US Postal Service fears running out of cash by 2024 amid a ‘death spiral’

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The U.S. Postal Service, contending with dwindling revenue even as it delivers mail to 1 million new addresses every year, will run out of cash in the next five years unless Congress eliminates flaws that lawmakers built into its business model, the postmaster general warned Tuesday.

Chief among the obstacles is a requirement imposed in 2006 that the organization pay in advance for retiree health benefits, rather than covering them as they come due, the practice of most government agencies and private companies.

That alone costs the service $7.1 billion a year and has contributed to 11 years of losses, including one of $3.9 billion in 2018. The organization has stayed afloat largely by defaulting on $48 billion in mandated payments over the past several years, Megan Brennan said during a hearing called by the House Committee on Oversight and Reform, and its operations are further complicated by inflation-linked caps on price increases for key products.

“No set of management actions is sufficient to offset the decline in the use of mail” as paper correspondence is replaced by digital transmissions, Brennan said. “Without these defaults and aggressive management actions, we would not be able to to pay our employees and suppliers or deliver the mail. We cannot overcome systemic imbalances caused by business-model constraints.”

While the Oversight Committee has previously attempted to push through legislation addressing the Postal Service’s existential dilemma, its last bill — drafted in 2017 — failed to make it to the House floor, Chairman Elijah Cummings, D-Md., pointed out.

[Opinion: The Postal Service will thrive if Congress takes the right steps]

“Things do not have to be this way,” said Cummings, whose party regained control of the House of Representatives in November’s midterm elections. “Congress can enact legislation making some basic reforms, which is what we have been trying to do, including eliminating unreasonable payments imposed by Congress that will end the defaults and ensure the post office is not always operating on the brink of a liquidity event.”

The organization has operated at a disadvantage since the pre-funding requirement was imposed in the Postal Enhancement and Accountability Act of 2006, according to witnesses who testified during Tuesday’s hearing.

One year later, then-Apple CEO Steve Jobs introduced the iPhone, which enabled users to access bills and correspondence from a handheld device that previously were sent by mail, increasing the competitive threat from internet services.

That was followed by a recession that stretched from 2007-2009, including a global financial crisis, and the “rout was on,” said Quad CEO Joel Quadracci, who testified on behalf of the Coalition for a 21st Century Postal Service. “After the recession ended, the mail volumes did not return, demonstrating that the shift to electronic alternatives was real and permanent,” he said.

Ironically, the growing leverage of digital capabilities by U.S. industry has also benefited the Postal Service, which handles the last leg of delivery for internet superstore Amazon and its e-commerce rivals as well as shippers such as FedEx and UPS.

[Also read: Stamps.com dumps Postal Service to pursue Trump nemesis Jeff Bezos]

“Just imagine if we had given in to those who advocated the end of Saturday delivery in 2011 or 2012,” said Fredric Rolando, president of the National Association of Letter Carriers, which represents more than 200,000 urban mail-delivery workers. “We would have missed out on the e-commerce boom, and worse, we would have unnecessarily eliminated tens of thousands of good jobs and weakened the Postal Service.”

While lawmakers expressed support for modifying the postal service’s operating mandates, several were reluctant to go along with the privatization or cost cuts suggested by Chris Edwards, director of tax policy studies at the libertarian Cato Institute.

“Mail delivery is something that Americans have been able to count on for decades and generations,” said U.S. Rep. Jimmy Gomez, D-Calif. “It’s the one thing in government that I think we should hold almost sacred, and I want to make sure every community has access to postal service.”

Ultimately, however, some cutbacks will prove inevitable as the organization tries to escape a “death spiral,” Edwards said.

“The crisis here is a lot more dire than a lot of people are recognizing,” added Edwards, who proposed narrowing a universal service requirement that’s highly valued in rural areas and allowing the organization to close offices including at least one in his own Virginia neighborhood. “Privatization may sound radical, but governments around the world have transferred thousands of state-owned businesses worth more than $3 trillion to the private sector. Everything from railroads to airports to postal systems have been privatized in Europe.”

CORRECTION: In a previous version of this story, the Washington Examiner incorrectly reported the first name of the postmaster general. She is Megan Brennan. The Washington Examiner regrets the error.

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