USPS – The Private, Self-Sustaining Wonder-Entity

So far, so wrong on my Toyota trade for some gap filling reversion. That’s ok. My stop hasn’t been triggered and even though I’d like a rush on the potential profit, there’s no hurry.

Every now and then I like to go off base on subject matter that I find interesting. The USPS is far from interesting material for most Americans, but recently, my wife had a friendly argument with a friend about the United States Postal System. Now this friend is highly intelligent. She graduated cum laude with a JD from Georgetown. She’s definitely no intellectual slouch. She contends and stands firm that the USPS is a private entity that does not draw on public funds in order to continue operating.

I happen to wholeheartedly disagree with my wife’s friend. So I thought, geez, if an enlightened intellect such as hers could maintain that rationale despite a tremendous amount of opposing evidence; then what does the rest of America think? I thought I’d lay out some facts for any readers interested in the debate. And if you have an opposing view, then feel free to leave a comment regarding your own thoughts on one of America’s oldest institutions. This debate is not new at all and the USPS is on the record on its own website stating it does not rely on any taxpayer funds.

Yes, the USPS claims to not be funded by taxpayer dollars as it is an “independent” and “private” entity that suckles at the teats of its master, the United States Congress. Despite the ability of the USPS to generate over $65 billion in annual revenues, we know that they continue to also generate substantial annual operating losses. This is primarily due to having to pre-fund, by Congressional mandate, the retirement healthcare benefits for its fat and bloated union.

The USPS makes a big deal about this prepayment obligation but that’s how the rest of the private sector operates, at least the small amount that still do prefund. Every entity that has defined benefit plans providing healthcare in retirement for its employees generally prepays into the benefit plan, but is under no legal obligation to do so. The USPS doesn’t want to have to prepay. Basically they want their cake and eat it too…all the benefits of a government entity without being officially labeled a government entity. Unfortunately for them, that’s not the way it works in Amurrica.

The government readily admits that the USPS has a surplus in the defined benefit system of approximately $50 to $75 billion, but that is to fund future healthcare benefits for USPS retirees. Those funds are not to cover operating losses. That would just be robbing Peter to pay Paul, which is what the USPS wants to do and obviously would only work for 10 to 15 years. The outcome at the end of the day is still insolvency.

Now before addressing the real argument of whether the USPS is a taxpayer funded entity or not, here are some useful links:

As far as the indisputable proof of the fact that taxpayers do fund the USPS by providing for funds to cover the substantial losses, it’s all readily ascertainable in the 2013 audit report of the Federal Financing Bank by the Office of Inspector General. The Federal Financing Bank “borrows from Treasury and lends to Federal agencies and private borrowers(aka USPS) that have Federal guarantees. The Bank also has a debt obligation to the Civil Service Retirement and Disability Fund.” (First paragraph, page 6 of the PDF)

If you go to page 8 of the PDF, you’ll find all that you need to know about USPS financing. The Federal Financing Bank essentially provides a $15 billion revolver(revolving debt). As the operating losses are generally less than $10 billion annually, this is sufficient to cover operating losses. However, all entities involved understand that the revolver is by no means a long-term viable fix to the solvency issues and that Congress(in all its impotence) will have to do a whole lot more to help the USPS outta this financial pickle.

For the record, the Federal Financing Bank borrows its funds from the Treasury. I’m a little rusty on the income generating abilities of the Treasury, but for the most part they earn income in primarily two ways. The primary way is through tax receipts, and the other way is through debt auctions.  At this point, debt auctions are debt monetization i.e. printing money out of thin air; a subject already well covered by so many sources. The mechanism for this is completed through the Federal Reserve and is essentially an accounting transaction on the books only. It allows for magical money to appear on the balance sheet of the Treasury. Unless the Treasury can prove beyond a shadow of doubt that all funds allocated to the USPS come from debt auctions, then taxpayer funds are being utilized to cover the annual losses generated by the USPS.

I know I sound pretty sure of myself, but I may be mistaken on some of the items or have an incomplete understanding of certain processes, procedures, or mechanisms. To my knowledge, this is how the game works for the USPS and stating that no taxpayer funds are utilized is simply a lame attempt at a red herring by the USPS that can be overcome with minimal research. It took me more time to write this post than actually find the facts.

I happen to be a proponent of privatizing the United States Postal System. Everybody knows efficiency truly exists in the private sector and the free market; not in the hands of bureaucrats. Short of that, I do not believe government employees should be allowed to organize which is a humongous reason why the postal system is in the position it is in today. These are of course different topics for a different argument.

I stand by my contention that the USPS is publicly funded by taxpayers. Anybody out there who feels differently, feel free to let me know.

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