Agreed, there are no truly free capitalist markets in the US, except maybe black markets.
The USPS is damn good at delivering the mail, I don’t trust any private company to treat a first-class letter with the care the USPS generally does.
The Post Office actually makes money, but they’re legally required to fund a new hire’s entire projected pension at the time of hiring which lets Republicans point at how the post office loses money when it was done that way on purpose.
What you're saying about pension payments is all wrong. They have the same obligation to fund promised benefits as any private company (which is different from government entities), and they haven't been making the payments.[1]
The situation of pensions is that the USPS is required by a law created by republicans to pre-pay their retirement fund for the next 75 years, something that no company in the world does. Not only this, but the money they pay is being diverted to the general government accounts, so it is possible that in the future the pension money is not there anyway, if the government decide not to provide the money in the future. The law had two draconian results: the USPS has to operate in the red, and the government has additional revenue that facilitated the tax cuts proposed by republicans.
>"FACT: ALL companies are required to fund any pension promises they make to their employees. (The only exceptions are for top executives, who can lose their pensions if a company goes bankrupt, and for entities that aren’t actually “companies” - state and local governments and churches.) NONE of them are permitted to take a “pay as you go” approach but must contribute to a pension fund an amount equivalent to what a worker has accrued that year in benefit promises, regardless of how far into the future that worker will be retiring, and must make up for any shortfalls due to asset losses or other reasons. The USPS and private sector companies use the same general actuarial principles to do so, though there are differences in assumptions, particulars of the calculations, etc."
The lie in this article is hidden here: "though there are differences in assumptions, particulars of the calculations..."
Companies need to fund their pension plans, but only for the portion of time the worker has been employed by them. For example, for FY 2020, the company needs to set aside money corresponding to an additional year of work. But for the USPS, the law requires it to set aside money assuming that the worker will work his entire career for USPS, and project all retirement costs 75 years into the future, even for workers that they haven't even hired yet. In actuary, this is the difference between "actual vested liability", and "total projected liability". The result is clearly absurd. Moreover, this money is not staying in USPS retirement accounts, is going to the government. So it doesn't even guarantee that the money will be there for USPS workers. To add to the injury, USPS is allowed only to invest on treasury bonds, which means that they need to raise even more money than a private company, which is free to invest in any high grade bond.
>USPS is required by a law created by republicans to pre-pay their retirement fund for the next 75 years
The USPS is required to pre-pay the pension costs they have incurred. It's not pre-paying the retirement fund for 75 years. It's putting money aside so that you have the money to pay your 25 year old worker the money you promised them when they're 100.
Incorrect, please do some research and see that it is not like this. For example, here is the article from Business Insider:
"[the law] required the post office to calculate all of its retiree pension and healthcare costs for the next 75 years, including for people it hadn't even hired yet, and put away enough over the next 10 years to cover them. To put this in perspective, that'd be like you only working from age 18 to 28 and then expecting to live on that income until you were 103 years old."
>MYTH: the USPS is required to fund pensions for the next 75 years, for workers who haven’t even been born.
>“[T]he 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.” The Week, April 16, 2018.
>FACT: the actuarial valuation methods used by the USPS are based only on accruals attributed to past service, no different than any other such valuation.
>The Postal Service Retiree Health Benefit Fund (PSRHBF) is a USPS-specific fund, and its 10-K report specifies that it uses the “aggregate entry age normal acturarial cost method.” For pension benefits, employees participate in the CSRS and FERS general civil servant pensions, using the same method. In this method, yes, the actuary calculates the value of all benefits to be paid out in the future, due to past and future service, and then subtracts out the value of the future accruals, to calculate the actuarial liability. In addition, the Civil Service Retirement and Disability Fund calculates a projection of liabilities 75 years into the future in its annual report, but this does not mean that 75 years’ worth of future accruals are advance-funded, only that the long-term sustainability of the system is measured over a 75-year period.
This is saying basically the same thing in a different language.
> In this method, yes, the actuary calculates the value of all benefits to be paid out in the future, due to past and future service, and then subtracts out the value of the future accruals, to calculate the actuarial liability.
I.e., the USPS has to raise the money to fund liabilities for 75 years, and it had to do so in 10 years, which essentially meant that they had to operate in the red making its financial situation even more complicated.
Your cite says they had to put aside money for all their pension costs over the next 75 years. Including people they haven't even hired yet.
My cite says that they had to calculate pension costs payable over the next 75 years that they already incurred. That's a much smaller number and matches the requirements for private companies.
What is the part of "calculates the value of all benefits to be paid out in the future, due to past and future service" that you don't understand? Congress required all possible benefits present and future be calculated (subtracting only future accruals, i.e., gains in investments) and then that money had to be raised over 10 years. That is never required from companies, which have to fund only the portion of pensions that they effectively supposed to pay based on current liabilities, not what they will be projected to owe in the future.
You can find the explanation in several articles, for example:
"[the law] requires the self-supporting U.S. Postal Service, which receives not one dime in taxpayer subsidies, to fully fund its retirees’ health benefits for 75 years into the future. It also requires that money be set aside over a 10-year period, at a rate of more than $5 billion per year.
That means the postal service is now paying for the future health care of retirees it has not yet hired, and who in some cases have not yet been born. No other public or private company in the nation bears any kind of financial burden like that.
Even worse, none of that money is truly being set aside. Instead, it is going directly into the U.S. government’s general fund, and it’s being spent on current government operations. The set-aside is a theoretical accounting gimmick. Those future retirement liabilities are actually being added to the national debt."
>What is the part of "calculates the value of all benefits to be paid out in the future, due to past and future service" that you don't understand?
Because pensions go up with years of service you have to account for the worker continuing to work when calculating pension liability. As an example, say a pension vests after 5 years. What should the pension cost be for an employee in year 2? The best answer is something like 1/5 of the NPV of their pension.
That's what they mean by "benefits to be paid out... due to .. future service".
>That means the postal service is now paying for the future health care of retirees it has not yet hired,
Did you not see the part of my cite where that is specifically called a myth?
It is very difficult to debate with someone who doesn't understand the very logic of how pensions work. No company in the world will pay the NPV of a future pension. Like any other person or institution, they will start making contributions over time to meet the requirements of that pension 20, 30, 50 years from now. To require otherwise is absurd. For example, suppose you are retiring 30 years from now. You cannot assume that you have to calculate the NPV of the required pension in 30 years and then contribute that value today. Like any normal person you will setup a plan to contribute towards a pension that will be available 30 from now, with the required amount. The same happens with any company. In fact, when you hear someone calculating the NPV of pensions that will be paid 20 to 50 years in the future, you most probably are talking to a republican who wants to "prove" that public pensions are insolvent. This is the pattern I've seen.
>You cannot assume that you have to calculate the NPV of the required pension in 30 years and then contribute that value today
?
Did you not read my post where it said:
> The best answer is something like 1/5 of the NPV of their pension.
Of course nobody is required to pay the entire NPV of the pension today. For an employee that is retiring in 30 years they are required to pay 1/30th of the NPV of their pension each year. That's what the USPS is required to do. They're not being required to pay the entire cost of their employee pensions up front.
Let's run the numbers and see if it works the way you say: In 2005, the last year used by the 2006 congress law, the unfunded liabilities of USPS were determined as between $50 and 59 billion [1]. In 2006, congress required USPS to make 10 payments of $5.5 billion. This doesn't meet your characterization os a 1/30th of NPV each year! It is basically paying to whole NPV in a staggered 10 years pre-payment plan.
Thanks for sharing your anecdote, but you left out the rest of the sentence that provides context for the word ‘mail’ when you quoted me. I was explicitly referring to first-class letters, not packages. I believe first-class mail is better left to the USPS.
Meh... I’ve had issues with first class mail as well. My neighbor getting my letters, I even had a letter torn open and the check taken. Turns out it was a postal employee but at least the postmaster followed up.
That’s unfortunate to hear, sounds like you’ve had some bad luck with the USPS. I can see why you took issue with my claim that the USPS is good about delivering the mail, I’d be frustrated if I was you as well.
> Agreed, there are no truly free capitalist markets in the US, except maybe black markets.
Are you kidding? They're all the markets nobody talks about because they're working.
Go to the store and buy a chair. There are a hundred different kinds. Any kind you like. The barrier to entry is low. There are many competitors.
> The Post Office actually makes money
The problem with the Post Office isn't that they don't make money (though having to be bailed out by the taxpayer is unacceptable for any reason, and the pension thing was at the behest of the USPS union rather than the Republicans). The problem with it is that they have a monopoly on carrying mail which prevents customers from enjoying the benefits of competition.
> Are you kidding? They're all the markets nobody talks about because they're working.
Go to the store and buy a chair. There are a hundred different kinds. Any kind you like. The barrier to entry is low. There are many competitors.
I was operating under the assumption that a market that has tariffs on foreign goods [0] is not ‘truly free’ but perhaps you disagree.
Do you expect a private company to service every single rural address that currently receives mail for the same or lower price? We can’t even get ISPs to wire the entire country.
> I was operating under the assumption that a market that has tariffs on foreign goods [0] is not ‘truly free’ but perhaps you disagree.
But now you're just being pedantic. You could make the same argument about taxes, where some states have higher property taxes so factories there have a competitive disadvantage and so on. But then you can't even make the same claim of black markets because their illegality increases costs.
In practice what matters is not whether there is some kind of ideologically pure anarchist vision of freedom which requires no government to exist anywhere in the world, but rather whether there exists competition sufficient to keep margins thin and make companies responsive to customer demands. Which there is, for things like chairs. Some might even say for things like package delivery.
> Do you expect a private company to service every single rural address that currently receives mail for the same or lower price?
They would surely provide service to every address at a price which pays their costs and a market rate of return. Whether that's lower than the existing price in every single case whatsoever doesn't seem like a very strong argument to hinge the entire existence of the USPS on. Especially when there isn't any obvious reason why that subsidy should be a moral imperative, or if it somehow was why it couldn't be satisfied with an explicit subsidy rather than operating an entire national business as a monopoly just to create an implicit one.
> We can’t even get ISPs to wire the entire country.
The incumbents that have captured the regulators? Of course not. And they've had regulations put into place to keep anyone else from doing it either.
>Do you expect a private company to service every single rural address that currently receives mail for the same or lower price?
I don't quite understand why that's something we need to do. Those that live in rural addresses that can't be efficiently delivered to can pick up their mail in town. Sure, it's less convenient but lack of conveniences is part of living in the country.
The USPS is damn good at delivering the mail, I don’t trust any private company to treat a first-class letter with the care the USPS generally does.
The Post Office actually makes money, but they’re legally required to fund a new hire’s entire projected pension at the time of hiring which lets Republicans point at how the post office loses money when it was done that way on purpose.