As the United States Postal Service misses key financial payments, critics and supporters speculate about bankruptcy or worse for an institution that predates the Constitution and the Declaration of Independence.
USPS officials have said they will miss two benefit payments mandated by Congress, which has caused a whirlwind of speculation about the future of the Postal Service.
The United State Postal Service is one of the few current government institutions spelled out in the Constitution.
The ability of Congress to “establish Post Offices and Post Roads” is spelled out in Article I, Section 8, of the Constitution, as part of a short list of enumerated congressional powers.
The Framers saw the postal system as critical to facilitating commerce and communications among the 13 states, and it was ranked as a high-priority item, along with the ability to create money, form an army, and ensure fair trade among states.
A lot has changed in 225 years, and today, the Postal Service is in a bad financial way–and subject to the control of a Congress that can’t agree on financial assistance for it.
One problem is the unique charter for the Postal Service: It is a federal institution and Congress has an oversight role (along with the executive branch), but the Postal Service has to pay its own way.
A second issue is that a 2006 act requires the Postal Service to fund its employee retirement plan for decades in advance. That additional cost has places a huge financial burden on the Post Office.
A third issue is that the Postal Service has a heavy union presence, which critics say restricts its ability to cut costs and remain competitive with UPS and FedEx.
And finally, the Postal Service has taken a huge financial hit on profits from first-class mail and package delivery, thanks to UPS, FedEx, the Internet, and mobile devices.
Rand Paul, the libertarian senator from Kentucky, told the conservative website Newsmax that a bankruptcy filing was certainly in the Postal Service’s future.
Paul says the USPS, as a private or public institution, needs to contain union costs, and only a bankruptcy filing would let the Post Office cut expenses related to its unionized employees.
Fredric Rolando, the head of the letter carriers’ union, says it’s an issue with congressional policy that is causing the business crisis.
“Besides bringing the Postal Service to the financial precipice, pre-funding also has prevented the agency from doing what it has done for 200 years–adapt to an evolving society. Instead, this artificial political crisis has focused management’s entire energy on a desperate attempt to pay bills that no one else has to pay,” he said in a statement.
What happens to the Postal Service?
Postal Service critics also want to see the service made into a privately run institution. One idea put out by conservative think tanks is that the USPS could monetize its huge real estate inventory, valued as high as $105 billion, to defray costs, attract investment and remain competitive with other delivery services.
But realistically, could the Postal Service actually shut down, if its problems grow worse and Congress can’t or doesn’t act to help? And how would Americans in rural areas or citizens with a lack of access to digital alternatives survive a postal outage?
No Immediate Shutdown for the Postal Service
For a variety of reasons, the Postal Service doesn’t face an immediate shutdown. For pure business reasons, UPS and FedEx partner with the Postal Service on local delivery, especially for packages ordered via Internet shopping. A shutdown would have a ripple effect on the whole package delivery business, and on businesses that market through the mail.
And then there is the issue of privatization and how the process would work.
Proponents of selling the Postal Service believe it would provide a financial lifeline to the 225-year-old system.
Rand Paul, however, points out one key problem.
“I’ve been trying to find somebody who would buy it. I can’t find anybody who’s interested in buying the Post Office. We’ve talked about this for decades,” he told Newsmax.
One reason is the huge unfunded pension obligation compiled by the Postal Service over the years. A buyer would have to pick up the tab for $46 billion, just in pension costs, according to a Bloomberg analysis.
Peter Orszag, an economist and former Obama administration official, argues that privatization is the only way to go, because it would remove Congress from having any role with the Postal Service.
“The U.S. Postal Service has a long and storied history. Yet it is now struggling because the world has changed and because congressional sclerosis has prevented it from adapting to the new realities. The best way to modernize it now is to move it out of the government,” he says.
Finally, there are a slew of potential constitutional issues related to removing the Post Office from the government system.
Postal Service supporters say it is a constitutionally mandated institution, pointing to the Postal Clause in Article 1, Section 8, but privatization supporters believe Congress was only given an option to establish the Post Office.
Add to the fray all the various interest groups tied to the Postal Service, from unions to local politicians.
Also, some people don’t have electronic communications devices and live in rural locations that only the Postal Service serves. Would there be a legal obligation to provide access to mail that would include government communications, like tax information or social security payments, as well as everyday mail?
And imagine the post office’s fate as argued as a Supreme Court case. The Postal Clause is one of the few enumerated powers in the Constitution. As seen in the recent health care decision, there are a lot of creative lawyers and academics who would certainly like a part of what could be an historic decision.
For now, the Postal Service doesn’t seem to be going anywhere, but there are huge questions about its role with Congress and how it can operate as a self-sustaining business.
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