Postmaster General Compares USPS to Greece, but Is Comparison Accurate?

Postmaster General Compares USPS to Greece, but Is Comparison Accurate?
December 5, 2012

Richard Morrison

Richard Morrison is manager of communications at the Tax Foundation. (read full bio)

Concerns over the perilous financial condition of the U.S. Postal Service have caused observers, including Postmaster General Patrick Donahoe, to compare the agency’s prospects to the spiraling economic crisis in Greece.

While the scope of the problem warrants the comparison and their finances are unsustainable without genuine reform, the Postal Service’s reaction to its bleak budgetary prospects offers some encouragement, according to a new study from the Tax Foundation.

“Although the postmaster general has made the Greek analogy only a few times in passing, the topic is worth considering in more detail,” said Tax Foundation fellow Michael Schuyler. “Greece's disastrous experience holds valuable lessons, applicable to the Postal Service, regarding the dangers of large and persistent deficits and the desirability of addressing financial problems sooner rather than later.”

Already In Default

Even without the postmaster general's comments, the Greek analogy would have come to mind on August 1, when the Service defaulted on a $5.5 billion contribution to the Retiree Health Benefits Fund.

The USPS also maxed out its credit line at the U.S. Treasury in September, reaching its statutory borrowing limit of $15 billion. The USPS has warned it will be perilously short of cash throughout 2013, meaning if receipts are even slightly below expectations or costs above, it may be unable to pay workers and suppliers promptly and in full.

A further blow landed on November 15, when the Service reported it lost $15.9 billion in 2012. The deficit consists of the August and September payments on which it defaulted plus $4.8 billion of other losses.

Thankfully, the Postal Service’s problems are less serious and easier to solve than Greece’s.

‘Attempting Self-Sufficiency’

“Postmaster General Donahoe used the Greek analogy to help people understand the peril to mail users if the Postal Service were to resist the operational changes needed to control its costs,” said Schuyler. “Although some of the Service’s proposals are open to criticism, it is to be praised for firmly rejecting the Greek approach and, instead, attempting proactively to return to financial self-sufficiency.”

In his report, Schuyler writes: “In three welcome respects, the Service is in much better shape than Greece. First, it has not attempted to deny or soft-pedal its problems. The plunge in mail demand that began in 2007 due to intensified electronic diversion and the severe 2007-2009 recession took the Service and most of the postal community by surprise, but the Service quickly saw and acknowledged what was happening and began adjusting its operations to the drop in mail volume.”

He also notes the USPS has shrunk its workforce 30 percent from 1999 to 2011, primarily through attrition and buyouts, while maintaining acceptable service quality. Greece until recently had been loath to major workforce reductions.

And, writes Schuyler, the USPS losses “almost look good compared to the financial imbalances in Greece.”

Richard Morrison (Morrison@taxfoundation.org) is manager of communications at the Tax Foundation.

Internet info

“Is the Postal Service Like Greece?” Michael Schuyler, Tax Foundation: http://taxfoundation.org/article/postal-service-greece

Richard Morrison

Richard Morrison is manager of communications at the Tax Foundation. (read full bio)