Mail is vital to so much of the economy. This horror story is exactly why it’s a good thing for everyone if the country has a well-functioning postal service that serves as national infrastructure rather than a profit-generating enterprise. But I guess that’s a controversial statement these days. Sigh.
USPS barely breaks even plus or minus a couple percent any given year while also being financially prudent with its pension obligations and substantial federal oversight that keeps it from doing particularly slimy things to make a buck.
All the "hurr durr it should be nationalized" and "hurr durr it should be privatized" noise is just the partisan hacks from both sides doing their thing. It's pretty much fine as it is, even if its service level for parcels is slightly worse than the private carriers
The day the US military shows a profit I will start to care about the USPS, actually no, I still won't care. It's not a business, it's a service. "partisan hacks", please take your "both sides" and leave, it's not even remotely close to the truth.
> substantial federal oversight that keeps it from doing particularly slimy things to make a buck.
Could you elaborate on this? I'm sure you couldn't be talking about attempts to let USPS provide basic banking services.
All non taxpayer funded entities operate with similar requirements for funding of deferred benefits such as defined benefit pensions.
See Pension Protection Act of 2006 and Postal Accountability and Enhancement Act of 2006.
USPS had a pass for a long time and get passed back and forth as government and non government for political purposes, but if you don't have access to the federal government's money printing abilities, there's no reason you should not be subject to funding requirements.
If, for example, the DOD had to pre-fund pensions the way USPS does, either your taxes would go up by ~30%, or half of the actively serving military would be given a pink slip by next Thursday.
In a world where we're running $3.1T/yr deficit, why wouldn't we just crank that number even higher? Either way, it's a future obligation of the federal government, but it doesn't mean it's going to come out of taxes now (even though it perhaps should)
It's mostly taxpayer funded entities that provide defined benefit pensions now, since in the US, they are exempt from any laws about setting aside any money for the future benefits.
This works well for politicians and senior government employee union members, who can be promised lavish benefits in the near term, at the same time as advertising low taxes to the non government employee voters since they can just make up numbers for how much they need to save to pay the benefits.
They won't do it so brazenly as to simply set aside $0 for benefits promised today, but it happens by using extremely liberal discount rates (~8%) to make future liabilities look less than they are. For reference, non taxpayer funded entities are subject to Pension Protection Act of 2006, which requires pension plans to use highly rated corporate bond yield curves, around ~4%. Each percentage increase in discount rate, roughly, makes the amount of money you need to save today 10% to 20% less (since you're assuming greater investment returns).
Legislators can also just not pay the recommended amount. For example, in a government pension plan, the actuaries comes back with a funding recommendation of $1B to pay for the benefits accrued this year (which is already understating costs due to liberal assumptions). The leaders or legislators will just say we don't have $1B this year, but let's do $500M, and then amortize the rest over the next 10 years. Maybe the governor or mayor promised no tax increases, maybe they want to push tax increases or budget cuts to after they move onto their next political office.
You can keep this rob the future to pay for today scheme going for a few decades while people are having lots of kids and the tax base is growing and income from taxes is growing. But it comes to a head, like it is now, eventually.
Usps literally requires an act of congress to change their rates. Needless to say there haven’t been any in quite some time. They lose money hand over fist and require bailouts and other financial games to keep operating.
For delivery of retail parcels to private consumers? No that should be part of what retailers pay for when they sell remotely. It's a cost of doing business and absolutely not the responsibility of the taxpayers.
You could apply this argument to everything the government is involved in as well. Why shouldn't retails pay for the roads we all drive on that lets customers reach them, electricity, police and fire and so on
IMO it's important to separate the economic infra and the public utility portions of it -- but economies of scale might be had when combined.
Some retailer getting their consumer product shipped to a customer is not a problem for the government to solve. Getting medicine to someone in need is. It's hard because on the surface they seem the same, but systems that functions like the former and latter have very different economics (say in the fail case) and their budgets/designs have to match the needs.
I don’t understand the argument you are trying to make. That price controls are good? Or that a national carrier will always be profitable because they can just jack up their rates?
The USPS cannot "jack up the rates". The USPS cannot change prices to increase revenue. The USPS prices are set by legislation, and cannot be changed. The USPS is not intended to make a profit, and is intended to provide a public good. Implying that the prices can/should be changed is spreading misinformation.
The USPS is profitable on the delivery side. If they were allowed to operate as a normal business they would have more revenue than Fedex and UPS. Their free flow cash margins have been positive since 2013. They would be VERY profitable except for legislative meddling.
However, they have a number of legislative mandates that suck up their profits.
The biggest is that they have to have cash on hand to pay out employee pensions for the next 75 years.
Everything that they make goes into a giant pot of money for the retirement fund of workers that haven't been born yet. The holdings must be in cash, so they can't even invest this giant pot of money. This was a law pushed through by conservatives with the seeming intent to ensure that the USPS is never profitable. It is a mandate that literally no other organization is saddled with.
Other legislative blocks to profitability:
They ae required to deliver lettermail to every address in the US for the same rate. They don't get to set the rates for lettermail.
They are prohibited from offering additional services through their branches such as copy and print services.
They are prohibited by law from participating in banking and money services except for legacy paper money orders. Online service is strictly prohibited.
Besides all that, there is no reason that a service considered vital to the economy has to be profitable. The postal service is one of the few essential government services that is expected to make money for some reason. We don't expect the fire department to be revenue positive even though they are allowed to charge basically anything they want for ambulance service.
As an anecdata aside: I've lived in a few countries where postal service is less than reliable (don't know when the mail will come, deliverability rates are pretty bad.). It is not a desirable state of affairs. I remember my mom having to plan half a day to pay bills. She would have to go to the office, or an approved payment processor for the company and wait in line to make a payment for each bill. Contrast that with dropping a check in the mail. The internet has changed a lot of things since then, but I still see a mail service as required.
>The biggest is that they have to have cash on hand to pay out employee pensions for the next 75 years.
>Everything that they make goes into a giant pot of money for the retirement fund of workers that haven't been born yet. The holdings must be in cash, so they can't even invest this giant pot of money.
This is not true. The law only requires saving money for accrued benefits, which makes sense to me. See section 802 and 803 of the Postal Accountability and Enhancement Act of 2006:
This is how deferred compensation should work. If an employer offers deferred compensation, they should be saving sufficient funds such that even if income were to stop today, the accrued benefits would have no problem being paid from the savings.
>This was a law pushed through by conservatives with the seeming intent to ensure that the USPS is never profitable.
This is also true, and the proof is "conservatives" exempted governments from the rules it wants the USPS to follow. Politicians do not want to force proper funding of government employee benefits, as then they could not advertise low taxes to voters at the same time they advertise higher compensation (via benefits in retirement) to government employee unions.
>It is a mandate that literally no other organization is saddled with.
Non taxpayer funded organizations do have similar mandates. See Pension Protection Act of 2006.
I did repeat some lies. Thanks for pushing on me to do my research better, haha.
I looked into the details to clarify:
The USPS has to have the cash on hand to pay earned benefits 50 years out. That is unique to the postal service.
The same act also mandated that price hikes at the USPS never move faster than inflation. Very few businesses would want to operate in an environment where you're biggest liability is future healthcare costs of employees, and your revenue is tied to inflation adjusted 2006 prices....
The Pension Protection act does make pension funding more regulated, but the requirements are nowhere near requiring cash on hand to fund 50 years of obligations. Other pensions are also allowed to have assets that aren't cash, meaning they can grow.
The larger point I was making, which I think is supported either way, is that the USPS is actually a viable business. The consistent profit loss is based on legislative mandates that their competitors, or anyone else, don't have to abide by.
>The USPS has to have the cash on hand to pay earned benefits 50 years out. That is unique to the postal service.
I do not see this in the text of the law in sections 802 or 803. Where is this information about specifically having "cash on hand" and "50 years out"?
>The same act also mandated that price hikes at the USPS never move faster than inflation. Very few businesses would want to operate in an environment where you're biggest liability is future healthcare costs of employees, and your revenue is tied to inflation adjusted 2006 prices....
The USPS is unfairly handicapped by being legislated to be operated as a businesses, yet somehow also legislated to have maximum prices. However, you don't have to be an actuary to know that no entity can possibly make good on offering healthcare for the entire life of their employees unless they have a money printing machine (aka federal government).
>The larger point I was making, which I think is supported either way, is that the USPS is actually a viable business. The consistent profit loss is based on legislative mandates that their competitors, or anyone else, don't have to abide by.
I agree with the sentiment of this statement, but I disagree that their competitors (namely UPS and FedEx) don't have to abide by similar legislative mandates. As far as I know, no company provides ridiculous benefits such as healthcare after you retire. And if it did, it would be similarly screwed as USPS.
Is it unfair that Congress forced USPS to actually set aside money for the healthcare that they promised their employees? Maybe the amortization schedule is unfair, but it should have been in effect a long time ago, one could make the argument that USPS prices have been too low considering the lavish benefits they have been promising. However, I also know that Congress has hamstrung USPS from actually being able to properly operate as a business.
Bottom line, USPS is a whipping boy for Congress, but the problem isn't the proper requirements to set aside funds for promised benefits. The problem is Congress using USPS as a political tool, simultaneously not letting them operate as a business, and not letting them have access to the money printing abilities of the federal government.
Considering how many public institutions are having pension fund issues I have a hard time being upset that at least one of them is being forced to make sure they can actually follow through with the promises, even if the rules are excessive
