USPS Bailout on the Horizon

Before we even come close to paying off our current government-sponsored enterprises (Fannie Mae and Freddie Mac) or recoup taxpayer dollars from Federal bailouts (General Motors & Chrysler) Congress wants to put the taxpayer on the hook again.

How much taxpayer money should be handed out to a bankrupt monopoly? According to certain members of Congress, the United States Postal Service will only need $100 billion to keep from failing. That’s cheap compared to Freddie & Fannie. What will the taxpayer receive for this generous financial backing? USPS employees keep inflated wages, layoff protections from collective bargaining negotiations, contribute less to health care costs than other federal and private sector workers, and allow an unsustainable business model to remain intact.

USPS has hit the brink of insolvency. USPS discontinued its contractual obligations to contribute to the Federal Employees Retirement System, citing their $8.51 billion deficit last year. This legally questionable action by USPS is not a solution to their fiscal crisis and only saves revenue in the short term.

USPS projected annual losses and deficits in the near future are astounding, by 2020 USPS will incur annual losses of $33 billion by 2020 and projected deficits of $8.3 and $8.5 billion in the upcoming years. Considering this data, the Postal Service has called on Congress to act to alleviate their financial constraints.

Two bills have been introduced to reform the Postal Service since its plea for help. One proposed bill, the Postal Reform Act, is sponsored by Rep. Darrell Issa. Option two, the United States Postal Service Pension Obligation Recalculation and Restoration Act of 2011, is sponsored by Rep. Stephen Lynch.

Paralleling the debt ceiling debate, Rep. Issa proposes true reform and cost-saving measures. Rep. Lynch’s bill is an accounting gimmick, similar to the “budget cuts” from Budget Control Act.

Issa’s reform leads to cuts in services, post office locations, and employees. These cuts will prevent a taxpayer-funded federal government bailout of USPS. In his words, Issa’s bill “encourages USPS to modernize its retail network and enables USPS to act more like a business.” As seen in the debt ceiling debacle, true cost-savings and straying from the status quo may be politically unfeasible.

Rep. Lynch’s bill extends USPS’s ability to accumulate debt, which will likely lead to a taxpayer bailout. Lynch makes convoluted claims of USPS over-payment of retirement obligations, which were put in place because of USPS’s fiscal liabilities and monopoly status. Rep. Lynch comments on the stringent obligations of USPS: “H.R. 1351 would correct the Postal Service’s overpayment to the federal government of both its Civil Service Retirement System and Federal Employee Retirement System obligations, which is collectively in the range of $60 to $80 billion, providing the Postal Service with an opportunity to find long-term solutions. In light of today’s announcement, we call on our Republican colleagues on the Oversight Committee to give this legislation prompt consideration.”

USPS reform is another chance for Tea Party and fiscally conservative GOP officials to prove they want spending cuts and fiscal reform. If there is another failure to secure any kind of real savings to the taxpayer, the unfaltering political support of true fiscal conservatives may not be there for the GOP in 2012.