So why is the USPS struggling financially?
A lot of people point to the rise of email, as well as private competitors like FedEx. Certainly, all those things contribute to USPS's problems. But what's really dragging down the Postal Service is something else entirely.
Namely, the Postal Accountability and Enhancement Act of 2006.
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."
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."
A lot of people point to the rise of email, as well as private competitors like FedEx. Certainly, all those things contribute to USPS's problems. But what's really dragging down the Postal Service is something else entirely.
Namely, the Postal Accountability and Enhancement Act of 2006.
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."
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."
