Barring some unexpected intervention from Congress, the cash-strapped U.S. Postal Service will default on Aug. 1, when it fails to pay $5.5 billion into a retiree health care fund, which is required under law.
Two months later, on Sept. 30, the Postal Service is likely to default again, this time on a $5.6 billion payment to the same fund.
It’s a monumental failure — but it’s Congress, not the Postal Service, that should be ashamed.
Congress set this slow-motion train wreck in motion way back in 2006 when it passed the Postal Accountability and Enhancement Act, which required the Postal Service to pre-pay expected health care costs for future retirees within 10 years. Compressing the payment period to just 10 years is why the annual payments are a whopping $5.4 billion to $5.8 billion apiece.
No other organization in the country carries such a burden.
Congress insisted on a 10-year payment period in order to capture the impact of the law on the deficit. The Congressional Budget Office’s arcane “scoring” rules require that the impact only be scored over 10 years. Forcing all liabilities to be pre-paid within 10 years enabled CBO to declare the bill to be deficit-neutral. That, in turn, provided the political cover Republicans needed to support the bill.
Aside from that, however, there was no reason to make the payments so large and to collect them so fast.
The Postal Service has asked for years for relief from the oppressive weight imposed by these payments, and Congress has failed, time and again, to do its job and find a better solution.
Four senators — two Democrats and two Republicans — sponsored a bill to stretch out those pre-payments over 40 years, lowering the annual payment to roughly $2.5 billion. The Senate approved the measure, but House Republicans balked, calling the plan a multibillion-dollar bailout of the Postal Service.
Not that Congress hasn’t come through with bailouts before, as with General Motors or AIG, the insurance giant that made “too big to fail” a household expression. If the Postal Service were a private entity, lawmakers would be rushing to ensure its 630,000 jobs were protected. They’d rail about how it’s too big to fail, and why saving the institution is the right thing to do. In truth, though, re-amortizing the Postal Service’s payments into its future-retiree health care fund is not a bailout. This is money that’s being set aside and invested, not payments to creditors or shareholders. The fund is a best guess at the amount that will be needed decades from now. It is not an immediate pressing debt. The House’s failure to act is disgraceful. Through their inaction, Speaker John Boehner, R-Ohio, and House Government Oversight Committee Chairman Darrell Issa, R-Calif., are demonstrating contempt for the Postal Service and a lack of respect for the law and for the obligations of their own institution.
Or perhaps, they are making a point: By allowing the Postal Service to default without consequence, they are recognizing the ineptitude of their own branch of government and their personal failure to lead by example.