US Postal Service, Costing $250 Million Daily, Posts Record $15.9 Billion Loss, May Run Out Of Cash Soon

Tyler Durden's picture




 

That the biggest government source of employment just posted a record $15.9 billion loss (bigger than the $15 billion expected previously), is no surprise to anyone: after all most are openly expecting the USPS to fold, the only outstanding question is whether it will transform into a company that is actually competitive with the private sector (unlikely), or liquidate (also unlikely in an era where government jobs are becoming the only form of employment available). Sadly, keeping this zombie alive costs all other taxpayers $250 million each day: money that could be used much more effectively in other areas of the economy, but won't. Because there are USPS votes that have to be purchased at cost. Perhaps the biggest surprise is that while the USPS had a total of 607,400 employees in October, this was the lowest number of total employees for the non-profit (but certainly loss-driven) government run organization since the 1960s! Perhaps most shocking is that the USPS peaked at over 900K employees in 1999 when it was still if not profitable (as it doesn't need to be by its charter) then certainly breakeven. Sadly those days are now gone, and the next thing to go will be all the promised benefits for the 600K or so employees.

From Bloomberg:

The U.S. Postal Service said its net loss last year widened to $15.9 billion, more than the $15 billion it had projected, as mail volume continued to drop, falling 5 percent.

 

Without action by Congress, the service will run out of cash on Oct. 15, 2013, after it makes a required workers compensation payment to the U.S. Labor Department and before revenue typically jumps with holiday season mailing, Chief Financial Officer Joe Corbett said.

 

The service, whose fiscal year ended Sept. 30, lost $5.1 billion a year earlier. It announced the net loss today at a meeting at its Washington headquarters.

 

“We are walking a financial tightrope,” Postmaster General Patrick Donahoe said at the meeting. “Will we ever stop delivering the mail? It will never happen. We are simply too important to the economy and the flow of commerce.”

 

The service is asking Congress to enact legislation before it adjourns this year that would allow the Postal Service to spread future retirees’ health-benefit payments over more years, stop Saturday delivery, and more easily close post offices and mail-processing plants.

 

Without legislative change, the service expects its losses to continue in the 2013 fiscal year, with a forecast loss of $7.6 billion, Corbett said.

 

“There is no margin of error,” given the low level of cash, he said. The service uses $250 million per day to operate.

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Thu, 11/15/2012 - 11:41 | 2984155 docj
docj's picture

No worries. President ChoomPrompter will bail them out from his "stash".

(feels a pain in the area of my wallet)

Thu, 11/15/2012 - 11:50 | 2984196 Stoploss
Stoploss's picture

Kill that fucking thing already, for fuck sakes..

Thu, 11/15/2012 - 11:58 | 2984232 sickofthepunx
sickofthepunx's picture

when the "for profits" decide it is not cost effective to deliver mail to your doorstep, you'll wish you had the USPS

Thu, 11/15/2012 - 12:07 | 2984272 Ignatius
Ignatius's picture

I ran a back of the envelope calc awhile back and found that first class mail is less in real terms (gold) than back in the 60's when I was growing up. 

Bashing the Post Office is quite fashionable these days and I'm sure there's room to criticize, but we will surely miss it if/when its gone. 

Thu, 11/15/2012 - 12:21 | 2984323 Enslavethechild...
EnslavethechildrenforBen's picture

Fire all the stupid Bankers, Politicians and Cops first.

If that doesn't take care of the problem, nothing will

Thu, 11/15/2012 - 13:11 | 2984380 francis_sawyer
francis_sawyer's picture

When Al Gore invented the internet, all hell broke loose for the USPS... But it's a good thing that smart folks like 'Leo K' were able to profit so handsomely off of AG's next hobby after that...

Thu, 11/15/2012 - 12:29 | 2984352 Titus
Titus's picture

The problem is a bush era requirement that the pensions are fully funded. Fulfilling this requirement is causing the whole problem.

What organization would not face the same problem if faced with this requirement in the current 0% interest rate climate?

Thu, 11/15/2012 - 15:27 | 2985159 sunnyside
sunnyside's picture

I understand your point, but shouldn't ALL organizations have fully funded pensions if they offer them?  Any that is not funded will either fail shortly or be cast to the taxpayer.

Thu, 11/15/2012 - 13:27 | 2984597 TWSceptic
TWSceptic's picture

I thought most people here would be smart enough to understand that the real costs of a government-owned corporation are much higher than the price you pay directly as a consumer.

Thu, 11/15/2012 - 13:55 | 2984722 Thisson
Thisson's picture

Yeah, I'm really gonna miss receiving junk mail and physical billing statements... NOT.

Thu, 11/15/2012 - 14:36 | 2984913 PhilB
PhilB's picture

Jesus....there seems to be a lot of postal office workers with time on their hands here or the world has gone crazy, yet again. The comments are right..kill the Post Office. There is absolutely nothing you need by mail these days. Packages can come by private carriers. Actual mail, letters, magazines, etc..should cost a fortune to deliver cause it is not vital to the economy anymore and is killing us. It 5 B last year loss, 15 B this year, and 7 B projected for next year. Math= 27 Billion in three years! That is crazy. No one here can post an argument for the post office with this kind of losses unless you or your family members work in one! Get real and a life..

Thu, 11/15/2012 - 15:30 | 2985184 sunnyside
sunnyside's picture

Our constitution calls for a post office.  Right or wrong with changing times lets not ignore it, but lets change the constitution and then kill the USPS.

Thu, 11/15/2012 - 16:03 | 2985322 PhilB
PhilB's picture

Actually our Consitution "empowers" Congress "to establish Post Offices and post Roads". It is not an obligation  to create a Post office nor maintain one. No need to change the consitution at all to get rid of the Post Office, only need to change the interests of the big cow whose teat these people suckle.

Thu, 11/15/2012 - 13:07 | 2984515 SmallerGovNow2
SmallerGovNow2's picture

The USPS does NOT COST THE TAXPAYERS AT ALL!!!  This story is mis-informed.  The post office simply defalted on their payment to the retiree trust fund (mandatory payments that congress makes the USPS do that congress does NOT do for SS/MC/MC - hence all our "unfunded" liabilities). 

Congress MAKES the USPS deliver 6 days a week and will not ALLOW the USPS to reorganize to become more profitable.

And if you think that UPS or Fedex is going to deliver a letter to your front door for 50 cents, you got another thing coming.  In fact, the US postal service is the "last mile" delivery and pick up mechanism for BOTH UPS and Fedex.  Without the USPS neither of these "overnight" specialty shipping companies could maintain their business model.

Sorry Tyler, but you need to do A Lot more research on this topic.  BTW, I always enjoy your site and your posts...

Thu, 11/15/2012 - 13:28 | 2984621 SmallerGovNow2
SmallerGovNow2's picture

Those that down arrowed me do not want the truth, because I wrote the truth....  Stay ignorant then...

Thu, 11/15/2012 - 13:34 | 2984651 Ignatius
Ignatius's picture

Hey, he read Ayn Rand, which he'll be many years in recovery.

Thu, 11/15/2012 - 13:59 | 2984742 Thisson
Thisson's picture

No, you're being down-arrowed for your myopic view.  Maybe 50 cents isn't the right price to deliver a letter.  Maybe the postal service conducting the "last mile" service for UPS and Fedex is simply another corporate subsidy that the taxpayer is burdened with?  It could also be viewed as a subsidy to rural users of postal services.  Maybe all of these services need to be repriced higher, and made more expensive, and maybe then it would not be economic for all these senders of junk mail advertising, credit card offers, etc.?  This entire thing is one huge malinvestment.  And postal staff are hugely overpaid when it comes to what they would actually receive for their services if forced to seek jobs in the private sector.

THAT BEING SAID, it's still one of the few constitutionally authorized government functions, so I don't mind some level of expense to maintain the postal system.

Thu, 11/15/2012 - 13:29 | 2984626 TWSceptic
TWSceptic's picture

You can change your nick to BiggerGovNow

Thu, 11/15/2012 - 13:41 | 2984674 alangreedspank
alangreedspank's picture

You want a SmallerGovNow and you can't even think of the mail being delivered by someone else than the state? Are you fucking kidding me ?

Thu, 11/15/2012 - 15:04 | 2984994 Zymurguy
Zymurguy's picture

It's going to cost someone a LOT soon if this doesn't get fixed!

Thu, 11/15/2012 - 13:18 | 2984525 TWSceptic
TWSceptic's picture

What a dumb comment, of course they will deliver, you just may have to pay more when you live more isolated, as it should be. But thanks to more competition and higher efficiency, prices will decline and quality will go up overall.

Thu, 11/15/2012 - 13:51 | 2984703 alangreedspank
alangreedspank's picture

Sounds about right, but costs might not go down right away as they'll be brought in the "seen" area as opposed to now, in the "unseen".

Thu, 11/15/2012 - 13:38 | 2984668 alangreedspank
alangreedspank's picture

Which is why the "for profits" have long since invented....the email...for profits.

Thu, 11/15/2012 - 12:08 | 2984280 eclectic syncretist
eclectic syncretist's picture

Oh no!  I won't be able to get spammed with junk mail anymore.

Thu, 11/15/2012 - 12:14 | 2984302 Ignatius
Ignatius's picture

Junk mail = free fire starter.

I also enjoy knowing -- daily -- that somebody cares....

Thu, 11/15/2012 - 12:22 | 2984325 insanelysane
insanelysane's picture

and by free you really mean $250 million/day.

Take it away and then if I miss it we can put it back.  This is why the govt never gets shut down even though it is sometimes used as a threat.  People won't miss it and the govt knows it so they just bluff about shutting down.

Thu, 11/15/2012 - 13:16 | 2984544 The Wizard of Oz
The Wizard of Oz's picture

So we're adding $2.3 billion to the deficit daily and of that $250 million is from the USPS alone? So it accounts for ~11% of the daily deficit? 

Thu, 11/15/2012 - 14:06 | 2984779 Omen IV
Omen IV's picture

it is a republican accounting gimmick -

there is no loss - public corporations that have pension liabilities do NOT account for future retirees benefits the way the postal corp was required by the republicans - this is all about union busting just like romneys decision not to save the auto industry - they want the unions dead !! so the democrats do not have people on the ground for elections

Thu, 11/15/2012 - 14:55 | 2985007 Zymurguy
Zymurguy's picture

Accounting fu... you have big powah!

Accounting tricks, smoke and mirrors.

Fri, 11/16/2012 - 12:08 | 2987996 HangSorosHigh
HangSorosHigh's picture

Democrats have people in the ground for elections.

Thu, 11/15/2012 - 13:17 | 2984553 vast-dom
vast-dom's picture

QE to the USPS workers minus their jobs and operating costs = Neo-Keynesian welfare solution. 

Thu, 11/15/2012 - 13:45 | 2984687 bunkerhillmob
bunkerhillmob's picture

 

Home > Opinion > Latest Columns  Fredric Rolando: Congressional politics to blame for Postal Service’s red ink           Comments (1) A Text Size

Published: 30 September 2012 10:14 PM

Few institutions in the country interact as much with Americans as the U.S. Postal Service, which delivers mail to 150 million addresses six days a week. Letter carriers — one quarter of them military veterans — provide Americans and their businesses with the world’s most affordable delivery service. Rooted in the Constitution, the USPS is viewed positively by 80 percent of the public.

Conventional wisdom is that the Postal Service loses billions of dollars a year because mail has been replaced by the Internet, taxpayers are on the hook, so cuts must be made. Folks deserve to know the story behind the headlines.

The Postal Service has performed well in operational terms, nearly breaking even despite the worst recession in 80 years. Some periods it’s been profitable delivering the mail — including a $200 million operational profit in fiscal 2012’s first quarter — while in others it’s lost some money. It hasn’t used a dime of taxpayer money in 30 years, funding itself by selling stamps and other products.

There is red ink. But it has little to do with mail volume, email or other mail-related issues. Instead, 80 percent of all the red ink stems from an external factor — congressional politics.

In 2006, Congress mandated that the Postal Service pre-fund future retiree health benefits, something required of no other agency or company. And lawmakers made it all the more unrealistic by requiring that pre-funding cover the next 75 years — all paid within a decade.

Before this unreasonable burden, the Postal Service was making billions in annual profits. But the mandate has exhausted profits, savings and borrowing authority, while creating an artificial crisis that has distracted the agency from doing what it’s always done — adapt to an evolving society. For 200 years, the Postal Service has met technological changes, including the telephone, telegraph and fax machine.

If Congress fixed the mess it created, the Postal Service could focus on developing a forward-looking business plan that taps into existing opportunities. For example, while more people pay bills online, they also order goods online. That exploding e-commerce market already is boosting USPS revenue as FedEx and UPS increasingly turn to its highly efficient network to deliver their packages, saving money for private carriers and their customers. Far more could be done to capitalize on this.

Congressional action to rectify its unfair mandate is common-sensical. Reducing services and dismantling the nation’s only truly universal delivery network, as some propose, is precisely the wrong approach, because it ignores the actual problem and instead attacks what’s working.

This would particularly hurt a large state like Texas. Those hardest hit by losing Saturday delivery or house-to-house service would be the Lone Star State’s elderly, rural residents, people needing medicines on weekends — along with small businesses (and their 1.4 million Texas employees) open weekends and needing to send and receive financial documents.

Degrading the network also would be counterproductive for the USPS by driving away customers and reducing revenue, while making it difficult to capitalize on rising Internet orders. The best day to deliver packages: Saturday, when people are home.

The stakes are high: The $1.3 trillion national mailing industry relies on a robust Postal Service to employ 7.5 million Americans in the private sector — including 609,024 Texans.

If people make their voices heard, lawmakers just might do the right thing — for Texas and for America.

 

Thu, 11/15/2012 - 15:03 | 2985046 Zymurguy
Zymurguy's picture

Good info, thanks!

I better understand the burden upon the USPS and if this above is true, we need to get our elected officials to correct the problem.  Sounds like a pretty simple fix.

So simple that I wonder why hasn't it been fixed already?  If it is a GOP vs. Dem thing they why haven't the Dem's fixed it when they had both houses?  I am not a big fan of unions and I really am against public sector unions but even from my standpoint it would seem best to fix this problem regardless of how much you may dislike unions.

Not trying to bash the USPS or it's union... just something doesn't add up.  Seems really like neither big political parties want it fixed.

Zym'

Thu, 11/15/2012 - 11:42 | 2984161 buzzsaw99
buzzsaw99's picture

the junk mail must get through!

Thu, 11/15/2012 - 11:45 | 2984171 bigdumbnugly
bigdumbnugly's picture

yes, it would be heartbreaking to see Cliffy standing at the end of the off ramp with a work for bar tab sign.

Thu, 11/15/2012 - 11:51 | 2984204 JPM Hater001
JPM Hater001's picture

"Will we ever stop delivering the mail? It will never happen. We are simply too important to the economy and the flow of commerce.”

Yes, candle makers were very important at one point too.  You could say we couldn't do without them...until we could.

Thu, 11/15/2012 - 12:34 | 2984381 DarkAgeAhead
DarkAgeAhead's picture

Actually I'm not so sure that we do all that well these days without candles.  Sandy?

Thu, 11/15/2012 - 11:43 | 2984165 Quinvarius
Quinvarius's picture

Stamps need to be like $2.50 to compensate for hyper inflation.

Thu, 11/15/2012 - 11:50 | 2984202 SpykerSpeed
SpykerSpeed's picture

Too late, I already bought a bunch of "forever stamps" for like 42 cents.  They're screwed.

Thu, 11/15/2012 - 12:01 | 2984245 pokrova
pokrova's picture

Forget silver and gold.  Invest in "forever stamps" they will be worth a fortune!

Thu, 11/15/2012 - 12:07 | 2984275 catacl1sm
catacl1sm's picture

I've considered that, but 'they' would probably come after you for price gouging in an inflationary environment.

 

Thu, 11/15/2012 - 11:54 | 2984218 James-Morrison
James-Morrison's picture

Invest in "Forever Stamps".

They will either double in value within a few years as inflation ramps, or become collector's items within a few decades (after the demise of USPS).

Plus a few thousand invested now will help the USPS cash flow.

Postage is only go up.

Thu, 11/15/2012 - 12:17 | 2984311 Ignatius
Ignatius's picture

This assumes that 'the promise' will be kept.  Kinda like a bond, that way.

Thu, 11/15/2012 - 12:33 | 2984374 Intoxicologist
Intoxicologist's picture

Whenever I walk into the post office to purchase stamps, I ask the postmaster this:  "If they're called 'Forever' stamps, how come I have to keep buying them?"

Deer-in-headlights look follows.

Thu, 11/15/2012 - 12:35 | 2984383 TheCanadianAustrian
TheCanadianAustrian's picture

I think within a few years they're simply going to "default" on their stamps. They'll raise the price of a stamp to $5 (or whatever) and declare the forever stamps redeemable for 43 cents or whatever the last issue price was for the stamps. Politically, they can get away with this by saying "Unforseeable circumstances have forced us to bring the permanent stamp program to an unfortunate end."

Thu, 11/15/2012 - 13:45 | 2984686 alangreedspank
alangreedspank's picture

Yup. LOL @ "Unforseeable".

Thu, 11/15/2012 - 12:00 | 2984237 sickofthepunx
sickofthepunx's picture

the cost of a stamp in the 1860s in inflation adjusted dollars is $5.60.

 

 

Thu, 11/15/2012 - 11:44 | 2984168 q99x2
q99x2's picture

Don't start picking on the post office before the Holidays. I spent half a lifetime waiting in line last year.

Thu, 11/15/2012 - 14:19 | 2984828 Midas
Midas's picture

They will come to your door and get your stuff.

Thu, 11/15/2012 - 11:52 | 2984169 HD
HD's picture

Off topic but interesting: footage of high speed drones over Denver

 http://gawker.com/5960588/local-news-crew-confirms-denver-mans-ufo-claim...

Do NOT follow this link or you will be banned from the site!