Email and Electronic Bill Paying as well as Retiree Benefits are Bankrupting the U.S. Postal Service

Posted by PITHOCRATES - February 10th, 2013

Week in Review

The United States is not the only country having trouble with their postal service.  Email and electronic bill paying have taken away a huge source of revenue for the postal service in the US.  As well as in the UK (see Post Office will shut one in five branches after ‘losing £40m a year’ by Anna Edwards posted 2/7/2013 pm the Daily Mail).

The Post Office said they were losing £40 million [$63 million US] a year, so it was seeking retail partners for 70 branches, enabling them to stay in their current locations…

CWU general secretary Billy Hayes said the announcement was a ‘huge blow’ to the Post Office network, saying: ‘Staff will be in shock at the scale of what will effectively be the closures of Crown post offices across the country.

‘This move will have a huge impact on the high streets of small towns earmarked to lose their Crown post office.

‘These offices provide a dedicated specialist service to communities which will not be replicated by a window or two in a bigger shop…

‘It leaves huge questions about the future of the Post Office – how can it realistically deliver services for passport applications, identity services and a range of financial services while being dramatically pruned back? What does it mean for Metropolitan Police plans to move into London post offices?’

Robert Hammond, of Consumer Focus, said: ‘The Post Office network must change if it is to be sustainable.

‘These changes to Crown post offices are part of the biggest-ever programme of change to the network and consumers will want to see Post Office services that are high-quality and accessible, and offer the products and services they need. This is more important than the issue of who operates the post office itself.

People are using Royal Mail less in the UK.  So to save the postal service the UK is taking drastic action.  Basically privatizing as much of it as they can.  By partnering with other retail outlets that can cut the overhead cost of standalone post offices.  Some people may not be happy about these developments.  But it’s their own fault for using email.  And paying their bills online.  If they want to keep the postal service this may be their only chance.  Something the Americans should consider.  Based on the money they’re losing (see Postal Service loses less, but still in trouble by Jennifer Liberto posted 2/8/2013 on CNN Money).

In the three months ended Dec. 31, the agency lost $1.3 billion — considerably less than the $3.3 billion lost in the year-earlier period.

The service was hurt as the volume of first-class mail, which most consumers use to pay bills and stay in touch, decreased by 4.5.%, said USPS chief financial officer Joseph Corbett. But it got help as shipping and package volume for the busy holiday season increased 4% compared to the prior year.

Still, the service is in trouble. The key culprit remains a 2006 congressional mandate, under which it has to pre-fund healthcare benefits for future retirees. The USPS has been borrowing billions of dollars from taxpayers to make up for the shortfalls…

The Postal Service on Wednesday unveiled a plan to end Saturday delivery of mail, a move which is expected to save $2 billion a year, a drop in the bucket compared to the $16 billion loss the organization reported for 2012.

The US has about 5-times the population of the UK.  So if we multiplied their losses (in US dollars) by 5 it comes to $316 million.  A far cry from the $16 BILLION lost in 2012.  The U.S. Postal Service has a far greater crisis on its hands than the Royal Mail.  And it goes to that unfunded retiree health care plan that the U.S. government is now forcing them to fund.  Compounding the problem of email and electronic bill paying.

Employers who provide retiree pensions and health care benefits are supposed to put money aside for their current workers’ retirement.  In accounting terminology, this retirement expense should be expensed on the income statement (lowering profits) with a credit going to the balance sheet to show the money owed.  A liability.  When a person retires and starts incurring retirement costs the employer pays for these and debits that liability account.  Reducing it.  And credits a cash account.  Reducing it.  When an employer pays a retiree it should be entirely a balance sheet transaction.  Completely off the income statement.  With no impact on profitability.  This payment should reduce their cash balances.  As well as their liability account for retirees.  For as they pay their retirees it reduces what they owe their retirees.

The U.S. Postal Service didn’t do this.  They simply paid and expensed these retirement benefits as they incurred them.  Greatly understating their retirees’ costs.  And overstating their profitability.  Leaving a massive unfunded retiree health care liability.  Funding this massive unfunded liability is bankrupting the U.S. Postal Service.  Or rather these massive retiree costs they were hiding off the books are now bankrupting the U.S. Postal Service.  Unions want to go back to NOT funding these retirement costs.  And have the U.S. taxpayer bail them out.  Just like they bailed out the UAW retirement plans when GM and Chrysler went bankrupt.

The U.S. needs not only to privatize portions of the U.S. Postal Service like the UK they also need to privatize pensions and health care plans.  Like most businesses have.  Give employees money to put away for their own retirement needs.  For the old ways just don’t work anymore.

Funny how progressives hate all of the other old ways.  Like thrift, going to church, waiting until marriage before having sex, etc.  But pensions?  Retiree health care benefits?  No, when it comes to these things they’re all for going back to the Fifties.

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