It's not manufactured. They are making promises that have a net present value of X dollars. That's a real cost they are incurring and it has to go on their profit/loss statement.
>Up until 2006, the USPS funded those obligations on a pay-as-you-go-basis,
No company is allowed to do that. All companies are required to fully fund their pensions:
>The funding requirement under PPA is simply that a plan must stay fully funded (that is, its assets must equal or exceed its liabilities). If a plan is fully funded, the minimum required contribution is the cost of benefits earned during the year. If a plan is not fully funded, the contribution also includes the amount necessary to amortize over seven years the difference between its liabilities and its assets. Stricter rules apply to severely underfunded plans (called "at-risk status").
https://en.wikipedia.org/wiki/Employee_Retirement_Income_Sec...
> But it probably would've spent at least part of the last decade making comfortable profits.
You have to keep cash flow and profit clear. The prefunding requirement does not change their profitability. It changes their cash flow.
> If the prepayments required under PAEA were never enacted into law, the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion.
Again, not in the black. They would have $20 billion dollars more in the bank but they would not be profitable. Simply put, they'd have a larger pile of cash to burn before the day of reckoning came.
An analogy would be someone jumping off a very tall bridge. They're dead the moment the feet leave the bridge. Saying that they would survive longer if they jumped off the top of the bridge is technically true but doesn't appreciably change anything. They're still dead. It will just take a bit longer and the splat at the bottom will be more impressive.
> If a plan is fully funded, the minimum required contribution is the cost of benefits earned during the year.
The USPS however, needs to fund not only the current year’s expenses, but also all expenses for the 50 following years. No one else needs to do this.
The change introduced by the 2006 PAEA impacts however the funding of health care benefits of retirees, which have to be funded at 100%. This is not required of private sector companies.
Additionally, to build up this future retiree health benefits fund, a very front loaded schedule of about $5.7B yearly between 2006 and 2016 was chosen. In fact, the USPS was not able to fulfill this schedule and defaulted on multiple payments.
Best source I have found: https://fas.org/sgp/crs/misc/R40983.pdf
> In this subsection, the term `Postal surplus or supplemental liability' means the estimated difference, as determined by the Office, between-- ``(A) the actuarial present value of all future benefits payable from the Fund under this subchapter to current or former employees of the United States Postal Service and attributable to civilian employment with the United States Postal Service; and
They have to fund the benefits that employees have earned. Not all of the pension cost that will be accrued over the next 50 years. That requirement is the exact same as private sector pension plans.
>That requirement is the exact same as private sector pension plans.
This is where you are confused. The bill has to do with pre-funding of health (and similar) benefits and not pensions.
Which brings us back to your original claim:
>This is a common talking point, but is factually incorrect. (1) The USPS hasn't made any of those payments since 2013. Their current financial woes aren't caused by the requirement since their not making the payments. (2) Pensions are required to be fully funded. In practice that's a bit more theoretical than actual, but the USPS isn't being treated any different.
Point (2) is incorrect since we aren't talking about pensions. Point (1) is incorrect as per the numerous sources I provided already (including a direct quote from the Postmaster General). But here's one more:
>the 2006 law requiring the pre-funding of health benefits for future retirees — not pensions — has put a financial strain on the Postal Service and hurt its ability to turn a profit in some recent years.
From https://www.politifact.com/factchecks/2020/apr/15/afl-cio/wi...
Conclusion: The current financial woes of the USPS are can be attributed in large part to the 2006 Postal Accountability and Enhancement Act.
The law did a lot including:
Postal Civil Service Retirement and Health Benefits Funding Amendments of 2006 - (Sec. 802) Relieves the Postal Service of an obligation to contribute matching amounts to its employees' civil service retirement. Provides for a mechanism and an amortization schedule regarding the handling of any surplus or supplemental liability of the Postal Service regarding the Civil Service Retirement and Disability Fund. Transfers from the Postal Service to the Treasury certain retirement obligations related to military service of former Postal Service employees. Makes Office of Personnel Management (OPM) determinations on surplus or supplemental liability subject to PRC review if the Postal Service so requests
https://www.congress.gov/bill/109th-congress/house-bill/6407
> Point (1) is incorrect as per thttps://www.congress.gov/bill/109th-congress/house-bill/6407... numerous sources I provided already (including a direct quote from the Postmaster General)
I think you're confused here. Straight from the Postmaster general:
> we were forced to default on $33.9 billion in mandated prefunding payments for RHB for the years 2012 through 2016
https://about.usps.com/news/testimony/2019/pr19_pmg0430.htm
>the 2006 law requiring the pre-funding of health benefits for future retirees — not pensions — has put a financial strain on the Postal Service and hurt its ability to turn a profit in some recent years.
Sigh, and we're back to the same confusion. Pre-funding has ZERO impact on profit. If you incur a cost today it goes on your balance sheet. The fact that the actual cash doesn't leave the company for 30 years doesn't change that.
You've just moved the goal posts. Your assertion was "Their current financial woes aren't caused by the requirement since their not making the payments."
Even though you've moved the goal posts, you're still wrong. Do you agree that having $0 available for infrastructure improvements, technology upgrades, delivery fleets, and R&D to improve efficiency for the past 14 years has had zero impact on current profit?
Really? Be honest.
Imagine if UPS had not upgraded (other than the basics) their hardware, software, and massive delivery fleet in a decade and a half. That amount of time is an absolute eternity in the areas of automation, transport and computing. Can you imagine where UPS would be right now in relation to FedEx has it stopped investing in itself since before the iPhone was invented?
Since you missed it. Once again, here's the relevant Postmaster General quote:
> "The Postal Service's $15 billion debt is a direct result of the mandate, this requirement has deprived the Postal Service of the opportunity to invest in capital projects and research and development."
Look, you've been arguing this entire time that the issue was pensions when it wasn't. And that it was the same rules for everybody (it wasn't). The other half of your argument was that the current financial position of the USPS is unrelated to the 2006 act. Provably wrong.
But since that original argument is falling apart you've changed your position to "the USPS is currently unprofitable". Well, obviously.
You're clearly not debating in good faith so I'm done here. Good day to you.
You're skirting the primary issue. This "cost" is manufactured and is a burden that no other entity (private or governmental) even comes close to having to bear. It's all in the submitted article but here's more. From [0]:
>Passed by a Republican-led Congress and signed into law by President George W. Bush, the PAEA gave the Postal Service new accounting and funding rules for its retiree pension and health benefits. Up until 2006, the USPS funded those obligations on a pay-as-you-go-basis, pulling out of its pension fund and adding to it as retirees' costs came in. But the PAEA required the Postal Service to calculate all of its likely pension costs over the next 75 years, and then sock away enough money between 2007 and 2016 to cover most of them.
>This is one of those ideas that sounds responsible on the surface but is actually pretty nuts.
>Consider your average 30-year mortgage. What if you had to set aside a few hundred thousand dollars right now, enough to pay the whole thing, even if you were still going to make payments over 30 years? No one would ever take out a mortgage. That's the whole point: the costs only come in over time, and the income you use to pay them comes in over time as well. It works exactly the same for retiree pensions and benefit funds. Which is why, as economist Dean Baker pointed out to Congress, pretty much no one else does what the PAEA demanded of the Postal Service.
>Meeting Congress' arbitrary mandate required putting away an extra $5.6 billion per year. "It is equivalent to imposing a tax of 8 percent on the Postal Service's revenue," Baker said. "There are few businesses that would be able to survive if they were suddenly required to pay an 8 percent tax from which their competitors were exempted."
Then, citing a quote form the Postmaster General that contradicts your position, you said:
> This is where pension prefunding comes into play. The USPS is running out of cash and if they didn't have to save it would take them longer to do so. But since they're not actually making the payments the law doesn't impact their cash position.
But they made payments from 2007 to 2012 (at the expense of modernizing). The Inspector General is pretty clear on this (emphasis mine) [0]:
> Eventually, the burden became too great, and the USPS began defaulting on the PAEA payments in 2012. But the damage was done. The Postal Service lost $62.4 billion between 2007 and 2016, and its own Inspector General attributed $54.8 billion of that to prefunding retiree benefits. Without the PAEA, the Postal Service wouldn't be doing stellar. (Though you could plausibly blame many of its remaining struggles on the Great Recession.) But it probably would've spent at least part of the last decade making comfortable profits.
> "The Postal Service's $15 billion debt is a direct result of the mandate," the Inspector General wrote in 2015. "This requirement has deprived the Postal Service of the opportunity to invest in capital projects and research and development."
And from [1]:
>The deep hole of debt that is currently facing the U.S. Postal Service (USPS) is entirely due to the burdensome prepayments for future retiree health care benefits imposed by Congress in the PAEA. By June 2011, the USPS saw a total net deficit of $19.5 billion, $12.7 billion of which was borrowed money from Treasury (leaving just $2.3 billion left until the USPS hits its statutory borrowing limit of $15 billion). This $19.5 billion deficit almost exactly matches the $20.95 billion the USPS made in prepayments to the fund for future retiree health care benefits by June 2011. If the prepayments required under PAEA were never enacted into law, the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion.
[0]: https://theweek.com/articles/767184/how-george-bush-broke-po... [1]: https://mronline.org/2011/09/23/the-manufactured-financial-c...
See also: https://www.bloomberg.com/opinion/articles/2018-04-04/congre...
Side note: Admittedly, these are opinions pieces but appear to be well sourced (especially [1]). If you have any numbers or quotes that contradict these then by all means provide them.