NCPA - National Center for Policy Analysis

Postal Service Announces $8.5 Billion Loss

November 22, 2010

The U.S. Postal Service (USPS) has announced a net loss of $8.5 billion for fiscal 2010.  Since 2006, the USPS has lost $20 billion, and the organization is close to maxing out its $15 billion line of credit with the U.S. Treasury.  Although the USPS has achieved some cost savings, they haven't been enough to overcome a large drop in revenue due to the recession and the greater use of electronic alternatives by the public, says Tad DeHaven, a budget analyst on federal and state budget issues for the Cato Institute.

The USPS is required to make substantial annual payments to prefund retiree health care benefits.

  • Last year, Congress allowed the USPS to postpone $4 billion of its fiscal 2009 into the future.
  • However, Congress did not provide similar relief on this year's required payment of $5.5 billion.

Critics of the retiree health care prefunding requirement argue that no other federal agencies or private companies face such obligations.  The argument is largely irrelevant for two reasons.  First, the federal government's financial practices are nothing to emulate.  Second, very few private sector workers even receive retiree health care benefits.

  • In 2008, only 17 percent of private sector workers were employed at a business that offered health benefits to Medicare-eligible retirees, down from 28 percent in 1997.
  • The actual number of private sector workers receiving these benefits is even lower, as not all employees employed at the 17 percent of businesses that offers retiree health benefits are eligible to receive them.

Policymakers should properly view the retiree health care benefit as a symbol of postal labor excess, which continues to weigh the USPS down like an anchor.  Therefore, they should avoid allowing the USPS to further postpone these payments into the future, which could lead to a taxpayer bailout, says DeHaven.

Source: Tad DeHaven, "Postal Service Announces $8.5 Billion Loss,", November 17, 2010.

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