Postal Service can't wish away retiree costs

I got a press release from ColorOfChange.org today that has me puzzled.

The group, calling itself the nation’s largest online civil rights organization, is upset that people are piling on the U.S. Postal Service.

According to the press release, the service’s financial crisis is “manufactured by Congress and the media.” The service would be turning a profit if not for the

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onerous requirement government imposed on it to pre-fund retiree health benefits 75 years into the future.

The group turns this into a real Republican vs. Democrat issue, with Republicans cast as “cheering” the recent move to eliminate Saturday delivery.

Well … a lot of Republicans may be backing the Saturday cut and pushing to privatize, but Democrats have been critical of the service, as well. Democratic Sen. Tom Carper of Delaware has called the Saturday plan inadequate to solve the Postal Service’s problems. He chairs the committee that oversees the service. (Click here to read story.)

Also, ColorOfChange clearly misunderstands the reasons why Congress in 2006 required the Postal Service to begin prepaying retiree health benefits, which it casts as a Bush administration move that is burdensome.

The requirement wasn’t to punish the agency or make it do something unreasonable. It was to make it come to terms with a real expense — retiree health care — that it hadn’t funded for decades.

This Bloomberg opinion piece by Josh Barro last summer explains the situation well. Private companies treat the accrual of retirement health care liabilities as a cost. Most government agencies do not, although they report them as a liability. But not treating them as a cost does not mean they are not, indeed, a cost.

In the old days, the Postal Service would pay for its retiree’s health benefits on a pay-as-you-go basis. Barro wrote, “Because the cost of actually providing health care to retirees in a given year is less than the value of benefits current workers are accruing, that meant the post office was understating the cost of retiree health care.”

The promise of providing that health care is a debt, a promissory note, which must be paid one way or another. If the Postal Service is sold and privatized, either the buyer would have to pay it, or taxpayers would take the hit when the cost of the sale was reduced by the outstanding amount owed.

Or Congress could vote to pull the promised benefit out from under postal service workers, which would create other huge problems.

But the obligation can’t simply be wished away.

So what is it ColorOfChange.org would like to do? Its main concern seems to be the loss of jobs, particularly those of black women, should the service be drastically curtailed. That is a legitimate concern.

But so are the promised health benefits of those women, and others, once they retire.

And, contrary to what the group believes, the Postal Service cannot survive long without making itself much smaller.

Yes, Congress deserves a lot of blame, but not for making the Postal Service pay its obligations to retirees. It deserves blame for not giving the service the freedom it needs to deal with its problems. One of the ways to deal with that is to cut its days of service and reduce its workforce even further.

That’s a harsh reality. When it comes to dollars and cents and a changing industry, there unfortunately aren’t a lot of great ways to alleviate harshness.