Thursday, July 19th, 2012 and is filed under Blog
We’ve seen this coming for years. The government’s stranglehold over first class mail via the US Postal Service has crowded out others from making the business more profitable. More importantly, it has precluded the USPS from implementing much needed reforms.
At present, it appears that the USPS will not have enough moneyto make the schedule August 1 payment of $5.5 billion into a health-benefits fund for future retirees.
As part of the 2006 agreement for USPS to recoup some of the money they had paid into the Treasury for their employees’ retirement health benefits, the Postal Service was required to prefund its future retirees’ health benefits with $5.6 billion per year to the Treasury for 10 years. Yet, Postal Service revenue has declined so precipitously over the past few years that Congress granted them a deferment from paying those prefunded obligations in 2009 and 2011.
Now, USPS is in such dire straits that it won’t be able to fulfill its current payroll obligations without further help from taxpayers. They face the specter of default at the beginning of August. Earlier this year, Postmaster General Patrick Donahoe asked Congress for the flexibility to act more like a business and use innovation to restructure and cut costs. In order to continue operating at a limited capacity, which is what the free market would dictate in this circumstance, there is a plan to end Saturday delivery, to cut the workforce by about 220,000 employees and to close 3,700 local post offices and 252 processing centers.
Instead of spinning off the USPS from its government partnership and allowing it to become privatized or at least reform itself, the senate passed a $41 billion bailout bill. The Senate bill (S. 1789) actually prohibits the post office from implementing those vital reforms.
The next time you hear the media decrying the downward spiral of the post office, remember that it didn’t have to be this way. But it is the way of Washington.
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