Phony Deficit Projections
Mask Management’s Real Goal
(This article by former APWU President Wiliam Burrus was first published in the May/June 2010 issue of The American Postal Worker magazine.)
I generally refrain from devoting significant time to informing APWU members about the actions of USPS managers. After all, postal employees have experienced the effects of management’s decisions first-hand, and my elaboration would not provide much new information.
The responsibility of leadership is to respond with action. Unless one intends to outline a program of opposition, there is little value in creating a record of what postal officials said or did.
For this article, I make an exception. On March 2, 2010, the Postmaster General released an “Action Plan” detailing the financial challenges facing the USPS in the next 10 years. The news media followed up with scores of news reports and editorials dutifully repeating the PMG’s assertion that the USPS is on track to suffer losses never before experienced in the history of an independent enterprise: A $238 billion deficit over a 10-year period. Without challenge, this assertion was repeated over and over again as breaking news.
Putting It in Perspective
We now have the opportunity to put this outlandish projection into perspective: To reach that figure, the Postal Service would have to suffer average deficits of $23.8 billion each year for the next 10 years. The USPS has never recorded a deficit that high in a single year, making it highly unlikely that it would average that amount annually for the next 10 years.
And we begin the count toward this colossal exaggeration this year, when it is estimated that the size of the deficit will be in the range of $7 billion. That means the Postal Service immediately will be $16 billion short of the $23 billion yearly average. Are we to believe that in 2011 the Postal Service will get back on track to reach the “average” by suffering a $39 billion deficit? (It should be noted that $39 billion is roughly double the combined wages and benefits of all clerks, mail handlers, city letter carriers and rural letter carriers.)
The USPS report that cites the preposterous $238 billion projection treads softly on the congressionally-imposed requirement that the USPS “pre-fund” future retiree health benefits. In fact, it is the pre-funding requirement that forms the foundation of the Postal Service’s current and anticipated revenue shortfalls.
Meeting an Imaginary Need
The need to pre-fund future retiree healthcare costs seems to exist only in the imaginations of those who inflicted it on users of the Postal Service. Members of Congress, egged on by many misguided supporters of postal reform, are too timid to tax American citizens to finance deficit spending, so they disguise this transfer of postal rates as “future health care payments.”
The logic behind the 2006 Postal Accountability and Enhancement Act, which imposed the requirement, was that if the Postal Service becomes insolvent, funds would have been set aside to fully pay healthcare premiums far into the future. But this is a self-fulfilling prophesy. By requiring this payment, Congress will force the Postal Service into bankruptcy. How ironic.
And where will the USPS deposit the $65 billion that it is required to pay toward this hypothetical obligation? Not in a savings account the way you or I would set aside money for a child’s college education or for a new home. These funds, once transferred to the federal treasury, will be used to pay for government services, including the military, Social Security, border patrol, the FBI, and education. Not one dime will be deposited in an actual account for future withdrawal. Yet the Postal Service is being required to pre-fund this future obligation because Congress says it must.
A Mind-Boggling Exercise
Using this pre-funding obligation as a starting point, PMG Potter outlined his plans for balancing his predicted $238 billion shortfall between revenue and expenses over the next 10 years. If the projections were accurate, this would be a mind-boggling exercise. Can you imagine trying to balance a deficit of $238 billion?
No amount of explaining can put into context projected losses of this magnitude. Whatever the amount of the deficit is, it represents the anticipated costs of mail service over a specific period of time compared to expected revenue over that same period. For the Postal Service’s projections to be accurate, over the next 10 years postal customers would have used services costing $238 billion more than the revenue that will be received in postage over this period. One does not have to be a genius to realize that something is terribly wrong with this picture.
Why would the Postal Service project revenue that is deficient in this magnitude? Revenue is determined by rates multiplied by volume. Is the PMG sending a message to mailers that the cost of service over the next 10 years will exceed rates in such alarming amounts and — in lieu of adjusting rates to the cost of service — he plans to take it from the hides of workers? If so, how cynical.
By law, the Postal Service is restricted from raising rates beyond the increase in the annual Consumer Price Index (CPI), but the law also allows the USPS to increase rates above that amount in “exigent” or emergency circumstances. So how can we expect postage rates to be deficient by such an extreme amount?
Disregarding Cost-Cutting Measures
A close analysis of the USPS “Action Plan” for reducing the imaginary $238 billion deficit reveals that the Postal Service is completely disregarding all of the cost-cutting measures already in place, such as automation, consolidation, and the recent dramatic reduction in the workforce that was aided by the agreement to offer a $15,000 retirement incentive. The plan essentially states, “If we stop doing what we are already doing, we will suffer horrendous losses.”
The fact is, if the USPS is relieved of the future healthcare pre-funding obligation; continues to increase rates at customary levels; eliminates discounts that exceed the costs avoided, and continues the efficiencies already being implemented, the phony $238 billion deficit would be reduced to zero over the next 10 years. The “Action Plan” could have been more accurately titled, “A Pressure Tactic to Achieve Five-Day Delivery.”
Every editorial writer with a pen has reacted to the phony projections by asserting that workers must accept severe wage and benefit cuts, and suggesting that if the unions do not willingly accept them, arbitrators should be required to consider the phony financial health of the Postal Service in their decisions.
What a torturous process to arrive at the conclusion they would really like to advocate: That in a free society, workers should be denied a voice in the terms of their employment.