Our reporting last week on a Brookings Institution study advocating that part of the U.S. Postal Service be sold off drew angry and passionate responses from postal employees, unions and liberal bloggers.
Elaine Kamarck, a former Clinton administration official, joined conservatives in arguing in her Brookings report that a money-losing post office cannot survive as a government entity in the Internet age, which has sapped its First Class mail business.
Karmack says the best path forward for the Postal Service requires breaking it in two. One arm would continue to deliver the mail five days a week. The other would stake out new business with no encumbrances.
Here’s the other side.
The two largest postal unions, fearful that thousands of jobs would be lost through privatization, have said for a long time that the Postal Service’s multibillion-dollar deficits are artificial. The agency’s eight consecutive annual losses, totaling more than $52 billion, are largely due to its obligation (imposed in 2006 by Congress as part of a sweeping postal bill) to pay $5.5 billion a year and counting toward the health benefits of future retirees.
Yes, the volume of First Class mail — the Postal Service’s most profitable product — is in a downward spiral, union leaders acknowledge. Yes, the recession brought still steeper losses.
But if not for the pre-funding mandate, required by no other public or private entities, they argue, the post office would be making money today, with the recession over and its package business booming.
“She jumped to incorrect conclusions about what’s driving the losses,” Jim Sauber, chief of staff for the National Association of Letter Carriers, the largest postal union, said of Kamarck’s report.
“The conventional wisdom is that the Internet is killing the post service,” said Sauber, an economist. “I’m not denying that the Internet is having profound effects both positive and negative. But most of the loss is from the pre-funding [requirement] and the recession itself.”
The agency’s finances have stabilized in the past two years, with revenue more than covering expenses by about $1.2 billion during the first three quarters of this year. That’s without the pre-funding payment, which postal officials have now defaulted on multiple times, or long-term obligations to workmen’s compensation costs. The higher revenue is largely driven by cost cutting, from shrinking the workforce to closing mail-sorting plants.
Numerous bills in Congress have called for eliminating the retiree payment, a budget maneuver at the time that most postal observers agree more than covers the agency’s obligations to future retirees. However, Congress has so far shown little appetite for fixing postal finances.
But even without the pre-funding mandate, experts say the post office is not in a healthy financial position long-term. It remains on the Government Accountability Office’s high-risk list, with auditors characterizing its short-and long-term outlook as a “serious financial crisis” earlier this year.
Workmen’s compensation debts, $15 billion owed to the U.S. Treasury, lagging investment in new vehicles, equipment and maintenance — these are persistent weaknesses. And most of a 3-cent rate increase that postal officials were able to count on for hundreds of millions of dollars in new revenue since 2013 is set to expire this spring.
Still, the unions don’t buy the assumption that the Postal Service is in such free fall that the best option is to sell it. They also don’t buy the claim that taking its most profitable arm, its package business, private would come close to covering the expenses of its unprofitable arm, universal delivery of the regular mail.
“We would deny the public the right to universal and uniform mail service at reasonable cost,” said Mark Dimonstein, president of the American Postal Workers Union. “It will be about whether someone can make a dollar as opposed to a right that has its foundation in the U.S. Constitution.”
Sauber and Dimondstein say their commitment to saving jobs for their members goes hand in hand with their concern that private companies would simply cherry-pick the most profitable mail routes.
“Who’s going to serve Montana or Utah?” Sauber said. “You can’t make money delivering the mail there. We’d fight like hell to protect the standard of living of our members, but what you would have is a much smaller, weaker postal industry.”
Dimondstein said the exploding e-commerce business survives on the public infrastructure of the postal system: Post offices, mail carriers, mail sorting plants. “There’s not a private entity that could do all that.”