USPS is going broke because the government decided it needed to be run like a for profit business. Its current business model is burdened with debts (pensions, mostly, and real estate, too) it took on before it was supposed to run like a for-profit business.
Why is the post office going bankrupt?
Factbox: Why the Postal Service is going bankrupt 1 TUMBLING MAIL VOLUMES. Mail volumes in the United States have been on the decline since 2006. 2 PREFUNDING. Congress, in a 2006 law, required the Postal Service to make annual payments to fund 75 years’ worth of future retiree health benefits in 10 years. 3 LABOR COSTS.
Why is the US Postal Service closing thousands of offices?
The U.S. Postal Service has come under scrutiny for a plan to close thousands of post offices – a move the money-losing agency says it must make to avoid bankruptcy. Factbox: Why the Postal Service is going bankrupt | Reuters
What’s wrong with the post office?
The Post Office’s problems are business-wide, because its expenses keep exceeding revenues. The Postal Service was designed to be self-sufficient — unlike other federal agencies, it does not live off dollars collected as taxes.
Is the US Postal Service broke?
USPS is broke. THE SHORT TERM SOLUTION: Include USPS in next round of COVID relief funds. THE LONG TERM SOLUTION: Pass USPS Fairness Act.
Is the post office broke?
USPS is broke. THE SHORT TERM SOLUTION: Include USPS in next round of COVID relief funds. THE LONG TERM SOLUTION: Pass USPS Fairness Act. /1 — Save the Post Office (@USPostOffice911) July 31, 2020 Article continues below advertisement Why is the USPS in trouble? There are several reasons the USPS is suffering.
Why is the US Postal Service in trouble?
The Postal Service’s business model is broken. The demand for its services has plummeted, and private couriers and 21st century delivery modes (drones and delivery robots, for instance) pose tough competition. USPS likely will continue to lose money despite the efforts of its employees and leadership.
Is the US Postal Service closing offices to avoid bankruptcy?
The U.S. Postal Service has come under scrutiny for a plan to close thousands of post offices – a move the money-losing agency says it must make to avoid bankruptcy. The U.S. Postal Service has come under scrutiny for a plan to close thousands of post offices – a move the money-losing agency says it must make to avoid bankruptcy.
Why is the post office closing so many offices?
Laws and political pressures harry its every effort to reduce delivery frequency (presently mandated at six days per week) and shutter money-losing post offices. By law, the vast majority of all USPS positions are held by unionized federal employees who have robust job protections.
Factbox: Why the Postal Service is going bankrupt
Reuters (Reuters) – Following the announcement of a plan to eliminate hundreds of post offices, the United States Postal Service has come under fire.The money-losing service claims that the closures are necessary to prevent bankruptcy.It lost $5.1 billion in fiscal year 2011, and officials have cautioned that the Postal Service may not be able to borrow money by the end of this fiscal year if the current trend continues.Its activities are supported by the sales of stamps and other products, rather than by tax revenues from the United States government.
The majority of its cost-cutting plans are subject to approval by Congress, which is still profoundly split on how to restructure the agency in question.Mail carriers are expected to survive if facilities are closed, the staff is reduced, and other modifications are implemented, according to postal officials.A few of the issues that have led to the Postal Service’s financial difficulties are as follows:
TUMBLING MAIL VOLUMES
Since 2006, the volume of mail sent in the United States has been decreasing.The shift in the way Americans communicate is a significant contributor to this trend.First-class mail volumes have been reduced as a result of the widespread use of email and online bill payment.Businesses also reduced the number of advertising they sent out as a result of the economic crisis.
The amount of so-called ordinary mail has rebounded significantly, but not enough to make up for the loss of first class mail volume, which is by far the most profitable mail classification.To see the Postal Service’s annual financial filing, go to this link: r.reuters.com/zub56s (in English only).
In a 2006 statute, Congress mandated that the Postal Service make yearly contributions to finance 75 years’ worth of future retiree health benefits in 10 years, a goal that the Postal Service has met.In order to meet these responsibilities, the agency has contributed more than $21 billion into a special fund established for that purpose.Congress granted the Postal Service permission to defer payment of the $5.5 billion debt until 2011.Postmaster General Patrick Donahoe has stated that the postal service will not be able to make its payment in the year 2012.
Critics of the requirement claim that the payments were responsible for the majority of the agency’s $25 billion in losses over the last five years.A bill introduced in the Senate would stretch the payments over a longer period of time, however many senators want the prefunding to be phased out entirely.Another argument is that the payments are necessary in order to prevent taxpayers from being forced to bail out Postal Service perks in the future.
Compensation and benefits for more than half a million employees, workers’ compensation, and the prefunding commitment accounted for almost 77 percent of USPS operating expenditures in 2011, according to the agency.For the vast majority of private firms, worker expenses account for a far smaller proportion of overall costs.Since 2008, the agency has removed more than 100,000 positions, but authorities believe the number should be reduced even more.The Postal Service anticipates that around 100,000 employees would retire by 2015, and authorities hope to cut up to 120,000 positions through layoffs.
Reporting With contributions from Emily Stephenson and Cezary Podkulfor -phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up
There’s more than one reason the Postal Service is losing money
President Trump is being listened to.Donald Trump, a former West Virginia senator, entered a guilty plea in a case filed on January 6.Trump will visit a rally in Michigan in April.Trump is considering withdrawing his backing of Brooks in the Alabama Senate race.
Furthermore, it is possible to obtain the idea that the United States Postal Service is unprofitable as a result of its undercharging of Amazon.com.What is it about the United States Post Office, which is losing billions of dollars every year while charging Amazon and others so little to deliver their parcels, that is making Amazon richer while making the Post Office dumber and poorer?″ It was the president who screamed, ″We should be charging MUCH MORE!″ The United States Postal Service’s financial predicament, on the other hand, is not limited to parcel delivery.
- Because its spending continue to outpace its profits, the Post Office is experiencing issues across the board.
- The Postal Service was created to be self-sufficient; unlike other federal agencies, it does not rely on money collected through taxes to fund its operations.
- More specifically, by charging for mail, it attempts to recover some of its operational expenditures.
- Sorting and carrying mail is a time-consuming and expensive undertaking.
- The United States Postal Service (USPS) distributes mail to 157 million homes and post office boxes around the country (including Puerto Rico, the American Virgin Islands, etc.) It has a fleet of 230,000 trucks and other vehicles to assist it in transporting all of that mail.
- However, this is not the entire story.
In addition, the USPS operates a vast retail business consisting of 31,000 post offices and another 4,000 contractor-run mail shops, each of which has its own set of overhead expenditures.The Postal Service only has a few measures at its disposal to keep its overhead under control.Legal and political obstacles stand in the way of its efforts to lower delivery frequency (which is now legislated to be six days per week) and close money-losing post office locations.In accordance with federal law, the great majority of all USPS posts are held by unionized government employees who are entitled to comprehensive job protection.
An ill-fated effort by the United States Postal Service (USPS) to install postal counters at Staples demonstrates just how expensive these protections can be – this consumer friendly and inexpensive initiative was struck down by the National Labor Relations Board because it dared to allow Staples employees to sell postage and accept parcels for shipment.The refusal to replace personnel who retire or leave has been the Postal Service’s go-to cost-cutting strategy for many years.There are 300,000 fewer workers working for the agency today than there were a couple decades ago.
- Nonetheless, the United States Postal Service has 500,000 employees and 600,000 retirees who are eligible for health and pension benefits.
- As a result, the compensation expenses of the agency have increased by $2 billion since 2015.
- The United States Postal Service recorded a $2.7 billion deficit this past year.
- The reason for this may be found on the revenue side of the ledger.
- The volume of mail is decreasing.
- Less mail means less money in your pocket.
The United States Postal Service brought in $75 billion in income a decade ago; this year, it brought in just less than $70 billion.In 2006, the amount of mail reached a peak of 213 billion postal pieces; in 2017, it was 149 billion.That is a 30 percent decrease.The number of letters, postcards, marketing mail (often known as junk mail), and periodical publications being delivered has simply decreased as large mailers and the general public have transitioned to electronic delivery.The only exception to this trend is the number of shipments, which has gradually increased in recent years.
The leadership of the United States Postal Service feels that transporting more packages is essential to the organization’s existence.However, that appears to be a little far-fetched.Packages continue to constitute a meager part (four percent) of the total volume of mail carried by the postman.
- Furthermore, it is unclear if the USPS makes any money from the delivery of shipments.
- USPS income from boxes increased by a stunning 28 percent last year, yet the postal service’s accounting for the costs associated with transporting packages (which are plainly bigger than letters and magazines) is not included in either its annual report or year-end financial statement.
- The fact that I can purchase a polyester trombone case online for $20 — and that the United States Postal Service would ship it for a fraction of the purchase price all the way from California to Washington, DC — is amazing.
- You’ll have a difficult time finding a private courier who will work for so little money.
- Add to this the fact that the United States Postal Service (USPS) has reported that its parcel revenue stream may be negatively impacted.
- Over time, the company’s major shipping clients are ″developing the technology that will allow them to redirect tonnage away from the Postal Service,″ the company says.
- (Examples include Amazon lockers, Uber delivery drivers, and other similar services.) The business model of the United States Postal Service is ineffective.
- In addition, private couriers and 21st century delivery modalities (drones and delivery robots, for example) are posing a significant threat to the company’s operations.
- Despite the efforts of its staff and leadership, the United States Postal Service is expected to continue to lose money.
Making the Postal Service sustainable in the twenty-first century will necessitate a complete overhaul of the organization.Parcel prices set at profitable levels may be an element of that new paradigm, but more broad and comprehensive reform is required if taxpayers are not to find themselves in the position of having to bail out their postal system.R Street Institute, a free market think-tank in Washington, DC, is led by Kevin R.
- Kosar (@KevinKosar), who is the institute’s vice president of policy.
Here’s Why the U.S. Post Office Is in Trouble and What We Can Do to Help
The United States Postal Agency (USPS) is a vital government service that is now in dire straits, because to a combination of factors.The United States Postal Service (USPS) is the only government entity that visits us most days of the week, which has made a significant impact in our everyday lives, particularly at this time of coronavirus epidemic.The rest of the article is below the advertisement.The United States Postal Service (USPS) delivers everywhere in the United States, which is something that cannot be said for other commercial delivery firms.
Thus, the United States Postal Service (USPS) is relied upon by a large number of individuals in rural locations for delivery of all types, including medication.Without forgetting about its status as one of the nation’s greatest employers, particularly for veterans and minorities.We’d be in serious trouble if it weren’t for the United States Postal Service.
- However, it is in risk of being forced to close substantial portions of its operations, which would have a devastating impact on our way of life.
- The rest of the article is below the advertisement.
Why is the USPS in trouble?
There are a variety of factors contributing to the USPS’s plight.Although the COVID-19 situation has benefited the company’s operations, it has also placed it in danger.According to Politico, because the vast majority of mail is sent by companies, and because the majority of firms are currently unable to operate, ″COVID’s slowing of the economy has cratered postal volume.″ Even before the epidemic, the United States Postal Service was experiencing financial difficulties.According to The Guardian, Congress approved the Postal Accountability Act in 2006, which obliged the United States Postal Service to pre-fund retirement benefits for employees 75 years in the future, ″even for employees who have not yet been born.″ The rest of the article is below the advertisement.
This is a first-of-its-kind and exceptionally punitive punishment.There is no other government institution that functions in this manner, and it has cost the United States Postal Service billions of dollars.Shortly thereafter, the Great Recession of 2008 began, and the Postal Service suffered as a result of the weakening economy.
- Because the federal government has refused to provide a bailout for the United States Postal Service, the agency has been forced to gradually reduce employee positions and eliminate post offices in increasingly rural regions, further stressing the organization’s resources.
- The rest of the article is below the advertisement.
- COVID then struck, causing considerably more damage to the firm, and Trump replaced the outgoing postmaster general with a Republican fundraiser as punishment.
- User @USPostOffice911 on Twitter reports that a policy imposed by the new postmaster general ″forbids overtime and daily deliveries of all mail, and changes sorting procedures to make it take longer″ has been applied.
- These factors compound to cause delivery timeframes to be delayed, service to be ineffective, and even additional strain on an already overburdened organization.
- The rest of the article is below the advertisement.
This might become a major issue in November, especially given the upcoming election and the fact that several jurisdictions are promoting mail-in [email protected] writes on Twitter, ″Trump is the most significant concern regarding the United States Postal Service and the election.If the mail is taking too long to arrive, people may begin to accept Trump’s unfounded claims of voter fraud through the mail.No genuine facts or proof have been presented in support of his claims.″ The rest of the article is below the advertisement.
What can we do to help the USPS?
The United States Postal Service (USPS) requires a large amount of money very quickly in order to continue operating successfully.You may help achieve this aim by calling your legislators on a regular basis and encouraging them to support the inclusion of the United States Postal Service in the next round of COVID relief government money.Please see this page for contact information for your local legislators, as well as an example script for what you should say on the phone.The USPS will be saved in the near term by these bailout monies, but that does not imply that all of its issues will be resolved.
The rest of the article is below the advertisement.The passage of the United States Postal Service Fairness Act, which would abolish the requirement to pre-fund retirement benefits, would be the long-term answer.Following approval by the House, it is currently simply sitting in the Senate ″with no vote scheduled in the near future,″ according to @USPostOffice911.
- When you phone your representatives, it’s a good idea to encourage them to support this legislation and to campaign for its passage.
- ″Remember to be kind to your mail couriers and local postal employees!″ @USPostOffice911 sends in a tweet.
- ″They put in a lot of effort every day to ensure that you receive your mail and goods.
- They take great pleasure in their job and strive to offer you with the finest service possible.″
How George Bush broke the Post Office
If Trump really wants to fix USPS, he should look at how the Republican government of 2006 destroyed it in the first place
The 16th of April, 2018 President Trump wants to see the United States Postal Service restored to its former glory.And, without a doubt, it need assistance: For the past 11 years, the United States Postal Service has posted net losses.Unfortunately, the president is preoccupied with a few trivial issues while completely disregarding the issues that actually need to be addressed.Trump appointed a task committee to conduct an audit of the United States Postal Service late last week.’The United States Postal Service is on an unsustainable financial path, and it must be reorganized to avoid a taxpayer-funded bailout,’ according to the executive order.The task force is expected to produce recommendations within 120 days and to investigate ″the expansion and pricing of the package delivery industry, as well as the role of the United States Postal Service in competitive marketplaces.″ Amazon was not mentioned in the order in any way.
However, many analysts believe that the internet retailing behemoth is the target of the investigation – and with good cause.Trump has been on a rant lately, saying that the United States Postal Service (USPS) provides Amazon cheap delivery rates and that the company is being fleeced as a result.Amazon relies on over 230,000 United States Postal Service employees to deliver many of its products.As my colleague Ryan Cooper revealed, the Postal Service is undoubtedly offering the firm some form of concession, while the specifics of the agreement are being kept under wraps.
- Defenders point out that the Postal Service is prohibited by law from charging less than the actual cost of delivery, despite the fact that it may be charging below-market prices in some instances.
- In practice, however, this arrangement has resulted in the true victims being other privately held enterprises.
- The Postal Service is essentially assisting Amazon in its efforts to undercut its competitors’ prices and establish monopolistic market dominance.
- However, for the United States Postal Service, e-commerce deliveries have recently proven to be a source of income development.
- The Postal Service could and should negotiate a better agreement with Amazon, but for the time being, the one it has is working out rather well.
- So what is it about the USPS that is causing it to struggle financially?
- Many individuals refer to the growth of email, as well as private rivals like as FedEx, as reasons for this.
- All of these factors, it is certain, contribute to the USPS’s difficulties.
- Something else, though, is responsible for the Postal Service’s current state of disarray.
- The Postal Accountability and Enhancement Act of 2006 is the legislation in question.
- The Postal Employees’ Retirement Act (PAEA), which was passed by a Republican-led Congress and signed into law by President George W.
- Bush, provided the Postal Service with new accounting and financing requirements for its retiree pension and health benefit programs.
- Until 2006, the United States Postal Service financed such liabilities on a pay-as-you-go basis, taking money out of its pension fund and putting it back in when retirees’ bills came in.
- However, the Postal Service was obligated under the PAEA to calculate all of its expected pension expenditures over the following 75 years and then set aside enough money between 2007 and 2016 to pay the vast majority of those liabilities.
This is one of those concepts that, on the surface, appears to be responsible but is actually completely insane.Take, for example, a typical 30-year mortgage.Think about it: what if you had to put away a few hundred thousand dollars right now, enough to pay off the entire debt, even if you were still required to make payments over a 30-year period?Nobody would ever consider taking out a mortgage.That is exactly the point: the costs only accrue over time, and the money that is used to pay for them only accrues over time as well.It is precisely the same for retiree pensions and benefit funds as it is for active employees.
And that is why, as economist Dean Baker pointed out to Congress, virtually no one else follows the requirements of the PAEA, including the Postal Service.Meeting Congress’ arbitrary rule forced the Postal Service to set aside an additional $5.6 billion every year, which Baker described as ″akin to placing an 8 percent tax on the Postal Service’s income.″ A recent study found that only a small number of firms would be able to survive if they were suddenly obliged to pay an 8 percent tax from which their competitors were exempted.Eventually, the load grew too high, and the United States Postal Service (USPS) began defaulting on its PAEA obligations in 2012.However, the harm had already been done.The Postal Service suffered a total loss of $62.4 billion between 2007 and 2016, with its own Inspector General blaming prefunding retirement payments for $54.8 billion of that loss.The Postal Service would be in serious trouble if it didn’t have the PAEA.
(Though it is reasonable to attribute many of the country’s current difficulties on the Great Recession.) However, it seems likely that it would have made a comfortable profit for at least a portion of the previous decade.″The mandate is directly responsible for the Postal Service’s $15 billion debt,″ the Inspector General concluded in 2015.″As a result of this need, the Postal Service has been unable to engage in major projects or in research and development.″ In fact, things are becoming worse.The Postal Service was likewise compelled under the PAEA to invest its retiree assets solely in government bonds under the terms of the Act.Once again, this is a fairly unorthodox way of conducting business.While it helps to reduce risk, it is also an excellent method to make extremely modest returns.
- The USPS will therefore have to set aside even more money in order to maintain the same level of service.
- Baker concluded that simply eliminating this requirement would be sufficient to restore profitability to the Postal Service.
- In a rational society, the United States Postal Service (USPS) would be considered as a universal public good: No one would question the fact that it offers the foundational delivery service to poorer and more remote locations that commercial carriers will not deal with since it is not lucrative to do so.
- Instead, the Postal Service is expected to compete with the private sector and to finance all of its expenditures entirely from its own revenues, with no assistance from the rest of the government or from the federal government.
- That’s already a poor situation.
- However, it is just illogical to place further restrictions on FedEx that a private rival such as FedEx would never impose on itself.
- Maybe it was just a case of clumsy politics.
- However, it appears to be a planned act of sabotage against a properly functioning public institution.
- In fact, Trump’s task committee will include Treasury Secretary Steven Mnuchin and White House Budget Director Mick Mulvaney, according to the latest information we have.
- The latter, in particular, is a conservative ideologue who believes in limited government.
It doesn’t appear to be too far-fetched to believe that they will suggest privatization the United States Postal Service and selling it for parts.And that they’ll use the Postal Service’s inability to compete as a justification for making this proposal.However, if Trump is serious about reforming the Postal Service, he should direct Congress to amend the Postal Accountability and Efficiency Act.
The Post Office Is Broke: It’s Time To End Washington’s Postal Monopoly
- Photographs courtesy of Getty Images (Image courtesy of @daylife) So far this year, the United States Postal Service has incurred losses of $4 billion, on top of a deficit of $15.9 billion in the previous year.
- Congress is exploring legislation to rearrange the deck chairs on the postal Titanic, which is currently in port in New York.
- The only option is for the federal government to exit the postal delivery sector.
- The Constitution grants Congress the authority to ″create Post Offices.″ The Post Office, which was established in 1792, quickly became a valuable patronage instrument.
- In the early days of the federal government, the postmaster was one of the most significant appointments made by the president; at one point, the system employed about three-fourths of all federal employees.
- Of course, entrusting the delivery of mail to politicians does not guarantee high-quality and on-time delivery.
- Congress responded by passing the Private Express Statutes, which granted the government exclusive control over first-class mail.
- Early rivals, including the illustrious Lysander Spooner, were subjected to fines by the state of Washington.
- Uncle Sam maintains a high level of vigilance on his monopoly.
- Boy Scouts who promised to send Christmas greetings to Uncle Sam were reportedly threatened with threatening letters from Uncle Sam.
- It was a season of friendliness toward men, with the exception of competitors of the United States Postal Service!
- The United States Postal Service claims that it would be ranked 42 on the Fortune 500 list—but that is only because the other 499 firms on the list, as well as everyone else, are forbidden from competing to carry mail to their respective customers.
- A typical government approach is reflected in the system: customers are to be grabbed by forced legislation rather than lured by innovative goods and services.
- The belief that Americans exist to support the United States Postal Service enabled the system to adapt to shifting demand.
- Government attorneys could sue competitors, but they could not compel citizens to write letters to the government.
- In 2001, the total number of pieces of mail delivered reached a record high.
- However, in spite of an increasing population, it has continued to decline, falling from 213 billion in 2006 to 160 billion last year.
- By 2020, it is projected that the number would have decreased to 130 billion.
- In 1971, Congress changed the postal service to operate more like a private corporation.
- The monopoly, control over system operations, and a range of indirect subsidies, on the other hand, were all kept by lawmakers.
- For example, the United States Postal Service is immune from all taxes, restrictions, and even parking penalties.
Since being self-sufficient, the post office has experienced a net loss in nearly every year.The United States Postal Service posted a $15.9 billion deficit last year and used up all of its borrowing ability.According to the Government Accountability Office, ″Given its financial challenges and prospects, the United States Postal Service will be unable to maintain its present level of service and operations.″ Supporters of the system, most notably the labor unions that represent a bloated work force made up of individuals who were previously referred to as ″the best paid semi-skilled workers in America,″ argue that the post office is compelled to prefund its employees’ retirement benefits.Because most businesses cannot rely on government bailouts, the practice is prevalent in the commercial sector.However, no other federal agency is required to keep money away for future responsibilities, despite the fact that most businesses cannot rely on bailouts.As a result, the most recent estimate of the national government’s unfunded retirement liabilities, issued last month, shows that it is $761.5 billion, an increase of $139 billion over the previous year’s projection.
The prefunding clause is intended to prevent taxpayers from having to bail out the United States Postal Service in the future.The pace of rise in postal charges over the previous half century has been 50 percent more than the rate of inflation.Increasing the speed at which future increases are implemented will encourage more customers to make more extensive use of alternative services, such as online bill paying.Consequently, the system’s primary response to the financial crisis, after holding to its legal monopoly status, is to propose service cuts to the general public.The elimination of Saturday delivery service and the closure of tiny, inefficient post offices are two of the most significant moves, both of which are met with vehement criticism from labor unions and other interest groups, such as the Greeting Card Association, and therefore from politicians.The ″cluster box″ distribution system, which is supported by the GCA and others but detested by homeowners, is another popular option.
It handles whole neighborhoods as if they were a single apartment building served by a single postal facility.There have been a slew of additional cost-cutting suggestions put up.Some actions might be conducted on a purely unilateral basis.Others would necessitate the use of congressional authority or the resumption of collective bargaining.Among the most apparent answers are reductions in wages and retirement benefits, reductions in the workforce, and improvements in labor procedures.Alternatively, selling real estate may generate large profits, but this would need to be done in conjunction with postal consolidation in order to realize the biggest savings.
Another possibility is network rationalization.It would also be possible to save money by improving mail processing and lowering data gathering, leasing empty office space, removing or reducing payments to the Thrift Savings Plan, and transferring the cost of mandatory services for the blind and abroad voters.Proposals to expand into other industries, such as internet access, check cashing, notarization, photocopying and faxing, ATMs, and other services, are even more doubtful.It would be difficult for an inefficient de facto government agency with significantly less foot traffic than major shops to compete in the provision of widely available commercial services.Rather than generating extra money, such measures are more likely to result in significant financial losses, increasing the pressure on Congress to provide a bailout.
Among the many bizarre suggestions made by the GCA, which is included in a lengthy list, are the transformation of post offices into ″centers of continuous democracy″ and the provision of ″community bulletin boards, licenses, permit applications, citizen polling/opinion gathering,″ among other things.The first and last appear to relegate the United States Postal Service to a more political, if not patronage, function.Licensing and permitting are handled by other government authorities.Community message boards don’t appear to be a significant source of cash.Two postal reform bills are now making their way through Congress.A piece of legislation proposed by Chairman Darrell Issa was passed unanimously by the House Oversight and Government Reform Committee last month (R-Cal.).
Due to the fact that it maintains the retirement prefunding requirement while emphasizing service reductions, the Issa plan was expected to win no Democratic support.In the Senate, Thomas Carper (D-Del.) and Tom Coburn (R-Okla.) are attempting to broker a deal that would reduce deliveries on Saturdays and curbsides while reforming retirement finance.The reality is that neither of these options is a long-term answer.
- Reduced commitments to meet retirement obligations by the Postal Service merely positions taxpayers for a future bailout, which would be on top of the trillions needed to address unfunded liabilities for Social Security, Medicare, and other government retirement benefits.
- Cutting back on services may help to lower the amount of money spent today, but it may result in future losses since it will encourage consumers to search elsewhere for better choices.
- As rates continued to grow, the United States Postal Service (USPS) would become an increasingly bad deal for consumers who were trapped into the government first class monopoly.
- It is possible to see this future in the recommendation of one postal expert to decrease mail service to only three days a week, as he suggests.
- Instead, Congress should liberalize the postal industry to allow for more competition and technological advancement.
The concept is only considered radical in the United States because countries like as Australia, Finland, Germany, the United Kingdom, Indonesia, Israel, the Netherlands, New Zealand, Russia, Spain, and Sweden have all liberalized their postal systems in recent years.Some have abolished the government monopoly, enabled competition, privatized government activities, or taken other, more restricted, actions to improve their situation.In fact, the European Union has compelled its members to liberalize their economies.According to the Organization for Economic Cooperation and Development, such changes have resulted in ″improvements in the quality of service, gains in profitability, increases in employment, and actual price reductions.″ Moreover, market innovation is another area where the purportedly laissez-faire United States lags behind ″socialist″ Europe.
- Without a sure, the Obama administration will embrace the choice that keeps the most significant role for the government at the biggest expense.
- Even President Barack Obama, though, recognizes the error of his ways.
- ″UPS and FedEx are doing just well,″ he said once, according to a source.
″It’s the post office, on the other hand, that’s constantly experiencing issues,″ he pointed out.″ Indeed.The Postal Service’s chief executive, John Potter, declared firmly three years ago: ″We want to be around for decades and centuries to come.″ However, monopoly will not be enough to rescue the United States Postal Service.The United States Postal Service is trapped in a death spiral of increasing losses, less service, fewer customers, and increasing losses.The system requires money, and it requires a lot of it.Uncle Sam, on the other hand, has none to offer.
The only solution is to put mail delivery in the hands of market competitors.
Why The U.S. Post Office Is In Trouble – 678,539 Employees And A $9.2 Billion Loss In 2020
- As a result of his prospective proposal to eliminate two-day first-class mail service and raise the cost of postage in order to make up for the billions of dollars in yearly USPS losses, the Postmaster General came under fire from members of Congress this week.
- The United States Postal Service has a big budget, but it also has significant losses, and the problem dates back years.
- According to the Postmaster General’s testimony before Congress, ″there is no end in sight″ to the agency’s budget troubles.
- According to a study by the General Accountability Office (GAO), the United States Postal Service (USPS) has lost $69 billion over the preceding 11 fiscal years, including $3.9 billion in fiscal year 2018.
- Then, in 2019, a $6.6 billion deficit that had been predicted turned into a $8.9 billion loss.
- The Postal Service reported a $9.2 billion deficit in 2020, despite the fact that overall revenues climbed by $2 billion (to $73 billion) throughout the year.
- Package delivery surged significantly (18.8 percent) during the pandemic, whereas first-class mail saw a 4.2 percent drop, and marketing mail experienced a 15.2 percent decline over the period.
- In other words, a $1 increase in income resulted in a $1.15 rise in costs over the course of the year 2020.
- It appears that the more mail the Postal Service sends out, the more money they lose.
- The United States Postal Service has not been deterred from expanding its workforce despite sustained losses.
- Last year, the agency hired 163,257 new workers, the highest number in its history, resulting in a net gain of 54,867 new people on the payroll for the year.
- According to Freedom of Information Act requests made by our auditors at OpenTheBooks.com, the United States Postal Service recruited 40,174 workers in 2019, 38,126 people in 2018, and 26,161 employees in 2017, for a sense of scale.
- And the check is on its way, especially for those who work for the United States Postal Service and make a lot of money.
- With a salary of $303,460, Postmaster General Louis DeJoy was the highest paid official in the country.
- Previously, Megan Brennan, who made $291,650 per year, resigned from her position in October of this year.
- In fact, the postmaster general makes more than genuine four-star generals in the United States, who receive $268,344 per year.
- DeJoy and Brennan are surrounded by a large number of people.
- In 2020, 50 workers of the United States Postal Service earned more than $200,000.
- Only 29 employees made more than $200,000 in the preceding year, according to the company.
- In 2020, an additional 5,346 employees, the majority of whom were executives and attorneys, earned more than $100,000.
- Last July, Congress provided the United States Postal Service with a financial lifeline in the form of a $10 billion loan from the United States Treasury under the CARES Act, sometimes known as the coronavirus bailout bill.
He also claimed that the loan ″will buy time till a liquidity crisis occurs…″ In contrast, the Postal Service continues to be on an unsustainable course, and we will continue to concentrate our efforts on enhancing operating efficiency and implementing other reforms in order to put the Postal Service on a road toward long-term financial stability.″ Critics have said that the service has become ossified and that it is in desperate need of workplace change.According to our research, the United States Postal Service does not have a forced retirement policy, which means that employees can continue to receive high wages for as long as they choose.Approximately 550 workers have worked for the company for at least 50 years; 8,500 have worked for the company for at least 40 years; 76,500 have worked for the company for at least 30 years; and 215,000 have worked for the company for at least 20 years.The United States Postal Service did not reply to our request for a statement.Defenders of the Postal Service would argue that the USPS could rely on its pool of experienced employees to assist create best-in-class solutions that would help to balance the budget.This was attempted by the executive suite in 2020.
When they appointed Richard Uluski, who had retired in 2016 after a 36-year career and had been complimented by the then-Postmaster General for ″demonstrating great leadership and delivering outcomes,″ they were hailed as a success.Uluski’s new role is ″Executive Coach,″ with remuneration of $100 per hour and a statutory limit on the number of hours he may work.A spokeswoman for the United States Postal Service responded to our request for comment and gave more explanation.In accordance with the National Defense Authorization Act (NDAA), which was signed into law in December 2019, he (Uluski) is employed with us as a reemployed annuitant.Mr.Uluski is permitted to receive his Postal Service pension while still earning a government salary—with some restrictions, as specified in the contract.″ If the United States Postal Service is to continue, it must decide whether it will function like a private enterprise or like an agency of the federal government.
If it opts for the latter, it should be more open about how it uses its funds in the future.Despite the fact that it benefits from its status as a federal agency, the United States Postal Service (USPS) does not participate in usaspending.com, a searchable database of federal spending, contracts, and grants that was created by Senators Barack Obama (D-IL) and Tom Coburn (R-OK) in 2006 to promote transparency and accountability in government spending.The United States Postal Service has similarly refused our requests for access to its vendor checkbook expenditures under the Freedom of Information Act.Despite several Freedom of Information Act demands to make its spending checkbook visible, the United States Postal Service has so far refused to provide access to its financial information.In reality, USPS informed OpenTheBooks that disclosing its procurement records would jeopardize the integrity of its procurement process and the privacy of its contractors.Consequently, while you may be able to monitor your mail in 2021, you will still be unable to track how individuals who handle your mail use public money in that same year.
Postal Service says it’s going broke due to pandemic, Trump flatly opposes emergency aid
- Without tens of billions in more funding, the agency will be ″out of cash″ by the fall.
- Coronavirus epidemic is causing financial ruin for the already-struggling United States Postal Service, according to its senior official, but the Trump administration has showed no signs of requesting emergency financial assistance, as it has done for other corporations.
- As part of a digital briefing before the House Oversight Committee last week, Postmaster General Megan Brennan informed lawmakers that the agency would ″run out of cash″ by the end of its fiscal year in September if Congress and the administration did not provide assistance.
- This was in part due to severe financial losses incurred as a result of the COVID-19 disaster.
- According to Brennan, the issue has resulted in a historic decline in mail.
- Specifically, she stated that the Postal Service, which is an autonomous agency of the executive branch, anticipated ″a $13 billion revenue loss directly to COVID-19 this fiscal year and a $54.3 billion further revenue loss over the next ten years.″ Brennan explained that the Postal Service relies on the sale of postal products and services to sustain its operations.
- ″As a result of the pandemic, postal product and service sales are dropping.″ It’s possible that the rapid decline in mail volumes, which is our most profitable income source, may continue for a long time.
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- Despite this, postal employees continue to be on the front lines of the epidemic, even as the volume of mail being shipped declines.
- During state stay-at-home orders, many postal handlers continue to distribute mail because they have been recognized as ″critical service providers.″ A representative for the United States Postal Service (USPS) informed ABC News on Monday that 693 of the agency’s 630,000 postal workers have tested positive for COVID-19.
- Several people have passed away.
- And the number of those affected is rapidly growing, with 259 workers proven to have caught COVID-19 as recently as April 2.
- In addition, the agency is supplying millions of gloves and masks to its employees, and it has introduced social distancing measures within its post offices, according to the spokeswoman.
- Despite the financial crisis, President Donald Trump resorted to a familiar theme on Friday when questioned about whether the administration had canceled financing for the agency that was being discussed as part of coronavirus relief packages: he put the line of blame at Amazon.
- In his speech, Trump stated that ″the internet corporations that provide their things to the Postal Service are the ones who are bringing the Postal Service to its knees.″ The company ″loses money every time they deliver a box for Amazon or any of the other online businesses, or any of the other businesses that deliver.″ Trump and Jeff Bezos, the CEO of Amazon and owner of the Washington Post, have had a long-standing dispute, with Trump accusing Bezos of being responsible for the destruction of the United States Postal Service for numerous years.
- ″I am correct in my assertion that Amazon is costing the United States Postal Service huge sums of money for serving as their Delivery Boy,″ Trump tweeted in 2018.
- ″Amazon should bear these expenditures (and any additional costs), rather than having them borne by the American taxpayer.″ On Friday, Trump reiterated his long-standing call for the United States Postal Service to boost the rates it costs online retailers such as Amazon for delivering items, which are sometimes to hard-to-reach rural areas.
- ‘They have to raise their rates, or else they’re going to lose a lot of money,’ Trump stated emphatically.
- ″For many, many years, the United States Postal Service has been losing billions of dollars every year.″ Government officials attempted to incorporate assistance for the United States Postal Service into the $2.2 trillion coronavirus relief plan authorized by Congress in March.
Nevertheless, the $13 billion dollar grant that legislators had previously agreed to never made it through the legislative process, in part because of opposition from administration negotiators, according to the Washington Post.According to the Washington Post, Treasury Secretary Steve Mnuchin threatened to veto the whole disaster relief package if a grant for the United States Postal Service was included.A $10 billion loan was included in the stimulus package, rather than a grant, as originally planned.That loan is still pending clearance by the Treasury Department, and the agency is struggling to stay afloat.Even if the loan is authorized, several Democratic members of Congress believe it will be insufficient.″The United States Postal Service is insolvent,″ said Rep.
Gerry Connolly, speaking to NPR.″It need debt forgiveness rather than debt extension, and it urgently requires an inflow of money,″ says the author.During Brennan’s briefing, she informed lawmakers that the Postal Service Board of Governors, which is comprised of members from both political parties, had requested that Congress provide the Postal Service with $50 billion in emergency funding as well as access to an additional $25 billion in Treasury Department borrowing authority.House Oversight Committee Chairwoman Carolyn Maloney said the Postal Service is ″hanging on for dear life″ and that unless Congress and the White House give ″real assistance″ in the next stimulus measure, the postal service might be forced to close its doors.Since its inception, the organization has struggled to turn a profit.Congressional rules, which force the Postal Service to prefund retirement health care benefits for employees who have not yet retired through the year 2056, have contributed to this development.
However, the surge in electronic communication has also resulted in the agency trying to keep up with a decline in the number of people who utilize its services.It claims that over the previous ten years, postal capacity has reduced by 28 billion packages, with a 23 billion parcel decline in first-class mail, which is a substantial income source.
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The Post Office Is Always Losing Money. It’s Not Its Fault.
- The United States Postal Service, an entity that has existed longer than the United States itself, is receiving more attention than it probably likes as the fight about financing and cost reductions heats up.
- Louis DeJoy, the Postmaster General, began testifying at a Senate committee on Friday and continued his testimony in a House hearing on Monday.
- The finances of the United States Postal Service, as well as its capacity to distribute mail-in ballots for the November election in a timely manner, have obvious political ramifications.
- In addition, important publicly listed corporations have a great deal at risk as well.
- The post office, of course, is a well-known institution.
- Every American has had some sort of connection with the United States Postal Service, but that doesn’t make the present fight any easier to comprehend.
- Here is what investors should be aware of, as well as some recent historical information.
What’s Going On
- Speaker Nancy Pelosi brought the House of Representatives back from its August holiday earlier this week in order to vote on a bill that would prevent certain cost reduction at the United States Postal Service.
- It is also part of a larger attempt by Louis DeJoy, the new Postmaster General, to bring losses under control.
- Later in the week, the United States Postal Service indicated that the reductions, which included removing mailboxes and mail-processing equipment, would be suspended after the November election.
- The United States Postal Service had a $2.2 billion loss in the most recently reported quarter.
- As a result of the epidemic, the amount of mail—letters rather than packages—has decreased more quickly than anticipated.
- The United States Postal Service (USPS) received $10 billion in financing under the Cares Act to assist mitigate the worst consequences of the epidemic.
- Even if more cash as part of a second stimulus package is being explored, the Postal Service has warned that it cannot guarantee that all mail-in ballots will be delivered in time to be counted if they are received close to election day.
Why Does the Post Office “Lose Money”?
- There are four major reasons why the United States Postal Service is less lucrative than the logistics corporations with which it competes: As a starting point, there is no reason why the post office should be profitable.
- It is essentially a federal agency with a duty to provide universal service.
- Postage to rural America is the same price as it is to send a letter within heavily populated cities, yet publicly listed logistics businesses charge extra for delivery to locations that are off the usual path.
- Second, the United States Postal Service (USPS) does not have direct influence over the cost of mailing a letter.
- For example, in 2016, Congress reversed a 2-cent rise in the price of stamps because legislators determined that the Postal Service had recovered the sales decreases linked with the financial crisis of 2008-2009.
- The price of a stamp is a matter of political contention.
- Whether you choose FedEx (ticker: FDX) or United Parcel Service (UPS), the cost of shipping your cargo is just a matter of competition and strategy.
- In addition, Congress put increased expenditures on the United States Postal Service about 2006, in part because the service was becoming too lucrative.
- Finally, we can point the finger to the internet: The amount of mail being sent is decreasing.
- Managing declining demand in a company’s most profitable business division is difficult for any organization.
- Growth aids in the absorption of fixed expenses and the recruitment of new, lower-priced personnel to help balance legacy liabilities in any firm.
Cash Versus Earnings
- Although the USPS is losing money, its cash flow has become more steady.
- This is due to the fact that, as previously stated, the USPS has some exceptional expenditures that were imposed by Congress and which artificially reduce earnings.
- On the surface, Congress directed the Postal Service to set aside $110 billion over a ten-year period in 2006.
- According to our calculations, this amounts to $11 billion every year.
- UPS, on the other hand, recorded an annual free cash flow of around $6.4 billion in fiscal year 2018.
- The requirement had a negative impact on cash flow until the post office could no longer bear the expenditure.
- Now, the Postal Service just registers the expense on its books, reducing its bottom line, but without putting aside any money for the expense.
Congress Did What?
- It’s a big responsibility, but for what?
- It was mandated by Congress that the Postal Service prefund its health-care commitments.
- Aside from the government, no other corporation is required to do so, albeit companies are required to prefund pension liabilities, which became a requirement of the law in the 1970s.
- Companies deposit money into a trust so that retirees may continue to receive their benefits even if the company goes out of business.
- Corporate health-care benefits are reimbursed as and when they are used.
- In essence, Congress determined that the United States Postal Service (USPS) should go above and beyond what companies do by collecting a portion of its revenues and utilizing them to prefund health care as if it were a pension.
- It is a claim on the financial flow of the United States Postal Service that other entities are not required to answer.
- Employees, of course, have a right to health insurance.
- The question is whether the United States Postal Service will pay those benefits when they are incurred or whether it will rely on a massive amount of trust that has been built up very fast as a result of a Congressional mandate.
The Postmaster General
- It was Benjamin Franklin—yes, the same Ben Franklin—who was designated as the first postmaster general in 1775, a year before the signing of the Declaration of Independence.
- As the 75th Postmaster General, Louis DeJoy succeeds him as his 74th successor.
- DeJoy was the CEO of New Breed Logistics, which was acquired by XPO Logistics (XPO) in 2014 for $615 million.
- DeJoy subsequently went on to work at XPO, where she eventually became a member of its board of directors.
- In 2018, he resigned from the board of directors.
- Has DeJoy made any contributions to the campaign to re-elect President Donald Trump?
- Barron, on the other hand, believes that his resume qualifies him for the position.
How Big Is the USPS?
- With around $71 billion in yearly revenues, including $23 billion in parcel income throughout 2019, the United States Postal Service is a hidden powerhouse.
- UPS generated around $76 billion in sales and $46 billion in package revenue in the United States during that time period, whereas FedEx generated $69 billion in sales and $48 billion in package revenue.
- If the United States Postal Service (USPS) were to go public, it would be worth between $50 billion and $70 billion, depending on its profitability and size.
- This comfortably places it as the third-largest non-rail logistics firm in the United States in terms of value.
- UPS is currently valued at around $167 billion, including its debt.
- FedEx has a market capitalization of around $76 billion.
- After UPS and FedEx, and with the exception of railroads, logistics firms rapidly shrink in size.
- According to revenue, Expeditors International of Washington (EXPD) and C.H.
- Robinson Worldwide (CHRW) are two of the next largest logistics companies in the United States.
- Unlike UPS and FedEx, they just organize shipments and do not hold the same networks of assets as those companies.
- Each of them is valued less than $15 billion dollars.
According to the United States Election Assistance Commission, mail-in ballots were used to cast approximately 24 percent of all votes in 2016. This equates to more than 33 million votes cast across the country, however the number is projected to be greater this autumn due to the influenza outbreak.
What It All Means for Stocks
- What is it that investors should be concerned about?
- The parcel-shipping sector is an oligopoly in that there are only a limited number of rivals, and each of them has a substantial impact on the dynamics of the market.
- It is possible that the Postal Service’s difficulties may benefit UPS and FedEx if the Postal Service loses market share or hikes prices, as Trump desires.
- UPS and FedEx stock have gained 37 percent and 38 percent, respectively, year to far, outpacing the gains made by the Dow Jones Industrial Average and the S&P 500, which are comparable.
- One of the primary reasons is the increase in delivery volume that has occurred as a result of the epidemic.
- The United States Postal Service’s parcel-shipping business is thriving as well, but its marketing-mail operation is suffering as a result of the recession.
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- At the same time, the Postal Service is on the verge of becoming bankrupt due to the current economic crisis.
- Because companies account for the great majority of mail sent, Covid’s halting of the economy has resulted in a significant drop in mail flow.
- We do not yet know how much, but it is possible that volume has already decreased by 30 percent.
- And, in the process, it may cause irreparable harm to an agency that has been running multibillion-dollar deficits for years and is burdened with $130 billion in unfulfilled employee benefits for the past decade.
- This autumn or winter, depending on how severe the revenue decline is, the agency may find itself with insufficient money and be forced to close its doors for good.
- In the post office’s two-century existence, this has never happened before or since.
- So yet, no action has been taken by Congress to save the company.
- This is partially due to poor decision-making by the leadership of the United States Postal Service in the run-up to the recent $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
- According to an insider who attended one of the discussions, representatives from the USPS and at least one of its unions went to Capitol Hill and briefed select members of Congress in a low-key manner.
- Overall, things did not proceed as planned.
- Only a few Democrats actively advocated for the agency’s assistance, while the Republican Party and President Donald Trump expressed skepticism when a $30 billion bailout was inserted into a House version of the Covid legislation.
- In the end, the CARES Act provided the Postal Service with only a $10 billion additional loan line, which was not enough.
- Leadership at the United States Postal Service attempted yet another bailout this week, telling the House Oversight and Government Reform Committee that the service required an eye-popping $75 billion to avoid going bankrupt.
- A growing number of Democrats are calling for an emergency appropriation for the United States Postal Service, but the Republican Party has remained deafeningly silent, perhaps intimidated by liberal activist messaging that Trump and his party want to bankrupt the post office and sell it to vulture capitalists.
- In neither of these instances did the post office’s front office openly reveal statistics that may have aided doubtful or just befuddled politicians in their decision to accept the post office’s major request.
- When the agency experiences a major change in its financial status, it is required to publish a publicly available report with the Postal Regulatory Commission, according to federal law.
- There are no indications that this