USPS posts $8 billion loss

Earlier this year, I noted that the budget for the United States Postal Service (USPS) would be $238 billion over the next 10 years. Last week, the USPS acknowledged that its budget shortfall for FY 2010 would be $8, and warned that it will be broke by the end of next year:

All federal agencies and the USPS, a quasi-federal outfit, have workers’ compensation obligations to help fund four major disability compensation programs.

The Postal Service also announced Friday that it plans to deplete its $15 billion line of credit with the U.S. Treasury by borrowing the remaining $3.5 billion. Although the Postal Service does not use taxpayer funding, it has tapped the credit line since the early 1990s. Depleting it means the Postal Service probably will go broke at the end of fiscal 2011 unless Congress takes action, members of the Postal Service Board of Governors said Friday.

The historic losses occurred despite more than $9 billion in cost cuts in the past two years, including the elimination of about 105,000 full-time jobs, “more than any other organization, anywhere,” USPS Chief Financial Officer Joe Corbett said Friday.

Over at Downsizing Government, Tad DeHaven points out that health benefits that labor unions have managed to squeeze out are part of the problem; he also concludes that privatization of the USPS is the way to go:

The USPS is required to make substantial annual payments to pre-fund retiree health care benefits. Last year, Congress allowed the USPS to postpone $4 billion of its fiscal 2009 into the future. However, Congress did not provide similar relief on this year’s required payment of $5.5 billion.

Critics of the retiree health care pre-funding requirement argue that no other federal agencies or private companies face such obligations. The argument is largely irrelevant for two reasons. First, the federal government’s financial practices are nothing to emulate. Second, very few private sector workers even receive retiree health care benefits.

In 2008, only 17 percent of private sector workers were employed at a business that offered health benefits to Medicare-eligible retirees, down from 28 percent in 1997. The actual number of private sector workers receiving these benefits is even lower as not all employees employed at the 17 percent of businesses that offers retiree health benefits are eligible to receive them.

The retiree health care benefit pre-funding requirement has become a rallying cry for the postal unions, as any threat to USPS solvency is a threat to the excessive compensation and benefits they’ve been able to extract from the postal service for their membership over the years.

Policymakers should properly view the retiree health care benefit as a symbol of postal labor excess, which continues to weigh the USPS down like an anchor. Therefore, they should avoid allowing the USPS to further postpone these payments into the future, which could lead to a taxpayer bailout. Instead, policymakers should recognize that the USPS’s financial woes require bolder action: privatization.

Since there has been so much discussion on the national debt, excessive spending and reform, the USPS should be taken off the back of the American taxpayer.