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Postal Service Set to Default on Pension Payment for First Time, but Congress Could Easily Fix the Problem
Think Progress / News Analysis
Published: Thursday 19 July 2012
“A vast majority of postal offices under consideration for closure are located in rural areas, where poverty rates are higher than the national average.”
In 2006, the Republican-led Congress passed an unnecessary law requiring the United States Postal Service to prefund its pension benefits for 75 years through a $5.5 billion annual payment. The Postal Accountability and Enhancement Act of 2006 (PAEA) is theonly one of its kind for a government agency. On August 1st of this year, the Post Office will likely default for the first time in its history on its 2011 pension payment. If Congress does not act, it will also default on its 2012 payment due September 30th.
The requirement has drastically harmed the functions of the agency, which is used by almost every American. In July, USPS began closing offices around the country to meet the annual payment. By the time current downsizing plans are completed in 2014, Americans will see 229 processing plants closed and 28,000 jobs lost. In June, ten USPS employees launched a multi-day hunger strike to protest the cuts.
Without the pension payment, USPS would have a $1.5 billion surplus instead of a $20 billion shortfall. “[T]hese ongoing liquidity issues unnecessarily undermine confidence in the viability of the Postal Service among our customers,” said USPS spokesman David Partenheimer.
Postal Service cuts also threaten to increase economic inequality. A Reuters analysis released in February found that America’s poorest communities “stand to suffer most if the struggling agency moves ahead with plans to shutter thousands of post offices.”
A vast majority of postal offices under consideration for closure are located in rural areas, where poverty rates are higher than the national average. Nearly 90 percent of Americans without broadband access live in rural areas, making USPS cuts especially harmful to the pocketbooks of rural Americans.
Congressional Republicans have consistently pushed to downsize USPS. In 2011, Rep. Darrell Issa (R-CA) introduced legislation that would end to-the-door mail delivery and put USPS under a control board, moves which would lead to more layoffs and bust postal service unions. Such proposed “fixes” are a thinly-veiled Republican ploy to use the unnecessary PAEA requirement to attack public sector employment.
In April, the Senate passed a bipartisan bill to stretch the pension payments over only 40 years,reducing the annual payment to $2.5 billion. The bill would also return $11 billion to USPS that was overpaid into one of its pension funds. “The longer the House delays consideration of the bill, the longer the uncertainty about the Postal Service’s financial future remains,” said Sen. Scott Brown (R-MA), who co-sponsored the Senate bill. “This is irresponsible and unfair.”
The House is currently preparing to leave for its August recess, making action to prevent a USPS default unlikely.
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By Richard (RJ) Eskow
5 comments on "Postal Service Set to Default on Pension Payment for First Time, but Congress Could Easily Fix the Problem"
July 19, 2012 2:42pm
The way I'm seeing it is that if our own government can default in order to get out of debt responsibility, then it must be ok for the rest of us to do the same thing--after all, things are not only thought for old uncle Sam, but old uncle Sam's family too. I'm sure he, and the banks that control him, will understand that universally applied standards are the only fair standards.
July 19, 2012 3:25pm
Couldn't agree more. And since the government has a printing press all set up to print dollars, shouldn't those be available to the general public, too, maybe at Wal-Mart?
July 19, 2012 1:59pm
Hello Joe, are you Acme Joe? The problem I find with this whole thing is that we had a heavily Democratic Congress for two years, with a Democratic President and nothing was done until after the 2010 elections. Suddenly the postal service brought it's onerous situation to light, when the repugnants in congress would do nothing about it. It's a UNION busting ploy of the first degree. Bust the unions. Sell of the profitable parts of the PS and damn those who are in the hinterlands and the poorer sections of the cities. If you think the PS is bad now (and it is not) wait until there are 25 different companies handling your mail with a different rate for every letter and every town.
July 19, 2012 2:45pm
Simply put, letters would become far to expensive to send, and so too for small parcels. Go to the UPS store and send a 4'x4' box and see what it costs you. In affect, the price of shipping small units will drastically increase, raising prices--once again--on consumers. Incidental, 'consumers" are being turned into "survivalists' in that they are only consuming what they need to survive.
July 19, 2012 11:05am
It certainly does seem ridiculous to require such onerous pension contributions from the post office, particularly as compared to the pay-as-you-go approach for other civil service employees. But at least it’s a refreshing change from finding out only after the money runs out that there are insufficient funds to meet retirement payouts, as is the case with the several California towns that are now flat broke (Stockton, San Bernardino, Mammoth Lakes, and Vallejo) and almost every state, with the worst offenders appearing to be California and Illinois.
Clearly the right solution is for any governmental body—whether federal, state, or municipality—to make regular contributions into individual plans rather than accumulate massive but unnoticed-by-the-public-until-it’s-too-late pension deficits. This also lets taxpayer’s know today what the cost is for future retirement benefits, and would prevent politicians from sweeping these costs under the rug for the next administration and the next generation to grapple with.
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