The Bailout Of The US Postal Service Begins: Cost To Taxpayers - $110,000 Per Union Vote "Saved Or Gained"

Tyler Durden's picture

A week ago, when reading between the lines of what had heretofore been considered an inevitable USPS episode of austerity in which hundreds of thousands of labor union workers would lose their jobs but in the process would streamline a thoroughly outdated and inefficient US Postal Office bureaucracy, we asked if a US Postal Service bailout was imminent, focusing on the following: "Enter Ron Bloom, Lazard, and the very same crew that ended up getting a taxpayer funded bailout for GM. From the WSJ: "The Postal Service's proposal to close thousands of post offices and cut back on the number of days that mail is delivered "won't work" and would accelerate the agency's decline, according to the six-page report by Ron Bloom, President Barack Obama's former auto czar, and investment bank Lazard Ltd., LAZ who were hired by the union in October." That's right: after all the huffing and puffing about "sacrifice" and austerity, the labor union took one long look at the only option... and asked what other option is there." The other option, it turns out courtesy of news from AP, is the first of many incremental bail outs of the US Postal Office, better known in pre-election circles as hundreds of thousands of unionized votes up for the taking, and which could be bought for the low low price of $11 billion in taxpayer money, or $110,000 per vote! And so the latest bailout of yet another terminally inefficient and outdated government entity begins.

 From AP:

The Senate offered a lifeline to the nearly bankrupt U.S. Postal Service on Wednesday, voting to give the struggling agency an $11 billion cash infusion while delaying controversial decisions on closing post offices and ending Saturday delivery.


By a 62-37 vote, senators approved a measure which had divided mostly along rural-urban lines. Over the past several weeks, the bill was modified more than a dozen times, adding new restrictions on closings and cuts to service that rural-state senators said would hurt their communities the most.


The issue now goes to the House, which has yet to consider a separate version of the bill.


"The Postal Service is an iconic American institution that still delivers 500 million pieces of mail a day and sustains 8 million jobs," said Sen. Joe Lieberman, I-Conn., a bill co-sponsor. "This legislation will change the USPS so it can stay alive throughout the 21st century."

One would think that the USPS workers would be delighted as a result... One would be wrong. This is merely the beginning:

The mail agency, however, criticized the measure, saying it fell far short in stemming financial losses. Postmaster General Patrick Donahoe said if the bill became law, he would have to return to Congress in a few years to get emergency help.


"It is totally inappropriate in these economic times to keep unneeded facilities open. There is simply not enough mail in our system today," the Postal Service's board of governors said in a statement. "It is also inappropriate to delay the implementation of five-day delivery."

In the meantime, we can now add another zombie to the endless list of insolvent organizations on the government's dole, whose only saving grace is it has nearly half a million votes that can be bought by the highest bidder.

The Senate bill would halt the immediate closing of up to 252 mail-processing centers and 3,700 post offices, part of a postal cost-cutting plan to save some $6.5 billion a year. Donahoe previously said he would begin making cuts after May 15 if Congress didn't act, warning that the agency could run out of money this fall.


The measure would save about half the mail processing centers the Postal Service wants to close, from 252 to 125, allowing more areas to maintain overnight first-class mail delivery for at least three more years. It also would bar any shutdowns before the November elections, protect rural post offices for at least a year, give affected communities new avenues to appeal closing decisions and forbid cuts to Saturday delivery for two years.


At the same time, the Postal Service would get an infusion of roughly $11 billion, basically a refund of overpayments made in previous years to a federal retirement fund. That would give it immediate liquidity to pay down debt to forestall bankruptcy and finance buyouts to 100,000 postal employees.


The agency could make smaller annual payments into a future retiree health benefits account, gain flexibility in trimming worker compensation benefits and find additional ways to raise postal revenue under a new chief innovation officer.

And some more details on the bailout:

—Place a one-year moratorium on closing rural post offices and then require the mail agency to take rural issues into special consideration. Post offices generally would be protected from closure if the closest mail facility was more than 10 miles away. The exception would be cases in which there was no significant community opposition.


—Shut five of the seven post offices on the Capitol grounds.


—Take into account the impact on small businesses before closing mail facilities.


—Cap postal executive pay through 2015 at $199,000, the same level as a Cabinet secretary, and create a system under which the top people at the Postal Service are paid based on performance.


The Senate bill faces an uncertain future. The House version, approved in committee last year, would create a national commission with the power to scrap no-layoff clauses in employee contracts and make other wide-ranging cuts.


"This of course kicks the can down the road," complained Sen. John McCain, R-Ariz., who unsuccessfully pushed for a commission in the Senate bill. He said the current proposal failed to address longer-term fixes and delayed major decisions. "We'll be on the floor in two years addressing this issue again, because it is not a solution."


Noting that more people every year are switching to the Internet to send letters and pay bills, Donahoe called the Postal Service's business model "broken." The agency has estimated that the Senate bill would only provide it enough liquidity to continue operating for two years or three years.

At stake are more than 100,000 jobs, The agency, $12 billion in debt, says it could run out of money for day-to-day operations as soon as this fall, forcing it to shut down some of its services. The mail agency forecasts a record $14.1 billion loss by the end of this year; without changes, it says annual losses will exceed $21 billion by 2016.

Yeah, yeah. In the meantime all that matters is that about 100,000 votes have been secured for the incumbent candidate. The cost? Only $11 billion, or $110,000 per vote. To all taxpayers.

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FubarNation's picture

Isn't the real story here that no one talks about is that Congress mandated that the USPS fund its pension waaaaaayyyyy ahead of schedule?  But doing so taking most of the $ made and squirrling it away for the pensions (actually though taking it and spending it like only the Dog Eater in Chief and his cronies can do) and strangling the USPS.


I'd like to know the real story here.  I do believe the USPS without this mandated early funding scheme would be making $.



GoinFawr's picture

Scoff! You want the 'real' story, here!? Bonne Chance.

Take note that you are the first to refer to the incredibly salient point about how a profitable public business has been deliberately legislated into losses in order to bust its union...

No sir, here it's all

"... they're pointing out the enemy to keep you deaf and blind. They wanna suck your energy, incarcerate your mind..."-Mark Knopfler.

Publicly owned business legislated into losses: those greedy unions had it coming

Privately owned business fails because they suck: all regulation is onerous

You all caught up now?

Uncle Remus's picture

Take note that you are the first to refer to the incredibly salient point about how a profitable public business has been deliberately unionized into losses in order to bust its business...

I know, dyslexia's a bitch to work with...

GoinFawr's picture

Haha! Don't worry, I'm thinking straight enough to recall our conversation regarding unions, during the course of which you outlined how you fit neatly into the second category I mentioned above....

Uncle Remus's picture

I believe that conversation primarily dealt with public unions. I am no fan of unions of any stripe, public or private. Public unions are nothing more than a malignant cancer on the public purse.

It is not my place to tell anyone how they manage the value of their labor with a private business. If queried however, I would be inclined to dissuade them of any collective-bargaining hive-mind notions.


amadeusb4's picture

Ding ding ding!!! We have a winner.

USPS' pension funding obligation was a ticking time bomb planted at the USPS as part of a parting gift to the privatize crowd from Bush and Cheney.

What I would like to know is why does Tyler turn in these idiot freeper diatribes every couple of weeks.

Uncle Remus's picture

I am pretty sure Obamacare has it's eye on the prize.

Reptil's picture

Yeah you nailed it....

DISAPPOINTING ZH, that this is not mentioned, though it was clearly spelled out in the comments of that post a week ago. Frankly... not mentioning that, means half a story, and it stinks.

WTF is going on here?


ljag's picture

I thought it was cats they ate. Dogs too? The horrrrrrrrrrrrrrrrror!

mayhem_korner's picture

"The Postal Service is an iconic American institution...


And there you have it.  Being an American icon is reason enough to fork over $11 billion of unrepayable obligations imposed on citizens who won't be conceived for another 60 years...

LouisDega's picture

Will this effect the delivery of my Larry Flynt educational transcripts?

Seasmoke's picture

no you have been reprieved for at least 2 more years .....cant you read ? .....well i guess you only look at pictures

ceedub's picture

Who cares?  This country is 3/4 the way full of water and this is like getting a bucket and thining we are gonna save ourselves from sinking.


Bailout everyone and sink this bitch faster to get it over with, so we can start again.

pods's picture

I like the way you think!

MachoMan's picture

I was in the post office mailing my tax returns this year...  so I chat up the USPS employee at the counter...  "so, I bet you guys are seeing a lot of downtrodden folks, having to pay taxes"...  yes!  Seeing a lot of them...  you know, my husband and I had to pay in too...  it seems like the government just wants too much from us.

FUCKING REALLY?  Either there is a manual out there advising them what to say to disgruntled customers (I thought I was being congenial) or there is some incredible misunderstanding out there...  maybe both.

yogibear's picture

We are stuck in a bailout everything mentality. Why be fiscally responsible anymore? Just spend all the money and more, threaten to implode (like a crying baby) and Obama and Bernanke come to the rescue. 

States, there is a lesson to be learned here. Do the same. Just blow all the budgets and threaten to take down Washington with default. 

Wall Street, if your big, cook your books and threaten to implode. Washington comes to the rescue. Just siphon money to offshore accounts. Everyone is being dishonest and fraudulent, just join the crowd.


Vandelay's picture

Stop using stamps.  Ask for all of your bills online and pay online, make them irrelevent

SheepDog-One's picture

98% of all the mail I get is a bunch of JUNK!

ceedub's picture

And they pay was less than what a stamp costs to mail them.

UPS and Fedex are probably loving this and can't wait to raise prices when they're gone.

Dr. No's picture

My brother received a $.11 check from bank of america for short term interest.  It was mailed first class.  The cheapest way to cash the check is to mail it to his bank (gas would be a killer).  I recommended he rip it up as a cost savings.  A bonus would be if some accoutant somewhere had to balance the BoA ledger to adjust a $.11 mis-match.

Benjamin Glutton's picture

another instance of Dem fascist compromising with GOP fascist to save us from disaster they created.


Postal service only .gov entity required to fully fund its future retirement costs.


I blame the greatest generation for not killing the fascist collaborators entrenched here in America. FDR should have sent them to Nuremberg.

SheepDog-One's picture

Yep, another shining example total proof 'theyre all the same, there is NO difference'...2 wings on the same buzzard picking your bones clean.

HoofHearted's picture

FDR should have been sent to 1933!

PrinceDraxx's picture

A fucking socialist/communist send fascists to Nuremburg? I want some of what you are doing.

If he had done, he would have needed to lead the parade.

SheepDog-One's picture

And who is going to get a 3rd job to pay for that? It wont be me, I guarantee you that, I refuse to pay any further taxes to a criminal entity based upon rejection of being a total slave, and I do not care what the consequences are!

EBR MOD 0's picture

careful SD1 they'll be a knockin' at your door...not nice to critisize the could be headed to a lovely FEMA camp near you. They will xfer your junk mail and be sure your mail gets there, sometime.

just kidding ;-)

l1b3rty's picture

And to think how hard they are working those poor individuals who have been promised a future of benefits!!! What wasted lives if only they would WAKE UP!

koaj's picture

If Congress hadn't priced Lysander Spooner out of the market in the 1850s then we wouldn't be in this pickle now.

TapperIsTicked's picture

I thought USPS was forced to lower their price to become competative with Lysdander and then Congress wrote legislation to monopolize the privilige to Guberment types. Basically, Spooner was spanking their ass in a competative environ and why deal with that when political types can save the day.

I agree with your point that guberment gets involved and here we go again, running blind but by god, we're running fast. Somethings never change.

nick howdy's picture

No you can't close down Postal Centers...N0 WAY!  Think of the local economies effected, think of all the vendors who support the PS..

There aren't just PS jobs at stake here..All those mail handling machines are made by someone and people make parts...and On an On..

We must keep it going...Everything must be bailed out! The system must keep moving, must keep going..Until one day it cannot move anymore, then finally it's dead...

But like so many things near to death..We will delay the inevitable, this death, no matter what. Anything is better than what we don't know..     

Carbine's picture

I just can't seem to get in the way of one of these cushy bailouts!  What do I need to do?  Instead of being independent and working hard I guess I should have found a union job or gone to work for the goobermint.  Any suggestions for a guy in his 50's to start again and find some work that will benefit from a future bailout?

PrinceDraxx's picture

Marry an illegal alien and have 6 ninos, amigo. You get free health care, food stamps, earned income credit...hey I know, you have to work a little bit to get the max but it's worth it. The good part is Section 8 housing in a rich neighborhood so you don't have to travel too far to steal whatever else you need. Unfortunately, you have to take a bus to get your drugs then.


GMadScientist's picture

How many days of Medicare Part D payouts, Afghan presence, or SPR splurging in Bush's term would've been needed to fund the entire $11B?

(hint: even you can count that high, Bob...maybe even without taking off your shoes!)


Mercury's picture

That's right: after all the huffing and puffing about "sacrifice" and austerity, the labor union took one long look at the only option... and asked what other option is there."


Actually, the options are: less money for post office employees, the same money for a reduced amount of post office employees (and less post office service) or a taxpayer infusion of money (bailout).

Or, some combination threof.

Is anyone really surprised that the bailout option is going to be the dominant/only course of action?  We'll probably end up with =>$ for the => number of post office employees, higher postal rates and less post office service. This lose-lose-lose-lose "solution" for the taxpayer will be (is) advertised as a successful, bipartisan comprimise.

And just so everybody knows: when government pension funds are “raided" from time to time to fill other shortfalls, there is  still a roughly zero chance of public sector retiree checks  ever not being mailed in their full amounts .

 When California and various other state/muni government really go bust….all that means is that outstanding government obligations (benefits for themselves) will now seek a slightly different route downhill to taxpayer wallets.

If you're a kid trying to figure out how  to get and afford a college degree so you can be competitive at the high end of the 21st century job market you really ought to consider chucking all that and instead start developing a strategy for getting a (any) government job.  It should be obvious by now  that the public sector will be the LAST shoe to drop.

Sure, some of you will be able to play in the big leagues but most of you will never be able to hit a MLB fastball or out earn your mailman.

pods's picture

Annual losses over 20 billion dollars.

That is $20,000,000,000.

The numbers get so large that people now see million, billion, and trillion in the same light:  Big numbers.

I would hazard a guess that of the 500 million pieces of mail, half or more is nothing more than junk mail. Which is merely make work for the agency.

There really is no answer, just as the horse and buggy guys noticed when they saw cars whiz by.



orangegeek's picture

People still mail stuff?  For real?


This is one organization that will get a trim when the markets head south.


Dow is looking ready for a big drop.

Dr. No's picture

Yep.  I mail in my paper 1040 each year.  I love to throw as much paper at them as I can.  I even send in schedules which are not required for the file.

bahaar's picture

Where did they get that fat postman from?  I've never seen one.  Only ones who walk a lot (and run a lot from dogs)

EBR MOD 0's picture

the fat ones work in the post offices around here, the ones really doing any walking or delivering mail with a truck, not so fat, at least the ones I see.

PrinceDraxx's picture

Yep, most of them are ex-military, generally indicating a lower IQ, which is why they get extra points on the qualification test. And before I get smoked for that statement, I support our troops in every way. I think their leaders are either misguided or malicious since they are still in Afghanistan. I know <B>I-Wish-I-Was-a-Badass-in-Chief</B> is neither worthy of being where he is nor worth following orders from.

Long way to say yes, than are in shape if they are walking a route, but few of them do that now, since it is so easy to get a medical exemption from it. Knew a guy once in Dallas went to work at like 5am and got his route. All the mail he delivered was to monster maiboard at 1 yes, not a misprint Apartment Complex. Whole route took about 20 minutes except on heavy mail days and then he had to work for an hour.

pepperspray's picture

Ever ask for a refund on a guaranteed product like Express Mail? Don't- because if you cause a 'disturbance' the clerk has every right and will act upon that right to report you to the local Postal Inspector for questioning.

Having spent 9 grand on postage for calendar 2011, you think throwing a refund bone to a 12+ year daily, walk-in retail customer once might foster good relations.  Instead, it creates one more unsatisfied customer.

But can I really complain? I mean- there's never a line, so my time is worth it.  Sure there's no volume no revenue and no future- but all the clerks I know still manage to afford week-long Disney vacations.  No worries, their job is evergreen.

overmedicatedundersexed's picture

latest rumor: GM will take over USPO. and sell all it's production for mail delivery via caddy CTS's..seems there are plenty on  GM dealer's lots left over from the economic boom er green shoots er rebound er easter or good/bad weather economy.. AAPL new app:it's in the mail...

PrinceDraxx's picture

Volts, after they are subsidized by the government.

hellas4life's picture

Up until 2006, USPS was debt-free and profitable, or -- at least -- breaking even financially.  The 2006 lame-duck Congress passed a mandate requiring the Postal Service to prefund 75 years' worth of future retiree health benefits within 10 years.  No other entity -- public or private -- has ever been subject to such a draconian requirement.  Congress created the problem, and Congress needs to fix it


PAEA law passed in 2006 requires prepayment to fund for health
benefits for future retirees. 10 year plan 2007-2016. About $5.5 Billion
required each year. This is a manufactured crisis via a poison pill.
The current $44 Billion in fund has enough to pay benefits for at least
20 years. A well designed attempt to privatize, sorry, I mean PROFITIZE,
the mail. First kill it, then take all the lucrative parts away.

Bottom line, the losses from 2007-2010 are around $20B, but the
prepayments were around $21B, so the USPS is operationally PROFITABLE. The artificial handicap is killing it. No reason to fully fund that account
by 2016. That is akin to starving your family to pay off a 30 year
mortgage in just 10 years. I am retiring in 2038, so my retired health
benefits will NOT be required in 2016.

Pensions. This is a separate issue. USPS has two types, defined
benefit and defined contribution. People hired before 1984 are CSRS, and
newer hires are under the FERS system.

The CSRS fund is OVER funded by about $50-75 Billion, with a balance
of $200 Billion. Depending on if you believe the OIG or PRC. The OPM
miscalculated, but won't fully admit it.

The FERS fund is OVER funded by about $11.5 Billion, with a balance of $75 Billion.

So you can see the USPS has been BAILING out the Federal government
for some time now. Any credit for these over payments WOULD NOT be a tax
payer bailout, and the funds could go directly to the prefunding of
retiree health benefits, raising THAT fund from the current estimated
balance of $44 Billion mentioned earlier to the 2016 PAEA goal of over $70
Billion, also eliminating the remaining 5 annual payments of $5.5

The USPS has reduced employee totals from 820,000 in 2000 to around
550,000 through 2020, the USPS should have
425,000 employees. So employee totals have been drawn down through
attrition FASTER than mail volume declines, but that is rarely

The fact that 80% of the USPS $70 Billion in annual revenues goes to
salary and benefits is NOT out of line. it is a labor intensive service industry. they make nothingg. What should that percentage be?? I think it is too low. It
is also misleading as only 54% of revenue goes towards pay and benefits
of employees who actually TOUCH the mail. Maybe if we owned an airline
like FedEX, we could get that number down to 37%.

USPS forecasts they will lose $238 Billion by 2020? Really?? The USPS
has NEVER lost more than $9 Billion in a single year, and have a $15
Billion debt ceiling. Pray tell, how will they be able to lose $30
Billion per year the next eight years. Seriously.

Finally (for now), the USPS says 80% of post offices are losing
money. That is low. It's more like 92%. The reason is that revenue is
credited at the point of entry, so large plants get all the credit, and
small offices that actually deliver it DO NOT get the credit for
delivering it. The smallest, most rural 10,000 post offices cost the $70
Billion dollar organization LESS than $1 Billion per year. If you shut
them all down, rural America will suffer unduly. Closing Post Offices
because they lose money is illegal. The United States Postal Service is
obligated to provide UNIVERSAL service nationwide.

Carbine's picture

Good Post.  However, as MF Global and Corzine have proven, "illegal" doesn't mean anything anymore - at least for large well connected organizations.  The rules can be changed for the most favored vote getters (unions) or money producers (Corzine).  Same will happen here.

nick howdy's picture

Why would Congress fix it..I'm sure the idea was to bankrupt the PS..and this bailout will continue along those lines to further bankrupt the country...Becuase  Congress never fixes the problems they create..

They can never admit the it was they who have caused the problem, and reverse what they have done...They only have solutions...

Solutions that never actually work because they can't ever seem to find the real problem only the symtom..

That's because they are the cause, they are the problem along with their elite buddies who pay them off..

ZackAttack's picture

What it does show me is, if FedGov will bail out a minor department, there is no way it will let California, Illinois or New Jersey fail.

Moral hazard trade all over again: when it looks like California is about to implode, go out and buy the dreckiest Inland Empire GO bonds.

GMadScientist's picture

I'm sure half of Newport Beach is planning exactly that kind of front-running.

Sleazebags in leased Mercs affecting roaches with suits.