The Next Big Bailout: The US Postal Service

Tyler Durden's picture

Following the roughly two-year overdue rout of municipal securities, which somehow has caught market "professionals" by surprise, there are increasing calls that the Socialist States of America should bail out all the insolvent cities and states that back these securities post haste. Judging by the approach to risk (or lack thereof) so far by supreme chancellor Bernanke and his impotent fiscal policy determining brethren, this will certainly happen within the next 12 months. But the government may be smart to leave some money on the sidelines: another far more prominent bankruptcy is coming - that of the US Postal Service itself, which in tried and true fashion, continues to raise compensation even as net income plummets, and the organization can no longer be deemed to be long-term viable. John Lohman explains.

After guiding toward a loss of $6 to $7 billion for fiscal 2010, the Postal Service disappointed on Friday, November 12th  announcing an $8.5 billion loss (they apparently didn’t attend the Jack Welch University of ‘guide-down-and-beat-by-a-penny’) for the year ending September 30th.  This is on top of a loss of $3.8 billion in 2009 and $2.8 billion in 2008.

These losses have forced the USPS to borrow $3 billion in 2009 and $1.8 billion in 2010, bringing their current debt level to $12 billion.  Only one problem: a statutory limit that prohibits them from borrowing more than $3 billion in any given year, and not to exceed $15 billion total.  And on page 71 of the report, they are kind enough to point out that they have cash obligations this year of $6.7 billion.

“The Postal Service has two substantial cash payments scheduled for September and October 2011: the previously-noted $5.5 billion due to the PSRHBF on September 30, 2011; and approximately $1.2 billion due in October 2011 to the Department of Labor (DOL) for the Postal Service’s annual payment on its workers’ compensation liability.”

So, $12 billion in current debt + $6.7 billion in obligations + another year of guaranteed losses (as foretold in the report’s Outlook on pp. 58-59) - $1.2 billion in cash = welcome to the taxpayer funded USPS bailout of 2011.  The “self-sufficient” monopoly run by the federal government that doesn’t “rely on the taxpayer” will request that Congress increase its debt limits so that it can borrow another $10 billion from the taxpayer-funded U.S. Treasury (at what appears to be, based on current debt outstanding, a taxpayer-subsidized weighted interest cost of 1.4%).  And this from page 54 of the report, where K-Y is applied to the taxpayer in advance of said bailout:

“…Based on the cash balance at September 30, 2010, current borrowing capacity of $3 billion, and projections of cash available from operations, there will be insufficient cash available to fund these financial obligations absent regulatory adjustments to some, or all, of these obligations.

…Given these restrictions, it is unlikely that Postal Service efforts to positively impact cash flow, will be, either individually or in the aggregate, sufficient to offset a cash shortfall on September 30, 2011.”

And the outlook for operations in 2011 which obliterates any hope that K-Y will not be necessary:

“For 2011, we project revenue to be flat versus 2010….Total expenses for 2011, excluding retiree health benefits, are expected to increase, as planned cost reductions are outweighed by the impact of contractual wage and benefit increases and inflation”

As it relates to wage and benefit increases, the USPS is currently negotiating with two of their four unions: APWU (211,000 employees) and NRLCA (207,000 employees), so collectively 62% of their total labor force.  And as of a couple weeks ago, it appears the negotiations aren’t going terribly well.

A final note on compensation, which is a mere 80% of their total cost.  It’s difficult to say for certain what the average postal employee compensation is because they use temporary employees (the Cato Institute estimates $79,000).  But, from the Total Workhours table (p. 45) and Compensation and Benefits line from Operating Expenses (p. 44), average hourly compensation and benefits can be computed. 

And there you have it.  Look for what will be the first in a very long series of USPS bailouts sometime in early 2011.

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dick cheneys ghost's picture

dont touch my "junk"

Spalding_Smailes's picture

LEeeeOoo  ...? Has anyone seen Leo ? He told me to buy the dip yesterday ... "SOL"

ReneSola Ltd. (ReneSola) is a manufacturer of solar wafers and producer of solar power products based in China.

They are down another 7% today ...?Hmmmmm 33% in 9 days :-(

LDK - 4%

TSL - 4.3%

JASO - 3.3%

WTF ???


by Leo Kolivakis
on Tue, 11/16/2010 - 17:46



My ass is fine, sold some after earnings, and bought more today. Options expire this week. Do yourself a favor and buy some of these Chinese solars. I'll even spoonfeed you some tickers to keep an eye on: SOL, LDK, TSL, YGE, JASO, and SOLF. If you're not in solars, you're missing the ride of your life! Solar bitchez all the way! LOL!

ZackAttack's picture

SOLF... that doesn't look like a lot of SolarFun to me. That looks like SolarPain to me.

You know perfectly well what's going to happen here. When the subsidies get cut off, these will wind up like the ethanol stocks.

Cruel Aid's picture

Headwinds: Oil dropping currently/Carbon Exchange CCX dead. It needs to go lower. I was in love with TSL for a while there, but left her while the getting was good.

tmosley's picture

Why do we need a first class mail monopoly again?

idea_hamster's picture

Originally, there was a significant 4th Amendment advantage to sending written matter by first class mail -- prosecutors needed a full-fledged probable-cause judicial warrant to search first class mail, whereas postcards and FedEx (all third class, IIRC) needed a much lower showing.

As for the meaning of that today?  Just ask the TSA, whose new slogan should be:

TSA: Free Govt Junk Rubz since 2010

Divided States of America's picture

US POSTAL cannot fail, I repeat, cannot fail. If it does, who will be sending out all the welfare checks to us?? Bailout is imminent.

Miss Expectations's picture

Last year was the first time in my adult life that I didn't send out Christmas cards.  Between card cost and postage it would have set me back well over $100.00.

RockyRacoon's picture

Wow!  You have a lot of friends/relatives.  Mine would have cost $12.50.


Triggernometry's picture

Are they hiring? My ex needs a job

Mr Lennon Hendrix's picture

Bailout the government until the dollar or government itself goes belly up, then the zombie corpses (Coprorations) take over.  THE PLAN.  UPS and FedEx are licking their chops.

Goldenballs's picture

No doubt the Bosses are very well paid as usual.Love to know how their pay has increased in the last 10 years.

Gene Parmesan's picture

I'd be interested in seeing how all of the union members working for the USPS have been doing over that time.

Goldenballs's picture

Quite,especially like to know how many large profit making sevices within the organisation have been sold off over the last few years to the private sector.Easy to blame the employee,s if we don,t question the management or lack of it we have learned nothing recently.

knukles's picture

Lick my stamp.

RockyRacoon's picture

Oh, that's old fashioned.  Stamps are all self-adhesive now.

Where ya been?

bob_dabolina's picture

There is something wrong here.

They deserve at least $60 p/hr.


knukles's picture

Who?  Oh, you mean that one employee that's never at the counter during business hours. 

bob_dabolina's picture

That guy deserves at least $80 p/hr

midtowng's picture

So postman, firefighters, schoolteachers, and the unemployed are what is wrong with America today.

Funny how the guys who actually run the country somehow manage to not get blamed.

Cdad's picture

What the fuck are you talking about?  Who do you think facilitated these ridiculous pay and retirement packages?

The postman, the firefighter, the school teacher the unemployed, along with our f'n bureacratic slugs, ARE ONE AND THE SAME!

Goldenballs's picture

Poor Management is to blame for nearly every problem toay.

economessed's picture

And the root cause of poor management is non-existent leadership....

tmosley's picture

And the cause of non-existent leadership is a system where those making economic decisions are spending other people's money rather than their own.

RockyRacoon's picture

It goes all the way to the top.  The Postmaster General is an appointed position.

ColonelCooper's picture


The fact that you'd even come up with a statement so asinine is simply stunning.

financeguru500's picture

It's easy to sit here and point fingers as one institution after another needs bailing out. How about we start pointing fingers at the true cause of the failing economy, the baby boomers who didn't boycott when the mega corporations shipped all our jobs overseas.

I was born in the 80's and so im shit out of luck I guess. We were past the point of no return before I even knew what was going on.

So if were going to blame anyone, I blame the people who during the 70's and 80's did nothing to prevent our current situation.

Bam_Man's picture

They just wanted the $29 DVD player.

Uncle Remus's picture

I was born in the 80's and so im shit out of luck I guess.

Yeah, that pretty much sums it up.

RockyRacoon's picture

Ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha!

Born in the 80s.   How quaint.   I had 2 kids in school by the 80s.

Ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha!

Sorry, can't help myself. 

While you were at it, did they teach you that "80's" is not correct?  How about proper capitalization?  Oh, never mind.  You're screwed all right, and it ain't my fault.  When you look in the mirror in the morning you're seeing the problem.

ZeroPower's picture

Wow you'd think all those shitty ebay items being packaged and shipped would save them?

sourgrapesson's picture

Strangely enough the only shitty ebay item I have ever received came from Canada.......

sourgrapesson's picture

Strangely enough the only shitty ebay item I have ever received came from Canada.......

Fraud-Esq's picture

direct marketing is the first budget cut. 

Recessionary numbers, lean years...

buzzsaw99's picture

Anyone who can lose money like that deserves a bonus. Bailout = double bonus.

Joe Davola's picture

I don't know how Tyler pulled this off, but the ad Google is serving up at the top of my page view is to apply for local mail clerk jobs!

centerline's picture

"Going postal" has a whole new meaning now.

Rainman's picture

USPS has over 400,000 union members.....?? Taxpayers are seriously fucked.

Public sector employees should never have been allowed to organize into unions anywhere in the USA. Politicians negotiating labor contracts on behalf of the taxpayer is a still-hidden economic disaster. USPS is just one of many examples.

NOTW777's picture

you r talking about the base of the dem party

this is how we get obama, pelosi, reid, frank, et al

Clark_Griswold Hedge Mnger's picture

I think they should pay the post office people the same that they pay our front line soldiers; get a few marine drill sargents in there, so they can have proper weapons training...

Uncle Remus's picture

The last fucking thing this country needs is trained brownshirts...

jag's picture

How many individuals or businesses need six days of common mail delivery a week?

You could cut it to 3 days for households and no one would be affected a whit. How many individuals get ANY routine checks in the mail? Even my 90 year old mother has her pension and social security direct deposited.And what is the need for anyone to recieve anything other than a check delivered in a timely fashion?

Even assuming you found those handful of people who somehow actually needed such intense delivery wouldn't it be far cheaper simply to accomodate them, individually, instead of continuing to deliver intensely to the 99.9% who don't need or care for such "service"?

If anything epitomizes the hysterical stupidity of government managed "operations" the post office is it. 


RmcAZ's picture

There should be an option to opt out of standard mail delivery... but the problem with this is that everyone would opt out, and then there would be no market for junk mail anymore. I believe the only reason the USPS even exists is because of junk mail. That is all I get. Everything else is done online. Any packages I get either come from UPS or Fedex.