – more than any other organization in America – and yet Congress wants to drain still more from the USPS.

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