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Friday, August 12, 2011

With Debt Ceiling Melodrama Behind Us, On to the Next Political Theater -- The 120,000 Post Office Cut -- Not a Bakken Story

Update

November 29, 2011: the Post Office isn't going to change

But with 557,000 employees, the postal service is among the nation's largest employers, behind the federal government and Wal-Mart. The postal service's 32,000 retail branches top Wal-Mart, Starbucks and McDonald's combined. It's also one of the largest employers of minorities and veterans.

Proposals to cut Saturday service and close underused post offices in order to save billions of dollars have met united opposition from Democrats and many of the conservative Republicans who swept into office campaigning on smaller government.
August 12, 2011: when I first posted this, the "number" was 120,000 jobs at risk. Now, one day later, the number has changed. The number is now 220,000. What happened? I don't know.

The USPS has already cut 100,000 jobs over the past few years and is in the process of cutting 7,500 executive positions.
The postal service needs to cut its payroll to 425,000 jobs and take over its retirement and health benefits instead of participating in federal programs, Postmaster General Patrick Donahoe told Reuters.
Wow, the numbers are staggering. Simple addition suggests when this all started there were about 745,000 employees (100,000 + 220,000 + 425,000), and now needs to get down to a fighting strength of 425,000. That represents about a 60 percent of the original labor force. Hmmm.

Does anyone really think Congress will allow that many cuts? My hunch: attrition only.

Original Post

I consider myself fairly well-read, but even I was taken by surprise on this one: the US Postal Service will be insolvent next month.

I knew they were in debt, and in deep debt, but I assumed they had cash on hand to keep operating. I did not realize they will be insolvent next month, but that's what their boss says:
"Financial crisis calls for significant actions, we will be insolvent next month due to significant declines in mail volume and retiree health benefit prefunding costs imposed by Congress."

Postal officials have said they will be unable to make a $5.5 billion payment to cover future employee health care costs due Sept. 30.  
Up until I read that, I assumed it would be business as usual, while they held Congressional hearings, and then find a way to kick the can down the road.

But when I read that the USPS will actually be insolvent next month, I thought it changed everything.

Not so fast:
Postmaster General Patrick Donahoe said, "Our intent is to continue to deliver the mail, pay our employees and pay our suppliers."
Yup, the USPS won't do anything differently: they will deliver the mail, pay their employers and pay their suppliers.

The USPS simply won't pay past due bills, and they won't pay Congressionally-mandated obligations for health care or pension contributions.

For the customer, business as usual while political theater plays itself out in Washington.

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