This is part of DeJoy’s wider cost-cutting plans that were approved in March and are coming into effect now. The are transitioning towards ground transportation vs air mail, increasing postage costs, reducing office hours, automating some processes, and more. It’s all to mitigate a projected $168b loss over the next 10 years. This wouldn’t be needed if they weren’t mandated to pre-fund their retirement accounts or buy separate health insurance, but that is up to Congress to fix.
Don't forget, it's a service. It doesn't lose money, it costs money. Otherwise please always say "lost" instead of "costs" for all military spendings, and all other government agencies.
> Most of the quasi-confusion can be traced back to the 1971 Postal Reorganization Act, which eliminated the old Post Office Department, replacing it with the US Postal Service. The act was intended to make the USPS self-financing from its own revenues, and to make it an independent, non-political public service. Prior to the PRA, postmasters (including the postmaster general) were political appointees; rates were set by Congress, and the POD had to go through the appropriations process to get the money it needed to operate.
USPS is a special case of government services which is neither a traditional agency nor a government-owned corporation. Its got a weirdly specific charter that was carved out to protect private shipping companies- for example they cannot buy their own planes. They simultaneously have to deliver mail to all US addresses with uniform pricing 6 days/week AND be operate without tax dollars. I use the term loss here because that is what they use, for example in their annual report:
https://about.usps.com/what/financials/annual-reports/fy2019...
What a boondoggle: the private shipping companies use the USPS to deliver to unprofitable routes as they have no such mandate. Imagine if NASA were similarly kneecapped to protect private space companies - it'd be awful.
NASA's been kneecapped by Congress, several presidential administrations, and itself for decades. If private space corporations like SpaceX eat NASA's lunch in the next decade or so, it'll be in spite, not because of them.
Maybe for the better - SpaceX, et al haven't incinerated any crew on the ground, blown up any crew during the ascent, nor burned up any crew in re-entry by ignoring their engineers in favor of their political appointees.
I agree with the sentiment but for all intents and purposes, pretty much any organ within a State is run like a for-profit corporation. Their "income" is taxation, fines, etc.
I believe the stark difference is, that a private company can spend what it earns, while the budget of government agencies or the military is basically arbitrary (committee-decided). Usually we would weigh agency spending against the value their service directly or indirectly provides. While a company's spending is weighed against its direct earnings.
Well, a private company can raise capital, so it can spend beyond what it earns, similarly to how the government budget can exceed tax receipts by issuance of debt and other methods.
The military budget is decided by a sort of committee (many of them, in fact, and not just Congress), but private companies all have ways of parceling out a budget as well, it's not as if most staff are literally paid out of their own personal direct sales. And the way that budget is decided almost invariably involves committees. The current DoD funding model was actually taken from what Ford Motor Co. used in the 60s.
When we were at risk of government shutdown earlier in the week, our office within the agency was relatively immune to the potential shutdown as our civilian staff are nearly all paid out of 'working capital' funds which are modeled after a direct earnings model, rather than being paid out of 'appropriated' funds which would have been at risk absent action from Congress.
Everyone should be mandated to pre-fund their retirement accounts. Not doing so is part of why we get so many fewer government services while paying ever higher percentage of GDP.
"This wouldn’t be needed if they weren’t mandated to pre-fund their retirement accounts"
Retirement account funding is a cost of employing today's employees. It should be paid out of today's revenues.
If not, you could easily end up in a situation where your retirement benefit expenses exceed your revenues (let alone profits) and you have no way to pay.
No other company has to do this. They created this rule specifically to make the USPS run at a loss so they would have a reason to gut it. And that's what they're doing now, gutting it.
do you have a source for this? the USPS claims "Unlike any other public or private entity, under a 2006 law, the U.S. Postal Service must pre-fund retiree health benefits. [1]" and everything else i've seen on the topic agrees that this is a requirement unique to the USPS.
2. retiree health benefits (what you are talking about)
For #1, all private companies have to pre-fund them.
For #2, private companies don't usually have to pre-fund them because (i) most companies don't offer medical insurance for retirees, and (ii) even if they do, they are discretionary (i.e. unlike the pension, the benefits can be cut/eliminated).
Correct. The 2006 law being referenced was trying to lock in retirement health benefits to USPS workers that were generally not available to private sector workers. It was one of the many pieces of union pork in that bill, and there is no end of irony that it is being portrayed as some nefarious Republican plot to kill the post office. It is not about how the benefits are funded but that congress mandated these benefits that disadvantages the post office by raising their labor costs.
Of course the post office is advantaged in many other ways -- e.g. it is illegal for a private agency to deliver mail, only the USPS is allowed to do that. Fortunately, the post office is magnanimous enough to allow private courriers to deliver mail if they purchase a stamp and then cancel it! Why must they purchase a stamp and affix it to the letter? Because it is illegal to place anything in a mailbox (even if you own the mailbox) without postage and only the USPS can collect postage. The USPS is also the only company that it is illegal to undercut by offering letter delivery for less than the USPS charges. IIRC, you have to charge at least six times as much, thus FedEx will never be able to outcompete the USPS on letter delivery as it's only allowed to operate under the "extremely urgent" mail loophole which requires higher charges mandated by law.
"The USPS actually enforces these rules from time to time. For example, Equifax learned a terrifying lesson in 1993. Armed USPS inspectors raided the company’s Atlanta headquarters to determine whether or not the letters the company had been sending via FedEx were indeed “extremely urgent” as required by the Private Express Statutes. The letters didn’t pass the test, and Equifax ended up having to pay a $30,000 fine."[1]
"it is illegal for a private agency to deliver mail"
At least there's some rationale for this. National postal agencies typically have monopolies, but the flip side is they have universal service obligations, i.e. they have to deliver mail to even unprofitable locations, e.g. rural areas.
This is analogous to taxi regulation: in theory, the monopoly granted to medallion holders has a flip side: rates are fixed, and they can't discriminate between riders based on destination.
In practice, taxis in NYC skirt these regulations pretty often.
Yeah, I understand the logic. But I was pointing out that yes, while Congress does mandate retiree health benefits for postal workers, it also advantages the USPS in other ways. It is a weird monopoly, with all sorts of carve outs. I am not advocating for some kind of drastic postal reform one way or another.
Private companies have to fund retirement benefits. The US government doesn't -- which is why there's arguments over why the US debt is around 20 trillion (current bonds outstanding) or over 100 trillion (including unfunded social security benefits).
Also, unfunded US govt retirement benefits come in two forms:
A) future pension and medicare costs, for people who are alive today, and
B) future retirement benefits for current and former govt employees
IMO (B) should be prefunded (or at least have an actuarial value on the govt balance sheet) because it's an actual liability.
But whether or not (A) should be treated the same way depends on whether the benefits are fixed as of now, or whether they can be reduced/eliminated if they take too large a part of the total budget at the time they're due to be paid.
Agreed, although (a) the fact that social security is the "third rail of politics" suggests that while it's not a contractual obligation like employee retirement benefits, it's effectively an unavoidable obligation; and (b) even if the future value of benefits to be paid out isn't recorded as a liability, the social security taxes paid should probably be treated as "deferred revenue" since that revenue is at least theoretically being gathered for the purpose of paying the future benefits in question.
Yes, taxes collected by govt effectively go into a single pool. The money is not ringfenced for particular purposes.
Both in the UK (where I'm from) and in the US (where I live now), there are separate taxes ('social security' in the US, 'national insurance' in the UK), but the AFAICT this is just a trick to obscure the true rate of payroll/income taxes.
> No other company has to do this. They created this rule specifically to make the USPS run at a loss so they would have a reason to gut it.
This is a great reason to not get your news from John Oliver, as everything you have said in this comment is false (except I'm sure the link works).
"Prefunding" a retirement account is the only way a private retirement account is ever funded. Normal people call it "set aside" or "fund". The alternative is to
1) not have a retirement benefit,
2) a social security pay-as-you-go system, which is not legal for any private company to have. In a pay-as-you-go system, there is no pension fund but workers get paid benefits from the company's general revenue. You can understand why that may be legal for the government, but not a private business (which can go bust). Private businesses are forced to set aside money for retirement benefits as the liabilities accrue. Obviously this creates a pain point when an arm of the government is privatized. But that doesn't mean we allow private companies to pay pensions out of general revenue just because they used to be public in the past.
Even those companies which no longer offer defined benefit plans but only make some 401K contributions still make those contributions to a fund in the worker's name each year, before the worker retires. They "prefund". All private companies "prefund". Have you heard of the phrase "pension fund"? That's the fund into which companies must make payment ahead of retirement when a worker is working and then the worker draws those down when he retires. Forcing companies to set those funds aside ahead of time for each worker is how we fight the temptation to skimp on those contributions and kick the can down the road. Companies that do skimp on pension fund contributions are committing fraud and this creates a big mess as the government has to bail them out or workers end up not getting their retirement checks.
What's interesting is where this misinformation came from as it's so popular on the left. There are all sorts of conspiracy theories about "gutting" the post office, but what I think is the key problem is the refusal to acknowledge there might be a tension between the generous retirement benefits negotiated by the postal workers union and the fact that the post office is facing financial shortfalls. And instead of acknowledging these real trade offs, it is some supposed unfair accounting rule that is causing problems for the post office and not, you know, all the money they are promising to pay workers when they retire.
Right. Generous retirement benefits for public sector employees are a trick played on taxpayers by politicians and those responsible for negotiating the contracts (those representing the govt, and unions representing current govt employees).
Most people think government employees are paid much less than they would be in the public sector, but that's because it's not obvious to most of us:
a. just how much it costs to fund a defined-benefit pension scheme, when asset yields are so low
b. how early people can retire with a 'full pension'
c. the low performance bar and difficult of firing a govt employee, even for cause
What on earth has DeJoy (I'm really not a fan) to do with service disruptions in Germany due to flooding there to give one example linked on that page? The USPS is handing off parcels and some countries struggle to deliver them for various reasons, Covid being one of them but if you check out the different countries there are a wide range of events that can disrupt deliveries.
Is it? I have been trying to send mail to Reunion for over a year, and it was stopped during COVID. Dejoy is worse than human shit, but … I don’t know that this is his doing.
