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So Here’s The Thing About The Postal Service Retirement Funding…

My lefty friends and those I follow keep regurgitating this ridiculous left-wing talking point about the reason the Postal Service is scrapping Saturday delivery.  The gist of it is this:

Republicans in Congress passed a bill that requires the Postal Service to fund 75 years worth of health benefits for every employee, and even for employees that don’t yet exist.  They were given 10 years to do this. It is causing massive cash problems for the Postal Service and that’s why they have to cancel service. It’s all Republicans faults and it’s just because postal workers are unionized.

There’s a whole lot of BS in that, so let’s unpack it slowly lest the sticky goo get all over us.

First, it is true that Congress passed a law requiring full funding of the Postal Service health benefit program for every employee until they die.  It was NOT, however, Republicans in Congress that agreed to give them that benefit. The Postal Service made a concession to unions to pay for full health care benefits for employees until they died.  That was a collective bargaining concession that a lot of dumb companies have agreed to, and many of them have been brought down by it.  Case in point, General (now Government) Motors or GM.  In the mid 200os, Warren Buffett was asked by Charlie Rose if he was interested in buying GM.  Buffett’s response, in short, was no. GM, he explained, used to be a car company, but had become a pension and benefit operation with a small car unit attached.  There was no way to save GM without serious concessions from the Unions.

He clearly didn’t know about Barack Obama back then.

Flash forward to the Postal Service and you have the same issue – free health care, and pension benefits, until you die.

That is a serious problem when health care costs rise exponentially each year, and people stop sending mail.

So Congress says, “Hey, who will get stuck with the bill if the Postal Service collapses and can’t keep paying those costs out of current revenue?”  Yup, you guessed it, the taxpayer.

They pass a law that says USPS must put cash aside from current revenue to cover that expense in the event of a USPS failure.  They gave them ten years to fund the pot because they had no idea if the USPS would last for twenty.

So the USPS keeps putting cash aside and all is going fine – except for the fact that costs keep rising (yes, despite ObamaCare, costs keep going up and are expected to for the foreseeable future) and the USPS keeps losing business and has to put less in than planned because they’re broke.  Discovering that their “free health care for all forever” plan is eating them alive, they recently announced a reduction in Saturday service to cut costs.

To be clear, if Congress had made Enron or any other big company fully fund pension plans, the left would be cheering.  If a company had to keep a big pile of money on hand so every employee would be taken care of in case of a bankruptcy, the left would be jumping up and down.

In this case, however, the howls can be heard in China.  The right, they wail, is trying to kill off unions and shutter government (never mind that they’re also the first to point out that USPS isn’t actually government to begin with).

The reality is Congress (perhaps for the first time ever) was actually trying to keep the taxpayer from getting screwed if the Postal Service went belly up.  The postal employees would have been left with nothing or the US taxpaying population would be asked to cover an employee benefit liability currently estimated at about $100 billion.

For once, they did the right thing.

All of that said, let’s now address the “75 years” and “employees who aren’t born yet” nonsense.

The funding requires enough money to pay these benefits until an employee is dead.  In the case of the US, life expectancy is around 79 years. So an entry level employee at 18 or 19 years old would need to be covered for almost 60 years – not 75.  Again, that’s the deal the USPS made with them.  Don’t blame Congress for them taking that on.

As for the “employees not yet born” issue, those are not funds paid in.  Funds are only paid in on the actual employees.  However, for business planning purposes, the USPS has to estimate how much an employee will cost them to do business now and in the future.  For that reason, they have to assume that the person working for the postal service 20 years from now will need to be covered, even if they’re not yet born.

They plug that estimate into a formula that tells them what future costs might look like.  It’s really no different than weather forecasting, climate modeling or any long range estimation.  You make assumptions based on current data.  What you don’t do, and what the postal service does not have to do, is make payments on someone who isn’t a human yet.  It’s not happening, so stop repeating that.

Hope that clears some of this up.  If you really want to dive into it, here is the Congressional Research Service take on it from 2011.


Written by Michael Turk