Is the U.S. Postal Service the Next Greece?

December 04, 2012

Postmaster General Likens Agency to Worst of European Fiscal Crisis

Washington, D.C., December 4, 2012—Concerns over the perilous financial condition of the U.S. Postal Service have caused observers, including its own 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 in the absence of genuine reform, the Postal Service’s reaction to its own 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.”

Even without the postmaster general's comments, the Greek analogy would have come to mind on August 1, when the Service defaulted on a legally required $5.5 billion contribution to the Retiree Health Benefits Fund. The Service also maxed out its credit line at the U.S. Treasury in September, reaching its statutory borrowing limit of $15 billion. It has warned that it will be perilously short of cash throughout 2013, meaning that if receipts are even slightly below expectations or costs above, it may be unable to pay workers and suppliers promptly and in full. Thankfully, the Postal Service’s problems are less serious and easier to solve than Greece’s.

“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.”

Tax Foundation Special Report No. 206, “Is the Postal Service Like Greece?” by Michael Schuyler, Ph.D. is available here.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

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