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Recursion

(56,582 posts)
Sat May 11, 2013, 11:35 AM May 2013

Fixing Retiree Health Payments Won't Save the Postal Service

Last edited Sat May 11, 2013, 12:30 PM - Edit history (1)

It's Yglesias, but still, some interesting points:

http://www.slate.com/blogs/moneybox/2013/05/10/usps_losses_mount.html

The latest on the U.S. Postal Service:

The financially troubled Postal Service on Friday posted a net loss of $1.9 billion in the second quarter, which ended March 31, compared with a $1.3 billion loss last quarter, when holiday shopping and heavy spending on political advertising during the 2012 election helped the agency.

...

The Postal Service said it continued to suffer from a 2006 Congressional mandate that requires it to pay $5.5 billion annually into a health fund for its future retirees. The agency defaulted on two payments last year for the first time and said it would not be able to make payments into the fund this year because of its worsening finances. The Postal Service and postal worker unions said Congress needed to fix the requirement by lowering the amount of the payments and stretching out the length of time needed to pay it.


This issue of the payments to retirees is interesting. I've heard plausible defenses of it, but at the same time it's true that private-sector firms don't account in this way. That said, if you add a $1.3 billion first-quarter loss to a $1.9 billion second-quarter loss, then it looks pretty clear that the USPS would be losing money even without the question of the $5.5 billion. The issue here is that the way the Postal Service is supposed to work is that a lucrative monopoly on First Class Mail allows it to provide various services the U.S. Congress deems desirable, but the monopoly on First Class Mail grows less lucrative by the day. To maintain the Postal Service's services, Congress would need to come up with some other revenue source.

So it's a good time to ask the question of whether USPS' services—primarily subsidized mail and parcel delivery to rural areas, and subsidized delivery of print magazines—are really all that important in the present day. It seems to me that they aren't. Rural life in general already receives plenty of subsidy from the government. Since the main lobbying constituency for the Postal Service is basically the unions representing the people who work there, what we ought to do is privatize the USPS as a worker-owned firm. Then the key stakeholders could work on management reform to increase efficiency, would be free to abandon deadweight service obligations, and would be able to unlock the considerable value of the Postal Service's real estate portfolio.


That actually sounds like a pretty good idea: "privatize" it by handing it over to the workers' union. Actually quite a few enterprises would benefit from that (barring my preferred solution of going the German route and having labor be a statutory stakeholder along with debt and equity).

EDIT: forgot the original link
17 replies = new reply since forum marked as read
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pansypoo53219

(20,907 posts)
1. IT'S SUBSIDIZED FOR A REASON.
Sat May 11, 2013, 11:55 AM
May 2013

it's a SERVICE for CIVILIZATION FOR ALL. its SOCIALISM.

IT'S NOT FOR PROFIT!

EVERYTHING DOESN'T NEED TO PROFIT!

a kennedy

(29,467 posts)
5. Thank you for this.......
Sat May 11, 2013, 12:27 PM
May 2013

and you're right, IT'S NOT FOR PROFIT!

EVERYTHING DOESN'T NEED TO BE FOR PROFIT!
edit for statement correction.

madrchsod

(58,162 posts)
2. well that`s a novel way to fix a problem that does`t exist
Sat May 11, 2013, 11:57 AM
May 2013

only in the minds of the privateers would handing over the post office to the union would be a "solution". first of all the union has no business running the postal service. the labor laws and the politics of the nlrb would destroy the system faster than the other solution of turning it over to private business. that is if one could find a private business that would want to actually run the postal service instead of looting the service`s bank account.

the postal service is a public good that has provided an excellent service since it was created.what it it needs the ability to compete with other markets and products.

PDJane

(10,103 posts)
3. The U.S. Postal Service is mandated by the constitution.
Sat May 11, 2013, 12:00 PM
May 2013

For people who think the constitution is nearly biblical, it might be good if they read the damn thing once in a while.

 

mythology

(9,527 posts)
7. They only read the parts they find important
Sat May 11, 2013, 12:29 PM
May 2013

The postal service, at least in the medium term, does need to exist. I don't know about over the long term (say 75 to 100 years from now) due to changes in communication and travel. But currently the people in rural areas are more likely to need the post office and it provides a public service. Even if services like UPS or FexEx delivered everywhere, they do so at a much higher price.

Recursion

(56,582 posts)
9. OK, but the monopoly on first-class mail may not be the revenue stream that works anymore
Sat May 11, 2013, 12:48 PM
May 2013

As Yglesias points out, an operating loss of 3 billion in two quarters (besides the retirement funds issue) isn't exactly a great place to be.

okaawhatever

(9,453 posts)
12. The problem there, that the authors fails to acknowledge, is that the price of stamps is
Sat May 11, 2013, 02:17 PM
May 2013

regulated by congress. They keep the price artifically low to keep their advertisers happy and let the usps set the price of overnight mail where there is competition. There are also numberous post offices in rural areas that deal with just a few letters a day and yet are open. The financial solution, is to stop mail on saturdays, close the 3,000 post offices that do very little business and allow the price of the first class stamp to increase. Also, maybe they need to re-contract with ups and fed-ex about all the deliveries they make for them. Many of their packages are delivered to their final destinations by usps workers. If the usps is threatened to go private (and i'm wondering what the true intent of allowing the workers a stake is). Let them cut off final destination to ups and fed-ex and see what the prices really are for their services. The problem is congress gets a call from their rural constituents and caves, they get lobbied by the advertising by mail businesses on stamp prices and they cave, and it makes the whole usps system look bad. Once again special interests are putting out their side of a story and the average voter doesn't know what the real problem is. Look at how many articles were out last time blaming unions.

PSPS

(13,516 posts)
4. Of course it will. This is just a propaganda opinion piece.
Sat May 11, 2013, 12:22 PM
May 2013

Here's a tip: Anything with the word "stakeholders" in it isn't worth your time to read.

Here's another tip: Anyone who measures the "value" of a government agency by the amount of "profit" it makes can be summarily ignored. They exist to serve a purpose, not become a profit center. Does the defense department make a profit? The police department? Fire department? These are just more of the tired whining of the rich who don't want to pay their taxes.

Response to PSPS (Reply #4)

Kolesar

(31,182 posts)
8. The excerpt reads like the "rationale" to privatize the Ohio Turnpike
Sat May 11, 2013, 12:30 PM
May 2013

"Abandon dead-weight service obligations" sounds like "cut wages" to me.

 

Travis_0004

(5,417 posts)
10. They should get rid of Saturday mail.
Sat May 11, 2013, 01:53 PM
May 2013

It won't fix everything, but its a step in the right direction. Plus, it can be done without laying anybody off. Just don't replace a few people as they quit/retire.

 

HiPointDem

(20,729 posts)
14. Yglesias is the person who claims the third world can't afford health & safety regulations. Fuck
Sat May 11, 2013, 04:56 PM
May 2013

him & his neoliberal opinions.

Anything he writes is bullshit in my book.

 

HiPointDem

(20,729 posts)
17. actually, it pretty much is. he pooped out this bit of excrement after the bangladesh disaster:
Sat May 11, 2013, 10:27 PM
May 2013
It's very plausible that one reason American workplaces have gotten safer over the decades is that we now tend to outsource a lot of factory-explosion-risk to places like Bangladesh where 87 people just died in a building collapse.* This kind of consideration leads Erik Loomis to the conclusion that we need a unified global standard for safety, by which he does not mean that Bangladeshi levels of workplace safety should be implemented in the United States.

I think that's wrong. Bangladesh may or may not need tougher workplace safety rules, but it's entirely appropriate for Bangladesh to have different—and, indeed, lower—workplace safety standards than the United States.

The reason is that while having a safe job is good, money is also good. Jobs that are unusually dangerous—in the contemporary United States that's primarily fishing, logging, and trucking—pay a premium over other working-class occupations precisely because people are reluctant to risk death or maiming at work. And in a free society it's good that different people are able to make different choices on the risk–reward spectrum...

The current system of letting different countries have different rules is working fine. American jobs have gotten much safer over the past 20 years, and Bangladesh has gotten a lot richer.


http://www.slate.com/blogs/moneybox/2013/04/24/international_factory_safety.html

hay rick

(7,521 posts)
16. Yglesias' article is worse than useless.
Sat May 11, 2013, 08:16 PM
May 2013

He refers to the healthcare pre-funding mandate of 2006's PAEA as "payments to retirees." I wonder if he even knows that the "payments to retirees" are for post-retirement health benefits for employees who, in many cases, haven't been hired yet and some who haven't been born yet.

A much better article on the Postal Service, considered as a business, can be found here: http://www.fool.com/investing/general/2013/03/04/how-the-postal-service-is-being-gutted.aspx
My post discussing Royal's article here: http://www.democraticunderground.com/10022472070

A relevant excerpt from that discussion:

Royal outlines three myths about the Postal Service. The first myth is that recent losses demonstrate that USPS is not a viable business. Royal notes that the majority of the red ink is the result of the healthcare pre-funding mandate imposed by the lame-duck Republican Congress in 2006. The pre-funding mandate requires the Postal Service to pay for 75 years of future employee health care benefits in a 10 year period. This onerous requirement means that the Postal Service is currently paying for future health benefits for employees who have not been hired yet and, in many cases, not born yet. Despite this burden, credit needs to be given where credit is due:

And the USPS has been a model for prudent squirreling. As of Feb. 2012, it had more than $326 billion in assets in its retirement fund, good for covering 91% of future pension and health-care liabilities. In fact, on its pensions, the USPS is more than 100% funded, compared to 42% at the government and 80% at the average Fortune 1000 company. In health-care pre-funding, the USPS stands at 49%, which sounds not so good until you understand that the government doesn't pre-fund at all and that just 38% of Fortune 1000 companies do, at just a median 37% rate. The USPS does better than almost everyone.


As if the pre-funding mandate were not a sufficient burden, the Postal Service is also restricted to investing those funds in low-yield Treasury bonds. This forces the Postal Service to save even more now than a private company would to obtain the same payout later.

The second myth that the article examines is "snail mail is dead." The article points out that, even though letter mail volume is declining due to replacement by e-mail, the larger problem is that, at 46 cents, first class mail is grossly underpriced compared to European services which are priced closer to $1 for a letter. Though the article doesn't mention the fact, European postal services tend to be more privatized than their American counterpart. FedEx and UPS provide no comparable service at anything close to the same price. Another area in which USPS provides underpriced service is pre-sorted bulk mail. Bulk mailers get discounts for pre-sorting mail that exceed the cost-savings to the Postal Service.

One barrier to proper pricing is that price increases are overseen by a separate agency, the Postal Regulatory Commission, and are restricted to increasing no more than the general rate of inflation. If costs exceed the inflation rate during a given period, they can not be recovered.

Proper pricing is important for a business mandated to deliver everywhere for a fixed price, a burden not faced by private services. Of necessity, many locations, such as rural ones, lose money -- part of the price of a national postal service. Private services can simply leave a location if it's not profitable. In fact, private services rely on USPS to deliver to unprofitable locations for them.


In addition to saddling the Postal Service with the suffocating health care pre-funding mandate and preventing it from properly pricing its products, Congress has also prevented the USPS from increasing revenue by expanding its services into related lines. While our representatives exhort the Postal Service to operate like a business on the one hand, on the other they also say that USPS can not "unfairly" compete with private companies. Recent restrictions include: implementation of an online payment system in 2000 (internet companies complained); putting public copy machines in Post Office lobbies; selling phone cards; and selling postage meter cartridges (Pitney Bowes objected). "And, of course, rivals such as UPS complained, ultimately leading Congress in 2006 to restrict USPS to mail delivery."

The third myth examined is that "privatized mail delivery would be cheaper and more effective." The article points out that in 2011, USPS delivered more than 30% of FedEx Ground's packages. FedEx uses the Postal Service because it is cheaper. Another way the Postal Service is forced to operate at a handicap is by preventing it from negotiating volume discounts with large parcel shippers. And then there's this:

It's bad enough that USPS is forbidden from entering new markets. When it does well on its home turf, rivals turn to Congress, silencing USPS when it delivers better rates. As economist Dean Baker explains, "About a decade ago, the Postal Service had an extremely effective ad campaign highlighting the fact that its express mail service was just a fraction of the price charged for overnight delivery by UPS and FedEx. {They} went to court to try to stop the ad campaign. When the court told them to get lost, they went to Congress. Their friends in Congress then leaned on the Postal Service and got it to end the ads."


The pre-funding requirement accounts for the majority, but not all of the Postal Service's financial problem. The inability to set prices to cover operating costs, the inability to offer new services, and the inability to invest over-funded pensions and the healthcare trust fund in financial instruments other than treasury bonds are additional mandated burdens that assure that the Postal Service will never operate in a "business-like fashion."

Congressional oversight of the Postal Service is inept and corrupt. Employee ownership would be an improvement over the status quo, but I think it would also create some new problems. One of the first problems would be pricing and transferring the Postal Service's assets. As a practical matter, the mailbox monopoly would have to be maintained and also the universal service mandate...
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