Snow, rain, heat and hail haven’t yet stopped the mail, but financial insolvency and a looming bailout may stop it altogether. That’s because the United States Postal Service will lose a record $10 billion this year. And because of this financial insolvency, no later than next summer, it will fail to meet payroll. This action most certainly will stop the mail — and leave taxpayers on the hook with a multi-billion-dollar “postage due” bailout bill.
Tackling this challenge presents Congress with an opportunity to save a constitutionally authorized American institution and save it by cutting costs and freeing it to make better decisions. I call it a business restructuring plan. What it promises taxpayers is a better working system without any taxpayer-funded bailout.
The Postal Service is a part of the federal government, but it became an independent agency in 1971 so that it could be run more like a business. In simple terms, this “spin-off” deal gave the newly independent Service billions of dollars in land, buildings, equipment, vehicles, and a trained workforce of 700,000. In return, the Postal Service was required to cover its own expenses, and not rely on taxpayer money. There is however, one small exception: because postal workers are federal employees, taxpayers automatically provide a backstop to certain Postal Service–paid obligations — like pensions and retiree health benefits. It pays the Treasury to cover these costs.
The Postal Service stopped making this payment for its share of employee retirement benefits in late June. Even with a six-week grace period signed into law by President Obama this week, they will miss a $5.5 billion payment for retiree health care. If they do not ultimately make these payments, the American taxpayer will pick up the bill. Even worse, a chorus of voices in Washington — pushed by political allies and others, would rather just pass another a bailout and kick the can down the road another few years.
They say, erroneously, that the Postal Service doesn’t really owe these obligations anymore and that in fact, it has “overpaid” into its retirement funds to the tune of $50–75 billion. The postmaster general and union leaders claim that to “save” the Postal Service, Congress must simply give this money “back.” They are attempting to rebrand a taxpayer-paid bailout as a “refund.”
But like any story about a free lunch, it’s too good to be true. There is no “overpayment.” Postal Service payments to employee pension accounts have always been made fully in accord with the law. Shifting this obligation from the Postal Service to the taxpayer is a “zero-sum game” according to the Congressional Research Service: every dollar the Postal Service does not have to pay is a dollar that the taxpayers do have to pay in the form of a bailout.
The decline in the volume of first-class mail is driven primarily by the unrelenting and absolutely necessary shift of business communication from paper to paperless technology. The challenge this poses to the Postal Service’s business model is not insurmountable. We just need to take the right steps.
We need to make it easier for post offices to be relocated to within other businesses, lowering costs, and expanding service. We need to eliminate unfunded congressional mandates — much of the problem facing overhaul under the current system. We need to reduce surplus and excess infrastructure. We need to get rid of special-interest discounts, like those for political parties. We need to level the playing field for collective bargaining, so that the financial health of the Postal Service is taken into account in labor deals. We need to streamline agency oversight, so the Postal Service can be free to modernize its business model.
Just as with any workable business restructuring plan, there must be triggers and consequences to protect taxpayers: if the Postal Service can’t pay its bills, new leadership must take over and clean up its finances. Every good restructuring deal has these types of accountability measures in place. In an era of big spending bailouts and sky-high deficits, taxpayers deserve iron-clad protection against another bailout being paid for at their expense.
Along with Rep. Dennis Ross and Sen. John McCain, author of the Senate companion bill, I have proposed the Postal Reform Act of 2011 (H.R. 2309, S. 1625), which enacts these commonsense solutions that will return the Postal Service to profitability.
The Postal Service has a record of delivering affordable, reliable mail through rain, snow, sleet, hail, heat and darkness. Protecting this service is going to require real business model changes and not just another blank check from taxpayers.
Rep. Darrell Issa is chairman of the House Oversight and Government Reform Committee.