Is the Postal Service Like Greece?

By on December 5, 2012 in Current Events with 16 Comments

Postmaster General Patrick Donahoe has been issuing warnings about the Postal Service’s dire financial status. He recently said, “If we don’t do something about the costs of this organization, we will look like Greece.”

Tax Foundation fellow Dr. Michael Schuyler decided to analyze this statement in a recent Tax Foundation report to see if it was accurate.

Schuyler said, “In using Greece as a cautionary example, Mr. Donahoe probably had multiple objectives: reconcile stakeholders to the need for operational changes at the Postal Service, dissuade Congress from blocking adjustments that the Service can make under current law, and prod Congress to enact the Service’s legislative agenda.”

Schuyler also said that the Postal service may have already defaulted in 2011 when it temporarily suspended some payments to FERS for its workers’ pension funds.

However, the crux of the report notes that there are some encouraging differences between Greece and the Postal Service, namely:
The Postal Service has not attempted to deny its problems
The Postal Service has engaged in significant self-help measures
Although the Postal Service’s losses are so extreme that they would likely have driven a private sector business into bankruptcy, they almost look good compared to what Greece was facing.

On the third point, Schuyler points out that 2012 USPS debt was 24.4% of revenue whereas for Greece, its government debt was more like 400%.

The Postal Service’s obligation to fund retiree health benefits is always cited as a major culprit of the losses. On this point, Schuyler says:

If Congress did not require the Service to put aside money to pay the costly health benefits it promises its workers after they retire, the deficits it reported in the last several years would have been substantially reduced and so would its reported deficits in the near future. Some stakeholders claim from this that the Service’s problems are artificial, the fault of a funding requirement Congress imposed in 2006 as part of the Postal Accountability and Enhancement Act (PAEA, P.L. 109-435). They assert that the Service is, in reality, in fairly good shape. It should be noted, however, that even if the RHBF is entirely ignored, the Service would have lost $4.8 billion in 2012, $5.1 billion in 2011, $3.0 billion in 2010, and $2.4 billion in 2009. Losses of $4.8 billion, $5.1 billion, $3.0 billion, and $2.4 billion caused by problems other than the RHBF do not equal performing well. No wonder Postmaster General Donahoe characterized as “irresponsible” the argument that the Service would be fine except for retiree health benefit contributions.

The report ultimately concludes that the analogy to Greece was designed to bring attention to the Postal Service’s situation, even though the numbers show it technically isn’t as bad as Greece. However, Schuyler says that if the Postal Service were to ever start pretending its problems don’t exist, the situation could take a turn for the worse.

The full report offers additional statistics and details on the Postal Service’s finances.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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