Bailout Baloney: Issa holds a hearing on the "Postal Service's $100 billion in unfunded liabilities"
March 10, 2014
On March 13, the House Committee on Oversight and Reform, chaired by Congressman Darrell Issa, will hold a hearing called “the Postal Service’s $100 Billion in Unfunded Liabilities.” Don’t be shocked if you hear the phrase “taxpayer bailout” a few hundred times.
Issa’s hearing is designed to do one thing: show that unless there’s more downsizing of the infrastructure and cutbacks to service, the Postal Service's large pension and health care obligations will inevitably lead to a taxpayer bailout.
The witness list isn’t out yet, but Issa will probably bring over someone from the GAO or the OPM to testify about the magnitude of the obligations. Between questions for the witnesses, Issa will speechify about how mail volumes are falling due to the Internet, how the unions and their Democratic allies in Congress refuse to face realities, and how government doesn’t work so things are best left to the private sector.
But there's a lot more to the story of "unfunded liabilities" that's not likely to come up at this week's hearings, so here’s a preview of the numbers Issa and his witnesses will be talking about along with a more reasonable assessment of the situation.
March 7, 2014
Next Wednesday is the deadline for submitting bids to purchase the historic Bronx General Post Office. The Postal Service is apparently proceeding with its plan to sell the building even though Congress has recommended a moratorium on the disposal of historic post offices.
Thanks to the efforts of Representatives Barbara Lee of California and José Serrano of the Bronx, Congress included two provisions concerning the sale of historic properties in the Appropriations Bill passed earlier this year.
The first said that the Postal Service “should refrain” from selling historic buildings until the Office of Inspector General (OIG) completes its audit investigation on the disposal and preservation of historic post offices (p. 75).
The second directed the Advisory Council on Historic Preservation (ACHP) “to report on the action plan for ensuring USPS compliance with Section 106 responsibilities during the divestment of historically significant properties”(p. 89)
According to the USPS-CBRE Properties for Sale website, the Postal Service has set March 12, 2014, as the deadline to submit “best and final offers” for the purchase of the Bronx GPO. (The initial deadline was January 15, but for reasons unknown the deadline was extended.)
The call for best offers requests that interested parties submit offers that respond to two possible scenarios — an outright purchase of the property and a purchase that includes a long-term USPS lease for a portion of the building so that it can continue retail operations in the building. Prospective buyers are also asked to describe their development plans for the property under both scenarios.
March 5, 2014
Today the Postal Service published the Final Rule on the Load Leveling plan in the Federal Register. As the Rule states, "The Postal Service is revising the service standards for Standard Mail that is eligible for Destination Sectional Center Facility (DSCF) rates. These changes will allow a more balanced distribution of DSCF Standard Mail across delivery days." The effective date is April 10, 2014.
Apparently the Postal Service is not going to wait to hear what the Postal Regulatory Commission has to say about Load Leveling in its Advisory Opinion, which is due out around March 27.
It’s been clear for a while now that the Postal Service was going to implement the plan regardless of what the PRC or anyone else had to say about it. We made that point in a previous post, and last week, the PRC’s Public Representative discussed the matter in her Reply Brief.
As the PR notes, in comments filed with the Commission, Quad/Graphics stated that during a January 10, 2014 webinar with mailers, the Postmaster General said that he planned to go ahead with the Load Leveling Plan regardless of the Commission’s opinion. Many of the mailers have said that they felt “railroaded” and “manipulated” by the Postal Service and that they believed the Postal Service decided to move forward with these changes “with limited regard to the views of its customers.”
The Public Representative reviews these comments from the mailers and then goes on to state the following:
The Postal Service’s predetermination that the Load Leveling Plan will be implemented regardless of mailer views and the Commission’s opinion does not represent “best practices of honest, efficient, and economical management.” While the Commission’s opinion is an advisory one and non-binding in nature, the whole purpose of the 39 U.S.C. § 3661 proceeding is for the Commission to provide its expert advice to the Postal Service. To predetermine that the advice is irrelevant to the Postal Service’s decision, particularly in light of the fact it is required by statute, does not reflect best management practices. Best practices should include consideration of both customer concerns and available advice, even if the final determination differs from the weight of the feedback received.
The Public Representative provides a detailed analysis showing that in two of the three operations tests the Load Leveling plan failed to level mail volumes and that carrier street time productivity actually decreased. The PR also argues that “the Postal Service has not provided evidence of the burden that the Load Leveling plan is intended to reduce and misstates the extent of carriers out past 1700 problem.” She also notes that the Postal Service did not do any cost-savings analysis or any market research on how much volume and revenue might be lost as a result of slowing down Standard Mail.
The Postal Service has provided a detailed Reply Brief of its own, responding to the arguments presented by the Public Representative and the mailers.
But the back-and-forth arguments before the PRC don’t seem to be of much consequence. As indicated by the Final Rule published today in the Federal Register, the Postal Service is going ahead with the plan. The fact that there’s an Advisory Opinion under way is relegated to a mere footnote in the Final Rule.
(Photo credit: SCF in Kearny, New Jersey)
March 2, 2014
A recent report by the USPS Office of Inspector General on offering financial services at the post office won immediate support from Senator Elizabeth Warren, and postal banking was thrust into the limelight. A big front-page story in Huffington Post entitled “Breaking the Banks” by Elizabeth Swanson offers polling data (and a poll of its own) that shows 44% of Americans favor letting the Postal Service getting into the banking business. After the president’s State of the Union message, David Dayen, writing in the New Republic, suggested that President Obama use his executive powers to order the Postal Service to consider postal banking. Dayan has another piece in Salon about how postal banking could even "save the economy."
While some news sites have been touting the idea as a way of saving the Postal Service, others have dismissed the idea as government overreach. The division of opinion falls along fairly predictable ideological lines, with the Left largely in favor and the Right mostly opposed, although as recently as last August Reihan Salam of the conservative National Review was touting the idea of postal savings accounts.
As many of the news articles and op-ed pieces point out, postal banking is not a new or very original idea. The old Post Office Department offered savings accounts up until the early 1960’s. Japan’s largest savings bank operates out of the post office, and many other foreign postal systems offer some form of financial services or banking.
In several pieces here on Save the Post Office, I’ve suggested that the postal network would provide an excellent platform for limited banking services, like small savings accounts, check cashing, electronic bill presentment, and payment systems. These services could bring the unbanked and the underbanked, as well as those with marginal or no access to the Internet, into the 21st-century economy. In many ways those kinds of services are a natural fit with a postal network oriented to public service.
Done properly, offering basic financial services through the postal network would be attractive and beneficial, not just to those at the bottom of the economic spectrum but also to many in the middle class as well. An initiative like this could be a wise way to preserve and expand our existing postal assets while preserving hundreds of thousands of good postal jobs.
Considering that I myself have been a proponent of postal banking, I hate to throw a wet blanket on the idea. The proposal has gained tremendous traction and gotten many people excited, but there are just too many reasons to be skeptical. Given the current structure of the Postal Service, the mindset of its leadership, and the attitudes and expectations of politicians in both Congress and the Administration, a move towards postal banking would not only be unlikely to save the Postal Service and the postal network, but it could also turn out to be as abusive and harmful as the current landscape of payday lenders and predatory banks. The last thing we need right now is for the Postal Service to try to balance its books by extracting billions of dollars in fees from some of the most financially vulnerable folks in society. That’s not the way to save the post office.