Post Office Warns of Pension-Triggered Default

CNN.com has the story:

The U.S. Postal Service warned Wednesday that it may default on some of its financial obligations later this year after reporting yet another quarterly loss.

The USPS, a self-supporting government agency that receives no tax dollars, said it suffered a loss of $329 million in the first quarter of federal fiscal year 2011. That compared with a loss of $297 million a year earlier.

The agency has been suffering from an ongoing decline in mail volume, which has undercut revenues, while retiree health care costs have been straining its reserves. [...]

The agency said it will be forced to default on some of its financial obligations this year unless Congress changes a 2006 law requiring it to pay between $5.4 and $5.8 billion into its prepaid retiree health benefits each year.

"The Postal Service continues to seek changes in the law to enable a more flexible and sustainable business model," Patrick Donahoe, the Postmaster General, said in a statement. "We are eager to work with Congress and the administration to resolve these issues prior to the end of the fiscal year."

Link via Instapundit.

The case for reducing government is becoming simpler by the day. Unless and until the public sector figures out to make pension promises sustainable, giving state agencies more money is a real and apparent threat to our fiscal and economic health. Government workers and the two major parties that have employed them have for decades used the guaranteed revenue stream of your tax dollars like an ATM machine. Now that there's no new Brinks truck in sight, they're panicking.

Did you know that according to Wikipedia, as of 2007 the Postal Service was the fifth-biggest business employer in the world, and that as of 2010 it was the second-largest civilian employer in the United States, just after Wal-Mart? So this is a 600,000-pension problem we're talking about here. Meanwhile, Obama administration officials remain much more concerned about the evil monopolists at Google.

Reason on the Postal Service here, on pensions here.

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  • ||

    The USPS, a self-supporting government agency that receives no tax dollars, said it suffered a loss of $329 million in the first quarter of federal fiscal year 2011. That compared with a loss of $297 million a year earlier.

    If they truly receive no tax-payer dollars, then more power to them. But can $500 million losses over two years really count as "self-sustaining"?

  • ||

    That's $600 million in losses, and NO.

  • ||

    D'oh! I rounded $297 million down for some reason.

  • US Government Accountants||

    Looking for a job?

    We have a great benefits package.

  • ||

    unless Congress changes a 2006 law requiring it to pay between $5.4 and $5.8 billion into its prepaid retiree health benefits each year.

    So, when they say "no tax dollars", they just mean in a technical, accounting sense.

  • ||

    wait, did I misunderstand that sentence? Now it occurs to me that the law is requiring the USPS to pay into the pension fund....not a requirement for congress to fund it. Coffee time.

  • Spiny Norman||

    They're self-sustaining until they lose money, then Congress bails them out. In other words, they're as self-sustaining as GM.

  • Gaylord||

    Why doesn't the post office simply fold? The only thing I get in the mail anymore are ads for grocery stores and lasik eye surgery. Why on earth is our govenrment paying people to deliver this crap?

  • Sovereign Immunity||

    A constitutional amendment would be required, as the post office is specifically enumerated.

  • rather||

    are delivery days?
    Mail once a week is cool with me

  • robc||

    Sigh...reading is fucking fundamental.

    Section 8 of the constitution(with emphasis by me added):

    The Congress ***SHALL*** have Power ...
    To establish Post Offices and Post Roads.

    Shall, not must. They can fold, there is no constitutional requirement for a post office.

  • ||

    Should've refreshed first. I like your answer better.

  • robc||

    You didnt even use the word "fuck" a single time, nor insult his reading ability. For shame.

  • Sovereign Immunity||

    I'm a she. Would you like to call me a dumb cunt now? Or *SHALL* I save you the trouble?

  • robc||

    I clearly would have used the term "fucking cunt".

    Except I dont think I have used that term ever. Well, until two sentences ago.

  • Sovereign Immunity||

    Thanks for clarifying; nice to know the stereotype of the misogynistic libertarian is urban legend.

  • cynical||

    No, but now we'll have to reply to every comment you make with speculation about your level of attractiveness. We may also consider whatever you actually said, but probably not.

  • ||

    I have so much yet to learn in the ways of Reason commenting. fuck!

  • ||

    To establish Post Offices and Post roads

    There's nothing that says the bloated Post Office has to be run by Post Office employees. The work could easily (and constitutionally) be contracted out.

  • Zeb||

    Why on earth is our govenrment paying people to deliver this crap?

    They aren't (yet), see "self-supporting". But they really should be cut lose to succeed or fail on their own. I think that a big part of their problem is that they can't increase the price of a stamp without congressional approval and they have to deliver to nowhere, AK for the same price as next door.

  • ||

    As long as they are required by Congress to maintain Post Offices in places like East Axehandle, Minnesota (pop 11), they ain't gonna make it.

  • robc||

    Since the post office is an enumerated power, why is it quasi-independent anyway?

    And yet, we cant get a blatantly unconstitutional thing like Amtrak off the dole?

    What the fuck?

  • Night Elf Mohawk||

    The real question is why the Constitution enumerates the power to create post offices when, clearly, mail has a substantial effect on interstate commerce and is thus a power granted by the commerce clause, anyway.

  • robc||

    sssshhhh...now youre trying to be reasonable or something.

    That question is along the same lines as: Why did congress go to the enormous trouble of passing the 18th amendment when they had the power to ban any drug they wanted to?

  • #||

    Add enumerated powers for pattents and weights and measures to that list

  • Spiny Norman||

    It's quasi-independent so they could push it off-budget, same as Fannie Mae.

  • ||

    Who would deliver mail to the rural United States?

  • Night Elf Mohawk||

    Who delivers Amazon packages to the rural US?

  • ||

    Some things are just too important to be left to the free market. Pizza coupons, for example.

  • Zeb||

    The USPS delivers a lot of them. But I am sure UPS and FedEx would be happy to pick up the slack.

  • pmains||

    Who forced these people to live in the rural US?

  • JoshINHB||

    The internet.

  • ||

    Amazon and companies like it are increasingly using UPS and FedEx to deliver packages to USPS locations for "last mile" delivery. It's apparently cheaper than using UPS or FedEx for the whole delivery.

    This, of course, doesn't have to be the case, and we'd be better served with a totally privatized delivery system, but it's one way the USPS keeps humming along. More or less.

  • Speedy||

    Who would deliver mail to the rural United States?

    The fucking internet.

  • Eastern Onion||

    Who would deliver mail to the rural United States?

    The same entity that delivers telegraphs to the rural Unites States.

  • ||

    Even my grandparent in the country use online banking and have an email account. Of course, they do use AOL... *shudder*

  • ||

    I rounded $297 million down for some reason.

    There's a future for you at the CBO.

  • mike||

    While its clear the Post Office is suffering because of past largess to employees, it would be tragic if they folded. As noted, they do not get tax support and my mail service is nothing short of a bargain. For less than 50c I can send a letter, for a buck or two I can send a pretty good stack of documents and have it arrive in two or three days to most locations in the lower 48.

    Replace with... UPS? FedEX? Can't shine a candle to USPS. The brown truck delivers about 15 million items a day. The USPS over 580 million - they process more per hour (24 million) than UPS delivers in a day.

    While USPS is not perfect (nor any other business), I'd rather see them fix their pension mess and raise rates 10% to be on sound footing again.

    A satisfied suburban and rural customer.

  • #||

    if UPS or Fedex were not barred by law from delivering letters, I guarentee you they would do it more cheaply than the USPS.

  • Zeb||

    I'm not sure that is true. They don't deliver packages more cheaply in general. But we should damn well be able to find out. The first class mail monopoly is pretty stupid.

  • sevo||

    "They don't deliver packages more cheaply in general."
    Well, it depends on how you figure costs.
    If you include the time standing in line at the PO at something reasonable, and the fact that any loss is, in practical terms, non-recoverable, USPS supposed cost advantage disappears in a hurry.

  • robc||

    I wouldnt guarantee it, but the American Letter Mail Company did it, before the Feds shut Spooner down.

    USPS lowered their prices from 18 cents to 3 cents because of Spooner.

  • #||

    also USPS package delivery only became better because of competition from UPS and Fedex. They had to offer competitive pricing.

  • Jay z||

    "For less than 50c I can send a letter, for a buck or two I can send a pretty good stack of documents and have it arrive in two or three days to most locations in the lower 48."

    Uhhh, no. The reason it costs 50 cents to send a letter is the same reason that over the last two years they have had $600 million in loses. And if you go back further the losses are in the billions. If they charged a price that would allow them to be sustainable that 50 cents would be more like $3.00.

  • Gaylord||

    "The USPS over 580 million "

    99% of it is crap.

  • Spiny Norman||

    "Shine a candle?"

  • Paul||

    Replace with... UPS? FedEX? Can't shine a candle to USPS. The brown truck delivers about 15 million items a day. The USPS over 580 million - they process more per hour (24 million) than UPS delivers in a day.

    Interesting. I'm trying to figure out the percentage of mail the USPS delivered that I actually wanted, vs. the percentage of of mail that UPS and FedEX delivered that I wanted.

    Off the top of my head, USPS figures around .5%, and UPS and FedEX were somewhere around 100%.

  • Paul||

    Oh, and if I could go a three day period without getting someone elses USPS mail, that'd be fucking great. I've got a permanent rotation of "Wrong Address" mail going back in my mailbox.

  • Pet Peeve||

    "...like an ATM machine."

    The "M" in "ATM" stands for machine!

  • Spiny Norman||

    ATM machines are those things that use PIN numbers.

  • ||

    brought to you by the Department of Redundancy Department

  • #||

    if UPS or Fedex were not barred by law from delivering letters, I guarentee you they would do it more cheaply than the USPS.

  • Old Mexican||

    The agency has been suffering from an ongoing decline in mail volume, which has undercut revenues, while retiree health care costs have been straining its reserves.


    A planet where pensions devolve into bankruptcy???

  • ||

    My old aunt, bless her soul, worked for the Post Office for maybe 20 years, and has been retired for about 40 years. In addition, her husband who also worked for the PO died over 60 years ago and I assume she is collecting something on his benefits also.

  • Old Mexican||

    The agency said it will be forced to default on some of its financial obligations this year unless Congress changes a 2006 law requiring it to pay between $5.4 and $5.8 billion into its prepaid retiree health benefits each year.


    "We're in the bailout!
    We're in the bailout!"

  • ||

    The USPS, a self-supporting government agency

  • ||

    UPS and Fedex don't deliver mail more cheaply than USPS because it's illegal for them to charge less than twice what USPS charges. Who wrote the regulation requiring that? USPS, since Congress delegated rulemaking authority to them. For the same reason, private mailbox services have more onerous regulations governing them than USPS PO Boxes do.

  • Post-mortem office||

    On-line bill pay and netflix streaming fucked 'em good. HA HAA!

  • ||

    The USPS, a self-supporting government agency...

    Matt, my understanding is that the USPS is (technically) no longer an actual government agency, but a corporation which is wholly owned by the US government. This matters because USPS Postal Inspectors have federal law enforcement powers; in other words all the powers of government, but lacking even the minimal accountability of a government agency -- truly the worst of both worlds.

    Also, don't forget junk mail subsidies. If UPS and FedEx had to deliver this it would be in envelopes and individually addressed, and they'd charge a market rate (ie, junk mail volume would decrease drastically).

  • Sovereign Immunity||

    That's an excellent point; perhaps, this template is how they are sweet talking doctors and nurses into liking ObamaCare?

  • Almanian||

    Robert Townsend? Is he still doing stand up?

    /Living Color

  • Jay||

    Instapundit hu...
    Maybe the torture supporting professor could write some more about his lust for genocide and hopefully we will see a link to it from here?

    /Jay

  • Brandon||

    Haha! the 'comments' section at Reason always makes me laugh. Libertarians are some funny motherfuckers.

    Economist Jeffrey Rogers Hummel has a good piece up on the possible consequences of default, by the way...

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