5

This video says the USPS requires a $6 billion bailout every year.

  • Why does it need a bailout every year?
  • When did the USPS first offer pensions?
  • Was the USPS underfunding their pensions?
  • What would happen if the USPS failed to fund their pensions?
  • 1
    Wow ... that video. It's like "what would happen if Saul Goodman entered politics?" – user11249 Oct 14 '17 at 0:16
  • 2
    @Carpetsmoker I thought it was amusing. Better than "what would happen if a reality TV start entered politics?" – Chloe Oct 15 '17 at 20:01
5
  • Why does it need a bailout every year?

    As usual with accounting, because the income is less than expenses. Specifically, expenses related to paying its liabilities.

    Income is obvious - advent of electronic communications (and competition from UPS and FedEx to top that off) drove down revenues significantly since 2000.

    As far as expenses (and liabilities): By federal law of 2006, USPS is required to pre-fund both its pension and retiree healthcare benefit liabilities (this is important - the fiscal issues aren't from pensions themselves but from pre-funding of Retiree Health Benefits Fund - RHBF).

    The audit explains that the Postal Service lost $62.4 billion between FY 2007 and FY 2017, with $54.8 billion of these losses relating to retiree health care prefunding that it had been required to pay down as part of Postal Accountability and Enhancement Act of 2006. This law required the agency to prefund its looming liabilities by contributing between $5.4 billion to $5.8 billion annually from 2007 and 2016 to the Postal Service Retirement Health Benefits Fund. Instead, it has defaulted on required payments since 2011. (source)

    enter image description here

    This R Street article has some more chart porn on the topic for those monetarily inclined.


  • When did the USPS first offer pensions?

    Interestingly, I was unable to find any details but, presumably, 1971 when it was first established as a company separate from Post Office Department

    A separate interesting question is whether USPS inherited its liabilities (and if they were funded) from POD.


  • Was the USPS underfunding their pensions?

    As usual with Facebook relationships life, "it's complicated.

    • They were NOT underfunding their pensions till 2006. Not only that, but ironically, this whole mess started because OMB found that USPS was overfunding Civil Service Retirement System (CSRS) pensions liability to the tune of $70B! :)

    • They continued funding their pensions fully till 2011


  • What would happen if the USPS failed to fund their pensions?

    I wasn't able to find the authoritative source yet but, presumably, they would become Yet Another Liability for PBGC (Pension Benefit Guaranty Corporation), which is what happens to all other private companies in USA.

| improve this answer | |
  • How can they overfund their pensions $70B when the chart shows they only made $0.9B income in 2006? – Chloe Oct 14 '17 at 0:56
  • 2
    "As usual with accounting, because the income is less than expenses." On an accrual basis, yes. On a cash basis of accounting, no. The answer depends on accounting conventions. – ohwilleke Oct 14 '17 at 20:44
  • 1
    Wow I read the first link and I can't believe they had the nerve to try "pay-as-you-go" when the writing is on the wall they will be gone in 75 years. They've lost money most of their entire existence (from the chart in another answer) and they expect to "pay-as-you-go"? Seriously? With people living much longer? They are just trying to promise the moon to suckers to get them to work there, with no real intention of fulfilling their commitment, knowing they will be long gone. – Chloe Oct 15 '17 at 20:07
  • 4
    @Chloe that's not entirely true. It's not a traditional for-profit business. It's a private company running a service mandated by congress. It's a rather unique thing and yea, a bit of mess. About the only parallel I can think of is Amtrak...also an entity that's supposed to be self-sufficient financially, but restricted by congressional mandates out of its control. – user1530 Oct 15 '17 at 21:14
  • 2
    @blip It's worth pointing out that USPS is not a private company, nor is it a government-owned company. It's just a part of the executive branch. Amtrak and the TVA are government owned companies (the TVA in particular is a poster child for why we should nationalize anything resembling a utility and follow it's example.) – Jack Of All Trades 234 Oct 16 '17 at 18:42
6

Why does it need a bailout every year?

The USPS is expected to be self financed and profitable, but has to also adhere to regulatory burdens that other carriers don't have to deal with such as:

  • mandated retirement plans
  • mandated pricing limits
  • mandated service areas

And, of course, they need to compete with FedEx and UPS that don't have these types of mandates in an increasingly shrinking market.

That said, USPS does not take taxpayer money. The 'bailout' talk refers to particular subsidies they receive. Plenty of industries and corporations receive subsidies and it's certainly valid to argue the validity of any of them but it's not quite fair to call them 'bailouts'.

As for the pension issue, note the major painpoint is the retirees' medical expenses which have been underfunded for several years which may lead to an actual bailout at some point.

| improve this answer | |
  • 1
    The first article says specifically states it does take taxpayer money, and it's much worse than $6B. And you can't operate most of 100yr existence at a loss without a bail out. It just fails to menstion it. The second article says it defaulted five years in a row. – Chloe Oct 15 '17 at 15:03
  • 1
    @chloe In the form of subsidies/loans. – user1530 Oct 15 '17 at 17:25

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .