January 27, 2016
You probably knew that, but it told readers the story once again in an editorial in which the first paragraph told readers that if the Postal Service were a private company “it would undoubtedly be viewed as insolvent.”
Yes, the Postal Service is losing money, but there are two items that need to be mentioned in this story. First, the Postal Service losses in recent years are primarily the result of a unique accounting method under which the Postal Service is being required to 100 percent prefund its retiree health benefits. There is no private sector company that has such a prefunding level.
It makes a difference. If we look at the Postal Service’s finances from the first 9 months of 2015, we see that it lost $2.8 billion. But a more careful look shows that it paid $6.6 billion to for its retiree health benefits, $4.3 billion of which is to prefund future benefits. Without this payment, it would have shown a profit of almost $1.5 billion.
The other more important point is the absurd restriction under which the Postal Service operates. On the one hand, it is told that it has to be run at a profit, like a private company. On the other hand, it is prohibited from taking advantage of its resources to move into new potentially profitable lines of business.
One obvious line would be postal banking, a service that it used to provide and which other postal services still do provide. With an unbanked population in the tens of millions, the opportunity to have low cost checking accounts and other basic banking services would likely be welcomed especially in low and moderate income communities.
People like Senators Elizabeth Warren and Bernie Sanders have promoted postal banking, as has the Postal Service’s inspector general. This certainly would be a reform worth considering, but of course the competition would not make the financial industry happy.
Note: An earlier version had incorrectly treated the whole sum for retirement health care spending as prefunding, instead of just $4.3 billion.
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