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PAEA Woes

From Mother Jones, Kevin Drum relates this Wes Venteicher story from the L.A. Times:

Postal officials recently tried to end Saturday letter delivery, which could have saved $2 billion per year, but Congress blocked it. A legislative proposal to replace doorstep delivery with curbside delivery, which would save $4.5 billion, failed last year. A plan to close thousands of rural post offices was abandoned after postal officials deemed the closures would “upset Congress a great deal,” Barnett said.

But one of the Postal Service’s biggest problems has nothing to do with the mail. Its finances sank in fiscal year 2007, shortly after Congress passed the 2006 Postal Accountability and Enhancement Act. The act, among other things, required the Postal Service to start pre-funding the health benefits of future retirees 50 years in advance at a rate of about $5.6 billion a year. The year after the act was passed, Postal Service ledgers showed a loss of $5.1 billion.

The pre-funding payments and other measures in the 2006 law have led some, including political activist and former presidential candidate Ralph Nader, to call the Postal Service’s situation a “manufactured crisis.” Only one other federal agency, the Defense Department, pre-funds future retiree health benefits, the Government Accountability Office said.

The act also limited the Postal Service’s ability to raise rates, forbidding increases larger than the federal consumer price index. America’s stamps, now 46 cents, are among the cheapest in the world’s developed countries.

USPS is sinking under the weight of the Postal Accountability and Enhancement Act (PAEA) of 2006.  Drum makes a bold pronouncement:

I have a sneaking suspicion that if the post office deunionized, suddenly its problems would be over. Republicans would be delighted to give it all the funding it needed. Until then, though, the more problems the better.

Close, but not quite the whole story.  Drum doesn’t mention this, but Venteicher’s piece contradicts a common refrain about how outdated package delivery is:

The Postal Service, which is provided for in the Constitution, has survived new technology before — the telegraph, telephone and TV, for example. Technology has brought positive changes along with the difficult ones: The Postal Service says package delivery has increased by 14% in recent years as more people shop online.

14% more package delivery recently–in a sane, non-PAEA world USPS might be the big winner in the expanding internet age at the expense of neighborhood brick-and-mortar stores.  But where there is increased package business, there will be FedEx and UPS:

FedEx Corp. (FDX) won a seven-year contract with the U.S. Postal Service valued at about $10.5 billion to carry mail between U.S. airports, fending off a challenge from United Parcel Service Inc. (UPS)

The new accord to fly Express Mail and Priority Mail starts in October once the current deal ends, FedEx said yesterday in a statement. The Memphis, Tennessee-based company didn’t give details beyond the value and length of the agreement.

The contract locks in FedEx’s business with the Postal Service and erases concern that it would lose some work to UPS as the U.S. mail carrier restructures after years of losses. FedEx has a larger U.S. air network and already has the labor and assets to handle Postal Service volume, most of which is processed during the day after the company’s premium overnight packages and documents have been cleared.

…FedEx’s winning the sole award for the domestic airlift work was a “disappointment” to UPS, said Kara Ross, a spokeswoman for the world’s biggest package-delivery company.

“UPS has other contracts with the USPS and will continue to provide excellent service and the company looks forward to future opportunities to expand its business with the USPS,” Ross said in a statement.

FedEx has been flying for the Postal Service for 12 years, and the new accord provides more flexibility for possible changes as the service restructures, FedEx Express Chief Executive Officer David Bronczek said in the statement.

Congress has bigger fish to fry than the USPS’s unions.  The legislative branch is looking to privatize the U.S. Postal Service out of existence.

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