Democrats and U.S. Postal Service officials are seeking a $75
While they seek to blame the COVID-19 coronavirus pandemic, the facts are plain. Unsustainable wage and benefit costs, along with unaffordable and inefficient service requirements in light of reduced demand—not the novel coronavirus of 2019—are the real reasons for the Postal Service’s financial troubles.
In recent weeks, the Postal Service has seen a reduction in
first-class mail revenue and an increase in operational costs. While it’s too
soon to tell the full extent of the damage, any coronavirus-related net losses
this year will likely pale in comparison to the operational losses the Postal
Service has racked up over many years.
All of this predates the virus.
During debate over the $2.3 trillion
CARES Act, House Democrats sought
$25 billion in subsidies, $11 billion in loan forgiveness, and a $15 billion
loan for the Postal Service. The final CARES Act legislation provided USPS with
a $10 billion loan while the calls for a much larger handout have continued
The financial vulnerability of the Postal Service is not a
new development. The nonpartisan Government Accountability Office (GAO) has
cited Postal Service finances as a worsening “high-risk”
concern since 2009.
This GAO assessment was based on basic math and obvious trends: First-class mail volume declined due to the proliferation of electronic communications, while USPS labor costs continue to escalate.
More than three-quarters
of Postal Service expenses are for employee compensation. That includes
salaries for mail deliverers, sorters, and post office clerks, along with
health and pension benefits for retirees.
The importance of that final component cannot be overstated. A Treasury Department report from December 2018 showed that the Postal Service faces more than $120 billion in unfunded liabilities for retiree benefits.
The Postal Service is required by law to fund the expected
future cost of retiree pension and health benefits to prevent a future taxpayer
bailout. The House voted
to remove the prepayment requirement in February, on the grounds that it would
improve immediate Postal Service finances. That would only mask the
organization’s liabilities and increase the financial risk for taxpayers.
President Donald Trump’s most recent budget includes a Postal Service reform plan that would save $91 billion over the next decade. Many aspects of the president’s postal reform are similar to other proposals, such as a Heritage Foundation plan from 2013.
While part of the solution involves finding ways to
potentially increase Postal Service revenue, the most important thing is to reduce
Cost efficiencies for the Postal Service could include
streamlining the number of post office locations to better fit in-person
demand, changing delivery schedules to be in line with a lower volume of mail,
and responsibly adjusting compensation levels.
Congress has failed to act on these long-standing ideas, largely due to political disincentives. After all, many legislators use post office naming rights as a way to curry favor with constituents, passing dozens of laws every year to that effect.
Perhaps most importantly, the American Postal Workers Union (representing
hundreds of thousands of workers) is vocal in support of continuing the broken
status quo. Too many members of Congress place the demands of well-organized unions
above consideration of what’s fair to taxpaying constituents.
Make no mistake, however: The Postal Service is in trouble.
The solution is not handing it the equivalent of a blank check to enable larger
and larger losses of public money. That would merely put a Band-Aid on a
Rather than capitulating to opportunistic demands and
catastrophic rhetoric, Congress should work on a plan to lift unsustainable
mandates on the Postal Service and ensure that taxpayers are protected from
Congress has ignored the systemic problems hamstringing the
Postal Service for too long.
Lawmakers should not put taxpayers on the hook for tens of
billions of dollars in bailouts to put off politically inconvenient reforms.
USPS needs real, structural reforms—even after the COVID-19 crisis abates.