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Tomorrow, USPS Defaults



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As I noted earlier this month, the deadline looms for USPS to make a $5.5 billion payment toward retiree health benefits that it cannot afford. In fact, the original deadline for this payment was months ago, and it can’t afford the next payment, due in September, either.

These payments are required as part of the company’s transition from a pay-as-you-go system to one where retiree health benefits are pre-funded. Pay-as-you-go is no longer an option because the Internet is destroying the mail business — tomorrow’s USPS revenue can’t be expected to cover tomorrow’s USPS retirees — and Congress gave USPS ten years to make the change.

This requires some very large payments, but lifting this requirement would just kick the can down the road. At some point the benefits need to be paid for, and USPS is making less and less money as time goes by.

From all appearances, reform is still stalled. As I wrote previously:

A Senate plan to reform USPS has passed, but the House has yet to vote on its bill — and there are huge differences between what the Senate wants (e..g extending the [transition] period to 40 years) and what the House wants (e.g. cuts in services and changes to benefits).

You can read NRO’s past coverage of USPS here. Overarching themes: USPS needs to trim unnecessary expenditures and do a better job of managing its unions. Also it would be better if we privatized mail delivery entirely.



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