First, let's remember that the USPS receives zero federal support. That's right. Zero. If you're worried about massive potential federal bailouts, turn your sights back onto the TBTF mega-banks on Wall Street. As usual, the Right is trying to distract you from the real villains.
Second, unlike any other public or private corporation in the U.S., it is mandated by Congress to fully fund its future pension obligations -- $5.5 billion a year for future retirees. The USPS reported a net loss of $8.5 billion for the fiscal year ending Sep. 30, 2010. The USPS's forecast "bankruptcy" is due mainly to its announcement that it cannot make its required $5.5 billion payment for future retiree health benefits due in September 2011. The USPS projects another $1.5 billion in costs it cannot cover in 2011.
Meanwhile, according to an audit conducted by the Postal Service Office of Inspector General, the Postal Service has been overcharged $75 billion to its Civil Service Retirement System pension fund. It already has $35 billion set aside in its retiree pension fund, enough to last decades.
Next, can "free-market" guy Newt really say that 44 cents is the market price to send a letter anywhere in the 50 states that has a mailbox within 2-5 days? What do you think the market price of sending a letter via FedEx, UPS, or DHL is? The answer is, "It depends," but for the USPS, which is mandated by Congress to provide universal delivery service across the USA, including on Saturdays, and at the same time requires Congressional approval to change its prices, the answer is, "It cannot depend." The USPS is allowed to raise the price of first-class stamps in line with inflation, so it could raise the price to 45 cents this year without Congressional approval. Congress declined a 2-cent increase in Fall 2010. Moreover, the USPS estimates that if it was allowed to make adjustable delivery schedules it could save $3.1 billion per year, but it needs Congressional approval to do so.
The USPS also had to request Congress's approval to innovate and expand its services into non-postal areas, but that hasn't been approved yet. In other countries the post office is allowed to process payments like a bank, for example. In Japan, the post office is the country's biggest deposit bank. This would be especially nice in the U.S., where 17 million adults are unbanked and 43 million adults are underbanked because they can't get an FDIC-insured bank account. You wouldn't have to build expensive new branches in poor and underserved areas: the post office is already there.
Gingrich conveniently failed to mention that postal workers are not allowed to strike when labor negotations are at an impasse, as private unions are. That's mandated by Congress.
Next, Gingrich failed to mention that the USPS cut back staff by 12 percent from 2008-2010. Yes, they had to pay out inducements to convince some staff to retire early, but it will realize more savings as time goes on. Labor costs have dropped about 6 percent since the 1970s, while the cost of postage has stayed below the inflation rate and taxpayer help has been totally phased out.
Next, Gingrich failed to mention that as the economy goes, so goes postal volume. Since the USPS is dependent on sales for all its revenue, it's having a revenue crisis. At the same time, yes, its "standby hours" rule has required it to pay employees who would otherwise be busy with normal mail volume: $50 million in 2010, which is still 40 percent less standby pay than in 2009.
Finally, Gingrich failed to mention that there are 4 different unions which represent different types of USPS workers, not one.
The bottom line is that Newt Gingrich is a political hack posing as a "big thinker" who loves nothing more than taking a complicated problem and boiling it down to one thing: a greedy union. People like Gingrich abhor complexity and have no patience for facts. Gingrich really does make you dumber.
Gingrich conveniently failed to mention that postal workers are not allowed to strike when labor negotations are at an impasse, as private unions are. That's mandated by Congress.
Next, Gingrich failed to mention that the USPS cut back staff by 12 percent from 2008-2010. Yes, they had to pay out inducements to convince some staff to retire early, but it will realize more savings as time goes on. Labor costs have dropped about 6 percent since the 1970s, while the cost of postage has stayed below the inflation rate and taxpayer help has been totally phased out.
Next, Gingrich failed to mention that as the economy goes, so goes postal volume. Since the USPS is dependent on sales for all its revenue, it's having a revenue crisis. At the same time, yes, its "standby hours" rule has required it to pay employees who would otherwise be busy with normal mail volume: $50 million in 2010, which is still 40 percent less standby pay than in 2009.
Finally, Gingrich failed to mention that there are 4 different unions which represent different types of USPS workers, not one.
The bottom line is that Newt Gingrich is a political hack posing as a "big thinker" who loves nothing more than taking a complicated problem and boiling it down to one thing: a greedy union. People like Gingrich abhor complexity and have no patience for facts. Gingrich really does make you dumber.
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This week, U.S. Postmaster General Patrick Donahue plans to announce that all future stamps sales will be so-called "forever stamps," which can still be used even if postage rates go up.
Anyone who has had to hunt around for 1 or 2 cent stamps to add to their old stamps after an increase may consider this good news.
However, consider the implications of this action. The Post Office is currently experiencing a severe budget deficit and has been unable to gain approval for a postal rate increase. In addition, they are threatening to stop delivering mail on Saturdays as a way to cut costs. As Peter Schiff astutely points out in this interview with The Daily Bell, the Post Office is trying to solve their short term revenue problems at the cost of even bigger problems down the road.
The Post Office will try to use any short term increase in sales from these forever stamps to solve their immediate fiscal problems. But if the Post Office is already having trouble operating at full capacity with current prices, imagine how difficult it will be to do so in five or ten years after inflation has pushed their costs up AND they are selling even fewer stamps because so many people already purchased them in the past.
In fact, this move is setting the stage for a future taxpayer bailout of the Post Office because it virtually guarantees its future bankruptcy.
The low price of stamps is not the reason why the Post Office is facing such huge deficits. The Post Office is seeking a 5.6% increase in the price of stamps despite an inflation rate of just 0.6%.
Instead, the Post Office is facing budget shortfalls because it is unwilling to engage in the necessary reform of its operations necessary in the modern economy.
As I discussed in To Save America, which is now out in an updated paperback version, the Post Office's union work rules require it to pay a large group of employees more than a million dollars a week to do nothing. Instead of being able to lay off redundant workers, the Post Office (and by extension, every American who uses the mail) keeps them on salary through a program called "standby time."
If the Post Office really wants to solve its fiscal challenges, it needs to engage in the difficult work of reforming its operating procedures, including its suffocating and costly union work rules like "standby time."
Congress should block the Post Office from implementing this genuinely dumb move and force it to confront the true cause of its budget woes and implement real reform.
Your friend [No, enemy! - J],
Newt
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