To understand how much trouble the U.S. Postal Service faces, consider that its $5 billion loss in fiscal 2013 represented a major improvement over the previous year’s $15.9 billion loss. Given the technological obsolescence of its most profitable line of business — first-class mail delivery — it would be a miracle if the Postal Service weren’t in the red. And that’s before you factor in other obstacles to efficient operation: regulatory price controls, no-layoff labor contracts, an expensive network of redundant processing centers and, most of all, micromanagement from a Congress that responds to the demands of interest groups including bulk mailers and rural customers rather than the broad national interest in avoiding a taxpayer bailout.
Now comes a sign that realism might, at long last, be taking hold in Congress. Sens. Thomas R. Carper, D-Del., and Tom Coburn, R-Okla., have moved through the Homeland Security and Governmental Affairs Committee a bipartisan bill that offers the Postal Service a measure of genuine financial relief in return for a measure of genuine cost-reducing structural reform.
The heart of the bill reduces the personnel costs that currently account for 80 percent of the Postal Service’s annual budget. Specifically, it would require a significant portion of postal retirees to move from the health insurance program for federal employees, which they currently use, to Medicare. This overdue change is eminently fair, given that the Postal Service and its employees contribute millions of dollars to Medicare’s trust fund each year, while the cost of providing a redundant alternative for its retirees increases the Postal Service’s crippling long-term liabilities.
The bill’s authors estimate the annual cost-shift from the Postal Service to Medicare at $800 million. In return, the service would get relief from a mandatory $5.5 billion annual payment for retiree health care, which it has been financially unable to make for the past three years anyway. Those contributions would be stretched out over 40 years.
We supported those required payments as a way of forcing structural change. Yet now that they are manifestly unpayable, the Carper-Coburn deal strikes us as a plausible second-best solution. In addition to the health care swap, the legislation would impose a de facto requirement that the Postal Service’s long-standing request to end costly Saturday delivery be met in two years, and it would give the service greater leverage in collective bargaining and negotiations with the Postal Regulatory Commission.
Similar in its broad outlines to a proposal President Barack Obama previously floated in his budget, the Carper-Coburn bill is a far cry from the transformation that the U.S. Postal Service truly needs. A more ambitious House bill, authored last year by Rep. Darrell Issa, R-Calif., called for an immediate end to Saturday delivery and the creation of a commission that would close unneeded facilities; the Carper-Coburn bill would protect postal infrastructure for two years. Still, the benefit-to-bailout ratio in Carper-Coburn is better than that in previous Senate postal legislation. That alone makes it a step in the right direction.