May 10, 2012 — Today’s U.S. Postal Service’s announcement about the most recent fiscal quarter reinforces our view of the financial situation facing the USPS and how it can be fixed.
The Postal Service reports that 96 percent of its losses – $3.05 billion out of $3.18 billion – have nothing to do with mail delivery expenses, but rather result from an external political mandate. Since 2007, Congress has compelled the Postal Service to pre-fund future retiree health benefits for 75 years into the future, an obligation that will cost the USPS $11 billion this year. No other public agency or private company in the country is compelled to pre-fund.
Today’s report follows on last quarter’s financial statement by the Postal Service, which also showed that in operational terms the Postal Service is doing quite well – in fact last quarter there was a $200 million profit delivering the mail, with pre-funding accounting for all the losses.
The Postal Service’s own data shows that the first thing Congress needs to do is address this artificial political burden that is driving almost all the red ink. For the first half of this fiscal year, the USPS reports that pre-funding accounts for $6.2 billion of the $6.5 billion in red ink.
It would be absurd to start to dismantle the universal network and degrade service to the American people and America’s businesses – when almost all of the red ink has nothing to do with the costs of those services but stems directly from a burden that Congress imposed and Congress could fix overnight.
The service reductions called for in the Senate bill, and the worse ones called for in the House bill, would not fix the actual financial drain on the Postal Service. Rather, they would worsen things by driving customers away and reducing revenue.
We acknowledge that a thoughtful restructuring of the Postal Service is needed to adapt to the country’s changing needs. For 200 years, the USPS has adapted to an evolving society. Neither of the bills before Congress provides for such a thoughtful or constructive approach.
The Postal Service’s own figures and statement shows that the major cause of the financial problems is not – despite the conventional wisdom – Internet competition. In fact, the USPS today, as last quarter, cited a sharp rise in the shipping of packages ordered online as contributing to the good operational performance. That bodes well for the future, because that part of the business will continue to grow. If Congress will step up and fix the pre-funding problem it created, the USPS can focus on taking full advantage of this and other opportunities to better serve the public.
For 30 years, the Postal Service has not used a dime of taxpayer money, while providing the world’s most efficient and most affordable delivery service.