Among the pundits weighing in on yesterday’s USPS financial report was Slate’s Matthew Yglesias. He’s billed as the web site’s “business and economics correspondent”, so you’d think he’d be fairly good at arithmetic, but I have my doubts…
Here’s some of Matthew’s take on yesterday’s report:
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.
If you didn’t know better, you would probably come away from reading Matthew’s piece with the impression that the USPS has already lost $3.2 billion, on top of the $5.5 billion it’s supposed to come up with on October 1.
Let’s see if we can help Matthew out here. First of all, the USPS’s PAEA pre-funding obligation for this fiscal year is $5.6 billion. Even though the USPS doesn’t have $5.6 billion lying around to send the Treasury, it does take a charge on its books each quarter for one fourth of that amount. This is pretty simple math- if half the fiscal year has passed, then the USPS has already booked pre-funding charges totaling $2.8 billion as of yesterday’s Q2 report.
Now take a look at the year to date “loss” the USPS reported yesterday- it comes to $3.130 billion. That means that without the pre-funding requirement, the USPS YTD loss would be $330 million.
So yes, Matthew, the USPS would still be losing money this year without the pre-funding. But why didn’t you bother doing the math and explaining exactly what that loss would be? Why did you instead leave the impression that the USPS is losing billions even without pre-funding? Why didn’t you mention that 89% of this year’s loss is due to pre-funding? Why didn’t you explain that the USPS has already stashed away $44 billion in past profits to meet the PAEA requirements?
You do know all of that, don’t you?
Slate: USPS losses mount..