Postal Service Set To Default On Pension Payment For First Time, But Congress Could Easily Fix The Problem

In 2006, the Republican-led Congress passed an unnecessary law requiring the United States Postal Service to prefund its pension benefits for 75 years through a $5.5 billion annual payment. The Postal Accountability and Enhancement Act of 2006 (PAEA) is the only one of its kind for a government agency. On August 1st of this year, the Post Office will likely default for the first time in its history on its 2011 pension payment. If Congress does not act, it will also default on its 2012 payment due September 30th.

The requirement has drastically harmed the functions of the agency, which is used by almost every American. In July, USPS began closing offices around the country to meet the annual payment. By the time current downsizing plans are completed in 2014, Americans will see 229 processing plants closed and 28,000 jobs lost. In June, ten USPS employees launched a multi-day hunger strike to protest the cuts.

Without the pension payment, USPS would have a $1.5 billion surplus instead of a $20 billion shortfall. “[T]hese ongoing liquidity issues unnecessarily undermine confidence in the viability of the Postal Service among our customers,” said USPS spokesman David Partenheimer.

Postal Service cuts also threaten to increase economic inequality. A Reuters analysis released in February found that America’s poorest communities “stand to suffer most if the struggling agency moves ahead with plans to shutter thousands of post offices.”

A vast majority of postal offices under consideration for closure are located in rural areas, where poverty rates are higher than the national average. Nearly 90 percent of Americans without broadband access live in rural areas, making USPS cuts especially harmful to the pocketbooks of rural Americans.

Congressional Republicans have consistently pushed to downsize USPS. In 2011, Rep. Darrell Issa (R-CA) introduced legislation that would end to-the-door mail delivery and put USPS under a control board, moves which would lead to more layoffs and bust postal service unions. Such proposed “fixes” are a thinly-veiled Republican ploy to use the unnecessary PAEA requirement to attack public sector employment.

In April, the Senate passed a bipartisan bill to stretch the pension payments over only 40 years, reducing the annual payment to $2.5 billion. The bill would also return $11 billion to USPS that was overpaid into one of its pension funds. “The longer the House delays consideration of the bill, the longer the uncertainty about the Postal Service’s financial future remains,” said Sen. Scott Brown (R-MA), who co-sponsored the Senate bill. “This is irresponsible and unfair.”

The House is currently preparing to leave for its August recess, making action to prevent a USPS default unlikely.

Ben Sherman