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US Postal Service Loses $16 Billion More

Posted by Steve Markowitz on November 27, 2012

The United States Postal Service announced a record loss of $16 billion for 2012.  $11 billion of the loss came from a requirement to pre-fund future health benefits for its retirees.  While some question this requirement, not doing so would result in huge future deficits and cash shortfalls for the USPS.

As reported by CNNMoney.com, the postal workers’ union has taken a head-in-the-sand approach of the losses with its president Fredric Rolando saying: “The mandate [to pre-fund future retirees medical benefits] sent has depleted Postal Service funds, forcing the [agency] to give up any quarterly or annual profits, empty its bank accounts and exhaust its borrowing authority … to satisfy an unfair political mandate.”  Rolando then incredibly concluded this lame logic by stating that the USPS would only lost $2.2 billion for 2012 without the prefund benefit requirement.  It seems that in a day of trillion dollar annual federal deficits, government workers view a $2.2 billion loss as trivial.

The problem for the Postal Service is an unsustainable business model.  While some blame the sluggish economy, it is the changing (decreasing) demand for the USPS’s services that is at the heart of the problem.  The Internet is replacing much of the bulk day-to-day mailing and private companies such as FedEx and UPS have eaten the Postal Service’s lunch at the premium end of the market were special service allow for reasonable profits.

While the Postal Service announced plans to cut over 150,000 workers in the next two years and increase first-class stamp prices, they will not be able to pivot quickly enough to match their decreasing revenues.  It is difficult enough for private companies to make such changes timely.  It is impossible for publicly mandated and controlled organizations to do so.  For example, the USPS would like to end its low-volume and low revenue Saturday services.  However, Congress will not support such an action due to varying special interests demands.  As a result, the Postal Service losses will increase.

The U.S. Postal Service is a federal agency.  While it does not receive direct taxpayer funds it has already borrowed $15 billion from the U.S. Treasury.  Washington politicians may claim a distinction, however, that is meaningless for taxpayers.

It is time to demand that the U.S. Postal Service become self-funded and supported.  Customers who use the Service must be willing to pay for its actual costs and the Service must be willing to supply a product at prices customers are willing to pay.  It ain’t rocket science!

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