Institute for Public Accuracy - Ralph Nader Says Postal Crisis is "Manufactured".

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Institute for Public Accuracy - Ralph Nader Says Postal Crisis is "Manufactured".

NEWS RELEASE

FOR IMMEDIATE RELEASE
September 23, 2011
CONTACT: Institute for Public Accuracy (IPA)

Nader: Postal Crisis “Manufactured”

WASHINGTON - September 23 - Reuters reported this week that President Obama has endorsed a plan to “rescue” the Postal Service, including by reducing service one day a week.

Bloomberg reports: “A measure that may put the U.S. Postal Service under a control board, end to-the-door mail delivery and close post offices using the same process as military-base shutdowns was approved by a U.S. House panel. The bill, sponsored by Representatives Darrell Issa, a California Republican, and Dennis Ross, a Florida Republican, was approved today with Republican support and Democratic opposition.”

RALPH NADER, via Jeff Musto, info at csrl.org

In a letter to Sen. Joseph Lieberman and Rep. Darrell Issa, Nader writes: “The deep hole of debt that is currently facing the U.S. Postal Service is entirely due to the burdensome prepayments for future retiree health care benefits imposed by Congress in the Postal Accountability and Enhancement Act of 2006. By June 2011, the USPS saw a total net deficit of $19.5 billion … deficit almost exactly matches the $20.95 billion the USPS made in prepayments to the fund for future retiree health care benefits by June 2011. If the prepayments required under PAEA were never enacted into law, the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion.” Nader stresses that, in terms of retirees’ health benefits, the Postal Service is required to do things that “no other government or private corporation is required to do and is an incredibly unreasonable burden.”

PDF of Nader’s full letter:

September 21, 2011

Senator Joseph Lieberman
Chairman of the Homeland Security and Governmental Affairs Committee
United States Senate
SH-706 Hart Senate Office Building
Washington, D.C. 20510-0703

Congressman Darrell Issa
Chairman of the Oversight and Government Reform Committee
House of Representatives
2347 Rayburn House Office Building
Washington, D.C. 20515-0549

If the U.S. Postal Service were forced to default and start to shut down, the consequences
would be dire. Americans would lose a service that is essential to many people and which has
bound our nation together. A shut down would also cause great damage to our economy. Senator
Carper has said that such an unspeakable event could "effectively shut down the U.S. mailing
industry that depends on the Postal Service.. .A shutdown of an industry of its magnitude, with
some 7 million employees and more than $1 trillion in revenue, would be catastrophic to our fragile
economy."1 For these reasons, as Congress considers ready solutions to the financial woes of the
U.S. Postal Service, I hope you will examine the viable options with a full understanding of how the
U.S. Postal Service (USPS) came to be in such a deep fiscal hole and how they might start to climb
out of it.

In 2006, the United States Congress passed the Postal Accountability and Enhancement Act
of 2006 (PAEA). This bill required that the USPS prefund its future health care benefit payments to
retirees for the next 75 years in an astonishing ten year time span.

Under the PAEA, USPS is required to make $103.7 billion in payments by 2016 to a fund
that will pay for future health benefits of retirees of the next 75 years. This health benefit
prefunding mandate covers not only current employees that will retire in the future, but employees
yet to be hired who will eventually retire. On top of this, none of the money that the USPS
contributes to this fund can be used to pay for current retiree health benefits. So the USPS must
make payments for current retirees' health benefits in addition to its required health benefit
prepayments for future retirees. This is something that no other government or private corporation
is required to do and is an incredibly unreasonable burden.

Furthermore, a July 2009 report2 from the U.S. Postal Service's Office of Inspector General
reveals not only that the prepayments for future retiree health care benefits required by PAEA bear
no relationship to the USPS's future liabilities but also that they aren't actuarially calculated. The
Office of Inspector General's report even questions the basic assumptions the Office of Personnel
Management (OPM) uses to calculate the USPS's retiree health care obligations and suggests that
they are likely unreasonable. OPM assumes health care cost inflation significantly higher than
industry accepted standards. OPM assumes health care cost inflation of 7 percent, while the
standard used across government and private corporations is around 5 percent. All of this means
that the unreasonable requirements under PAEA are even more perverse in that they may result in
an overpayment of nearly $13.2 billion by 2016 - funding the future retiree health care obligations
by 115 percent.

The deep hole of debt that is currently facing the U.S. Postal Service (USPS) is entirely due
to the burdensome prepayments for future retiree health care benefits imposed by Congress in the
PAEA. By June 2011, the USPS saw a total net deficit of $19.5 billion, $12.7 billion of which was
borrowed money from Treasury (leaving just $2.3 billion left until the USPS hits its statutory
borrowing limit of $15 billion). This $19.5 billion deficit almost exactly matches the $20.95 billion
the USPS made in prepayments to the fund for future retiree health care benefits by June 2011. If
the prepayments required under PAEA were never enacted into law, the USPS would not have a net
deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion. Should the
Postmaster General's predictions of a nearly $10 billion loss by the end of the year prove accurate,
the USPS would have a net deficit of almost $24 billion. However, it would also have been required
to make a total of nearly $26.5 billion in prepayments in accordance with PAEA by that point.
Eliminating these prepayments, in this scenario, would allow the USPS to be in the black by $2.5
billion - instead of seeing a net deficit of $24 billion.

It is clear that these prepayments for future retiree health care benefits are - at this point -
the primary reason for the U.S. Postal Service's financial crisis. In fact, simply looking at the
numbers reveals that the Postal Service's "financial crisis" is in fact an entirely manufactured
"crisis" precipitated by the ill-advised schedule of prepayments for future retiree health care
benefits mandated by the 2006 PAEA passed by Congress and signed by President Bush.

In addition to providing its retirees with health care benefits, the U.S. Postal Service takes
part in the federal government's retirement system in order to provide retirees with pensions. The
system for current employees is the Federal Employees Retirement System (FERS), which replaced
the Civil Service Retirement System (CSRS) in 1987. To understand just how much this crisis has
been manufactured, we only need to look at two reports by the U.S. Postal Service's Office of the
Inspector General that examine the payments the USPS has made to these funds.

A January 2010 report5 reveals that from 1972 to 2009, the U.S. Postal Service overpaid the
Civil Service Retirement System (CSRS) by about $75 billion and proposes that this be paid back to
the Postal Service immediately. On top of this, an August 2010 report6 projected that the USPS had
overpaid the Federal Employees Retirement System (FERS) by about $6.8 billion by the end of FY
2009. Combined, these overpayments amount to about $82 billion.

It has been suggested in these reports that these overpayments to the federal pension systems
be refunded and credited toward the U.S. Postal Service's retiree health benefit prepayment
requirements under PAEA. Having funded about $38 billion of their $103.7 billion obligation under
PAEA, an $82 billion refund would allow the USPS to fully fund these retiree health benefit prepayments
and end future payments. It would even allow them to pay down a significant portion of their debt:
leaving about $16.3 billion left over to pay any remaining obligations.

Critics of the U.S. Postal Service will say that declining mail volume has been a result of the
internet age and a move toward digital communications. One cannot deny that the USPS has lost
mail volume or that costs have grown over the years due to increases in energy prices and the total
number of delivery points that must be met as the U.S. population increases. These factors
combined with declining revenues have certainly impacted the USPS's net income, but they aren't
the chief drain on the USPS's financial resources. Those that would claim otherwise simply distract
from the true culprits already mentioned. The most significant problems impacting the USPS's net
income are the unreasonable burdens placed on it by PAEA and by its overpayments to the CSRS
and FERS funds. And most of the loss of volume has happened from 2007 to today, due to the
financial crisis and the subsequent recession. In fact, the largest declines in mail volume and
revenue came between 2008 and 2009 - at the peak of the most recent financial crisis and recession.

From 2007 to 2010, USPS's annual revenue fell by nearly $8 billion, representing about a
10.5 percent drop from its 2007 peak revenue of about $75 billion. A ten percent drop is certainly
significant - but not to be unexpected in the midst of a straining financial environment that forces
consumers to cut back spending. To provide some perspective: even Fortune 500 companies in the
top 10 in 2011, like General Electric, Ford Motor Company, and Exxon Mobil have all seen annual
revenue drop by even greater margins. Ford saw its annual revenue fall from its 2007 peak of $169
billion to about $129 billion in 2010 - almost a 24 percent drop.7 Exxon, similarly, saw its annual
revenue fall from a 2008 peak of $460 billion to $370 billion in 2010 - an almost 20 percent drop.8
And General Electric saw a 17 percent drop in annual revenue from 2008 to 2010.

The U.S. Postal Service has already responded to these declining revenues by cutting nearly
110,000 jobs in four years10 through attrition and closing hundreds of post offices. Since much of
this lost volume and revenue may be a result of the financial crisis and recession, many of these
permanent closures may be unwarranted. Mail volume usually recovers once the economy begins to
recover, relatively speaking. Despite the fact that the U.S. Postal Service has already taken action to
account for the effects of the current economic conditions, it is still looking at ways to cut service
and jobs - considering cutting service from 6 to 5 days per week, closing more post offices, and
cutting more jobs.

Any reform that Congress passes must maintain the U.S. Postal Service's universal mandate.
The USPS is required by law to provide a maximum level of service to all citizens of the United
States. The U.S. Postal Service also must fulfill an, at times, competing mandate of remaining self
sufficient and fiscally sound. Unfortunately, in order to balance these sometimes competing
objectives, the Postal Service has resorted to closing thousands of Post Offices throughout the
United States, reducing its workforce, and cutting back on the quality of service provided to its
patrons. Together, raising rates and reducing services are a suicidal prescription for further decline.

The Postal Service recently began studying 3,652 more post offices for closure. Originally it
claimed that this initiative could save nearly $1 billion. However, more recently the U.S. Postal
Service has provided estimates of cost savings from this effort - without noting the substantial
community benefits that are wiped out by the loss of a Post Office - that only amount to $200
million. And it would only save that much if all of the 3,652 post offices are ultimately closed -
something they have stated they do not intend to do. Either way, $200 million only represents two
percent of the $10 billion deficit projected by the Postmaster General for this year, assuming no
refund of the USPS's overpayments to federal pension systems. What is the sense in closing such a
large number of post offices and cutting back on the service and the sense of community to millions
of U.S. citizens in exchange for such a pittance of cost savings - especially when there are other
much larger ways, noted earlier, that can be adopted to put the Postal Service back on financially
sound footing? Not to mention the Postmaster General's declaration last year about starting
aggressive sales promotion under his watch.

Remember, too, that especially during times of natural disasters and national security
concerns, there are people who rely on the USPS for critical emergency supplies and medicine.
Cutting services further could impair these citizens' ability to gain access to these necessary
provisions at times of peril.

In light of the challenges and burdens facing the Postal Service, Congress should do its best
to pass reforms that will eliminate the manufactured financial crisis that the USPS faces in a way
that minimally impacts patrons of the USPS. To reiterate, the prepayment of retiree health benefits
for the next 75 years (in a period of 10 years, by 2016) required by PAEA is overly burdensome and
something that no other government agency or private corporation is required to do.

Congress should not only ensure that the $82 billion in overpayments the USPS made to
federal pension systems, identified by the U.S. Postal Service's Office of Inspector General, be
refunded, but that the provisions of PAEA that require the USPS to prefund its retiree health
benefits at such an accelerated schedule be repealed.

This would ensure that the USPS returns to solid financial footing and do so in a way that
prevents more post offices from being closed, more jobs from being cut, and the quality of service
from deteriorating further. Such an outcome would be favorable to the people in this country that
rely on the post office to bind their community together, to do their business, to receive precious
communication from a distant friend or relative, to pay their bills, or to receive their medicine,
among many other things. Otherwise, those who are most vulnerable in our society will feel the
harshest effects of further post office closings and service cuts.

Remember Ben Franklin's vision.

Sincerely,
Ralph Nader /signed/

http://nader.org/uploads/USPS-ltr.pdf

Nader wrote the forward to the book Preserving the People’s Post Office
.
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A nationwide consortium, the Institute for Public Accuracy (IPA) represents an unprecedented effort to bring other voices to the mass-media table often dominated by a few major think tanks. IPA works to broaden public discourse in mainstream media, while building communication with alternative media outlets and grassroots activists.

http://www.commondreams.org/newswire/2011/09/23-4