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Citation? The linked article says: >The agency would be in a much stronger financial position had Congress not passed the Postal Accountability and Enhancement

by mthoms 6y ago

Citation? The linked article says: >The agency would be in a much stronger financial position had Congress not passed the Postal Accountability and Enhancement Act (PAEA) in 2006, which “requires the Postal Service, which receives no taxpayer subsidies, to prefund its retirees’ health benefits up to the year 2056,” on a 50-year basis. > According to the Institute for Policy Studies (IPS) in 2019: “If the costs of this retiree health care mandate were removed from the USPS financial statements, the Post Office would have reported operating profits in each of the last six years.” >“[N]o other entity, private or public, has to make” such provision for future health benefits of current and future retirees so far in advance. Private companies also can change their health benefits without an act of Congress, unlike the Postal Service. “Current reserves of $47.5 billion could be used to pay expected pay-as-you-go retiree health care costs 10-15 years into the future,” IPS noted. >The 2006 law also bars the Postal Service from obtaining other revenue by providing “nonpostal services,” such as offering banking services or opening cafes at post offices. And it also limits the ability of the Postal Service to raise rates beyond the rate of inflation.

treis 6y ago
There's two separate things here: (1) Book profit: it appears that they're arguing if you ignore pension cost the USPS is profitable. But that's a meaningless point. Its like saying if you ignore what they spend on gas then they'd be profitable. Obviously you can't just ignore costs when calculating profit. These pension obligations are real costs that have to be accounted for. (2) Cash flow: This is where pension prefunding comes into play. The USPS is running out of cash and if they didn't have to save it would take them longer to do so. But since they're not actually making the payments the law doesn't impact their cash position. The USPS has about a 100 billion dollars in pension liability that they can't pay. And they haven't actually made money in like 15 years. Tax payers are on the hook for that and the amount they're on the hook for goes up by billions every year. From the postmaster general: >. In order to ensure that we had sufficient liquidity to fulfill our primary statutory mission of providing universal postal service, we were forced to default on $33.9 billion in mandated prefunding payments for RHB for the years 2012 through 2016. Additionally, we did not make $6.9 billion in payments due to OPM in both 2017 and 2018 for normal costs and amortization of RHB, Civil Service Retirement System (CSRS), and Federal Employees Retirement System (FERS) unfunded liabilities. Without these defaults, the deferral of critical capital investments, and the aggressive management actions described above, we would not have been able to pay our employees, our suppliers, or deliver the mail. >Due to the factors outlined above, we do not have sufficient cash to meet all of our existing legal obligations, fully pay down our debt, and maintain a sufficient level of liquidity to ensure continuity of postal operations and meet our universal service obligation. https://about.usps.com/news/testimony/2019/pr19_pmg0430.htm https://about.usps.com/news/testimony/2019/pr19_pmg0430.htm
- mthoms 6y ago
  > it appears that they're arguing if you ignore pension cost the USPS is profitable. Its like saying if you ignore what they spend on gas then they'd be profitable. Obviously you can't just ignore costs when calculating profit. You're skirting the primary issue. This "cost" is manufactured and is a burden that no other entity (private or governmental) even comes close to having to bear. It's all in the submitted article but here's more. From [0]: >Passed by a Republican-led Congress and signed into law by President George W. Bush, the PAEA gave the Postal Service new accounting and funding rules for its retiree pension and health benefits. Up until 2006, the USPS funded those obligations on a pay-as-you-go-basis, pulling out of its pension fund and adding to it as retirees' costs came in. But the PAEA required the Postal Service to calculate all of its likely pension costs over the next 75 years, and then sock away enough money between 2007 and 2016 to cover most of them. >This is one of those ideas that sounds responsible on the surface but is actually pretty nuts. >Consider your average 30-year mortgage. What if you had to set aside a few hundred thousand dollars right now, enough to pay the whole thing, even if you were still going to make payments over 30 years? No one would ever take out a mortgage. That's the whole point: the costs only come in over time, and the income you use to pay them comes in over time as well. It works exactly the same for retiree pensions and benefit funds. Which is why, as economist Dean Baker pointed out to Congress, pretty much no one else does what the PAEA demanded of the Postal Service. >Meeting Congress' arbitrary mandate required putting away an extra $5.6 billion per year. "It is equivalent to imposing a tax of 8 percent on the Postal Service's revenue," Baker said. "There are few businesses that would be able to survive if they were suddenly required to pay an 8 percent tax from which their competitors were exempted." Then, citing a quote form the Postmaster General that contradicts your position, you said: > This is where pension prefunding comes into play. The USPS is running out of cash and if they didn't have to save it would take them longer to do so. But since they're not actually making the payments the law doesn't impact their cash position. But they made payments from 2007 to 2012 (at the expense of modernizing). The Inspector General is pretty clear on this (emphasis mine) [0]: > Eventually, the burden became too great, and the USPS began defaulting on the PAEA payments in 2012. But the damage was done. The Postal Service lost $62.4 billion between 2007 and 2016, and its own Inspector General attributed $54.8 billion of that to prefunding retiree benefits. Without the PAEA, the Postal Service wouldn't be doing stellar. (Though you could plausibly blame many of its remaining struggles on the Great Recession.) But it probably would've spent at least part of the last decade making comfortable profits. > "The Postal Service's $15 billion debt is a direct result of the mandate," the Inspector General wrote in 2015. "This requirement has deprived the Postal Service of the opportunity to invest in capital projects and research and development." And from [1]: >The deep hole of debt that is currently facing the U.S. Postal Service (USPS) is entirely due to the burdensome prepayments for future retiree health care benefits imposed by Congress in the PAEA. By June 2011, the USPS saw a total net deficit of $19.5 billion, $12.7 billion of which was borrowed money from Treasury (leaving just $2.3 billion left until the USPS hits its statutory borrowing limit of $15 billion). This $19.5 billion deficit almost exactly matches the $20.95 billion the USPS made in prepayments to the fund for future retiree health care benefits by June 2011. If the prepayments required under PAEA were never enacted into law, the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion. [0]: https://theweek.com/articles/767184/how-george-bush-broke-post-office https://theweek.com/articles/767184/how-george-bush-broke-po... [1]: https://mronline.org/2011/09/23/the-manufactured-financial-crisis-of-the-u-s-postal-service/ https://mronline.org/2011/09/23/the-manufactured-financial-c... See also: https://www.bloomberg.com/opinion/articles/2018-04-04/congress-not-amazon-messed-up-the-u-s-postal-service https://www.bloomberg.com/opinion/articles/2018-04-04/congre... Side note: Admittedly, these are opinions pieces but appear to be well sourced (especially [1]). If you have any numbers or quotes that contradict these then by all means provide them.

by mthoms 6y ago

treis 6y ago

There's two separate things here: (1) Book profit: it appears that they're arguing if you ignore pension cost the USPS is profitable. But that's a meaningless point. Its like saying if you ignore what they spend on gas then they'd be profitable. Obviously you can't just ignore costs when calculating profit. These pension obligations are real costs that have to be accounted for. (2) Cash flow: This is where pension prefunding comes into play. The USPS is running out of cash and if they didn't have to save it would take them longer to do so. But since they're not actually making the payments the law doesn't impact their cash position. The USPS has about a 100 billion dollars in pension liability that they can't pay. And they haven't actually made money in like 15 years. Tax payers are on the hook for that and the amount they're on the hook for goes up by billions every year. From the postmaster general: >. In order to ensure that we had sufficient liquidity to fulfill our primary statutory mission of providing universal postal service, we were forced to default on $33.9 billion in mandated prefunding payments for RHB for the years 2012 through 2016. Additionally, we did not make $6.9 billion in payments due to OPM in both 2017 and 2018 for normal costs and amortization of RHB, Civil Service Retirement System (CSRS), and Federal Employees Retirement System (FERS) unfunded liabilities. Without these defaults, the deferral of critical capital investments, and the aggressive management actions described above, we would not have been able to pay our employees, our suppliers, or deliver the mail. >Due to the factors outlined above, we do not have sufficient cash to meet all of our existing legal obligations, fully pay down our debt, and maintain a sufficient level of liquidity to ensure continuity of postal operations and meet our universal service obligation. https://about.usps.com/news/testimony/2019/pr19_pmg0430.htm https://about.usps.com/news/testimony/2019/pr19_pmg0430.htm

mthoms 6y ago
> it appears that they're arguing if you ignore pension cost the USPS is profitable. Its like saying if you ignore what they spend on gas then they'd be profitable. Obviously you can't just ignore costs when calculating profit. You're skirting the primary issue. This "cost" is manufactured and is a burden that no other entity (private or governmental) even comes close to having to bear. It's all in the submitted article but here's more. From [0]: >Passed by a Republican-led Congress and signed into law by President George W. Bush, the PAEA gave the Postal Service new accounting and funding rules for its retiree pension and health benefits. Up until 2006, the USPS funded those obligations on a pay-as-you-go-basis, pulling out of its pension fund and adding to it as retirees' costs came in. But the PAEA required the Postal Service to calculate all of its likely pension costs over the next 75 years, and then sock away enough money between 2007 and 2016 to cover most of them. >This is one of those ideas that sounds responsible on the surface but is actually pretty nuts. >Consider your average 30-year mortgage. What if you had to set aside a few hundred thousand dollars right now, enough to pay the whole thing, even if you were still going to make payments over 30 years? No one would ever take out a mortgage. That's the whole point: the costs only come in over time, and the income you use to pay them comes in over time as well. It works exactly the same for retiree pensions and benefit funds. Which is why, as economist Dean Baker pointed out to Congress, pretty much no one else does what the PAEA demanded of the Postal Service. >Meeting Congress' arbitrary mandate required putting away an extra $5.6 billion per year. "It is equivalent to imposing a tax of 8 percent on the Postal Service's revenue," Baker said. "There are few businesses that would be able to survive if they were suddenly required to pay an 8 percent tax from which their competitors were exempted." Then, citing a quote form the Postmaster General that contradicts your position, you said: > This is where pension prefunding comes into play. The USPS is running out of cash and if they didn't have to save it would take them longer to do so. But since they're not actually making the payments the law doesn't impact their cash position. But they made payments from 2007 to 2012 (at the expense of modernizing). The Inspector General is pretty clear on this (emphasis mine) [0]: > Eventually, the burden became too great, and the USPS began defaulting on the PAEA payments in 2012. But the damage was done. The Postal Service lost $62.4 billion between 2007 and 2016, and its own Inspector General attributed $54.8 billion of that to prefunding retiree benefits. Without the PAEA, the Postal Service wouldn't be doing stellar. (Though you could plausibly blame many of its remaining struggles on the Great Recession.) But it probably would've spent at least part of the last decade making comfortable profits. > "The Postal Service's $15 billion debt is a direct result of the mandate," the Inspector General wrote in 2015. "This requirement has deprived the Postal Service of the opportunity to invest in capital projects and research and development." And from [1]: >The deep hole of debt that is currently facing the U.S. Postal Service (USPS) is entirely due to the burdensome prepayments for future retiree health care benefits imposed by Congress in the PAEA. By June 2011, the USPS saw a total net deficit of $19.5 billion, $12.7 billion of which was borrowed money from Treasury (leaving just $2.3 billion left until the USPS hits its statutory borrowing limit of $15 billion). This $19.5 billion deficit almost exactly matches the $20.95 billion the USPS made in prepayments to the fund for future retiree health care benefits by June 2011. If the prepayments required under PAEA were never enacted into law, the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion. [0]: https://theweek.com/articles/767184/how-george-bush-broke-post-office https://theweek.com/articles/767184/how-george-bush-broke-po... [1]: https://mronline.org/2011/09/23/the-manufactured-financial-crisis-of-the-u-s-postal-service/ https://mronline.org/2011/09/23/the-manufactured-financial-c... See also: https://www.bloomberg.com/opinion/articles/2018-04-04/congress-not-amazon-messed-up-the-u-s-postal-service https://www.bloomberg.com/opinion/articles/2018-04-04/congre... Side note: Admittedly, these are opinions pieces but appear to be well sourced (especially [1]). If you have any numbers or quotes that contradict these then by all means provide them.