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USPS Stuck Between Rock and a Hard Place —Michelson

November 2010
The news that U.S. Postmaster General John Potter announced his retirement effective Dec. 3 is just one more chapter in an ongoing saga at the U.S. Postal Service (USPS). Potter was the 71st successor to Benjamin Franklin and—serving nine years at the helm of the nation’s second largest civilian employer—was actually the longest serving Postmaster General since the 1820s. But, after serving 32 years at the agency, starting from the bottom as a mail clerk, the 55-year-old Potter picked a good time to start collecting his pension.

His successor, current Deputy Postmaster General Patrick Donahoe, faces a projected $7 billion loss in 2011, exacerbated further by the Postal Regulatory Commission’s (PRC) recent ruling that denied an “exigent” rate request by the USPS, as a result of the recession, to raise postal rates in excess of its statutory Consumer Price Index (CPI) price cap. The PRC ruled that the recession has been an extraordinary circumstance, but said the Postal Service failed to quantify the recession’s impact on its finances and to show how its rate increase request (for a 5.6 percent increase, on average) related to the resulting loss of mail volume. In other words, it determined the USPS’ cash flow problems would have occurred whether or not the recession took place. The rate request would have only reduced the $7 billion operating loss by $2.5 billion anyway. The Postal Service has since appealed the PRC’s ruling, but most experts believe the initial determination will be upheld in court. 

Perhaps the Postal Service’s appeal was more designed to win over the court of public opinion than the U.S. Court of Appeals. A large part of the blame rests squarely on Congress, which requires the USPS to prepay its retiree healthcare obligations to the tune of $5.4 billion each year—and then uses the funds, interest-free, as a way to make the federal deficit look smaller. And the supposed “bailout” of the USPS last fall really amounted to $4 billion of temporary fiscal relief to meet that prefunding obligation and payment installments. In actuality, the federal government and taxpayer money are not subsidizing the Postal Service; the USPS is subsidizing the government through its arcane prepayment requirements. The Postal Service’s request to end Saturday mail delivery as a way to cut costs also continues to languish in Congress. And, when Potter proposed closing thousands of under-utilized post offices, politicians were quick to respond, “not in my district,” fearing negative backlash from their voting constituencies.

 

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