Issa labels postal union ad misleading


In a letter released today, Rep. Darrell Issa, R-Calif., takes aim at a union’s claim that the U.S. Postal Service gets no taxpayer support.

Issa, chairman of the House Oversight and Government Reform Committee, concedes that the Postal Service no longer receives a direct government operating subsidy, but cites a 2007 report that the agency benefits from many “implicit subsidies” and “extra powers” worth several hundred millions of dollars a year. Those include federal, state and local income tax exemptions, Issa wrote, as well as the ability to borrow from the federal treasury at low interest rates.

The letter, dated Monday, is addressed to American Postal Workers Union President Cliff Guffey. That was the same day the APWU began airing an ad on national TV cable channels asserting that its members’ work is “funded by solely by stamps and postage.”

As anyone following USPS issues knows, Issa and Guffey haven’t exactly been best buds of late, given that they have starkly different ideas about what’s needed to cure the Postal Service’s ills. Issa acknowledges those differences in his letter, but adds that “we must be clear about the underlying facts.

“I ask you not to engage in a campaign to mislead the American people.”

In an email, APWU spokeswoman Sally Davidow said the ad is accurate  and “is intended to dispel the myth that the Postal Service is funded by tax dollars.”

The Federal Trade Commission report cited by Issa lists not only implicit subsidies for the Postal Service, but also added burdens, Davidow said, and concludes that the burdens exceed the subsidies. The union plans to formally respond to Issa in writing.


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  1. Phillip Tabbita on

    Rep. Darrell Issa, R-CA, has it wrong. The ad is not misleading. Hopefully it will correct false impressions about Postal Service funding.

    Budget and government funding disputes this past April raised the possibility of a government shutdown. APWU members, their families, friends and many others wondered whether mail would get delivered. Of course mail delivery would continue in a government shutdown; because it is mail users who pay for delivery and not federal government tax dollars. This is the ad’s message.

    Here is another concern the ad addresses. Many seem to think that the federal government had to cough up the billions in losses reported in USPS financial statements. It doesn’t help dispel this erroneous impression when some in Congress and the media allege that USPS is requesting or needs a “bail out.” Again the federal government did not cough up a dime to cover the reported losses.

    As USPS was reporting the losses, the Federal Government required the Postal Service to pay billions ($2.9 billion in FY 2010) into Federal coiffeurs for FERS, although the USPS had already overfunded this retirement program by about $7 billion. In fact, despite previous overpayments, in FY 2011, the Feds increased the Postal Service required payment to FERS from 11.2% to 11.7% of basic payroll. Unimaginable, but true.

    Similarly, the Service has been obligated to pay about $5.5 billion per year – as it was and is reporting losses – to the Treasury for future payment of retiree health benefits. Those dollars paid in the last two years won’t be needed to pay any benefits for about twenty years. Clearly the Federal government is benefiting by holding overpayments and forcing about $6 billion per year from the Postal Service to the Treasury where it can be held for decades. Without this overfunding and prefunding, the Postal Service would have made money over the last four years despite huge drops in mail volume and a serious recession. There would have been losses in the last two years – but relatively small losses – due to structural and market changes and the Postal Service must address these changes.

    It is sad that the Postal Service might be the victim as Representative Issa picks a fight with APWU President Guffey. The Postal Service must address some structural problems and changes in markets with investments in its networks, IT and new products. It is being starved of any capital by these huge unjustified overpayments and prepayments – amounting to about ten cents of every dollar in Postal Service revenue. Talk of subsidies and bail outs is misleading and will not lead to the legislative changes necessary for a viable Postal Service.

    Clearly the flow of monies is from the Postal Service to the Federal government and not the other way.

    Jumping into the weeds for a moment . . .

    Mr. Issa cites a 2007 FTC report ( as to “implicit subsidies.” The report details some of the advantages due to the Postal Service special status as an independent establishment of the federal government as compared with private sector companies. It also detailed many of the constraints put on the Postal Service by that special status. The analysis was based on 2006 data for postal competitive products. The FTC estimated that the exemption from state and local taxes provided $38-113 million. Those estimates might be smaller today because the numbers of facilities and vehicles have been reduced and Postal revenues have fallen. Offsetting the “implicit subsidies” the FTC estimated “burdens” on USPS at $111-262 million. Things like air service cost, not allowed to participate in Medicare Part D, restrictions on markup for periodicals and non-profit postage rates, etc. These costs may have grown a bit since 2006.

    The PAEA requires the Postal Service to pay the equivalent of Federal Income tax from its Competitive Products Fund to its regular Postal Fund. In 2010 the Postal Service paid $192.8 million in implicit federal income taxes (2010 Annual Compliance Determination,, p 150). The payment is required to assure that any such advantages do not result in unfair competition with private sector companies.

    Simply, USPS doesn’t get a direct payment from tax dollars. The monies the Feds pay to USPS are for postage – the same as any other mailer is expected to pay to get its mail delivered. Fortunately, mailers don’t follow the Feds lead. They pay the postage bill promptly and in full.

    Although Representative Issa doesn’t mention it, he might have made a better case by citing American Recovery and Reinvestment Act benefits USPS received:

    “In 2010 and 2009, approximately 6,500 fuel efficient vehicles were contributed to the Postal Service under the provisions of the American Recovery and Reinvestment Act. The excess of the fair value of these vehicles over the fair value of the vehicles traded-in was recorded as additional non-cash capital contributions by the U.S. government of $53 million in 2009 and $45 million in 2010.” (USPS 2010 Annual Report,, note 1, page 68)

    However, this was not a request from USPS. The Feds provided the vehicles for reasons other than concerns about getting mail delivered. The Postal Service will incur initial operating expenses to integrate these vehicles into the fleet. And this doesn’t change the legitimate purpose of the ad into a “misleading” message.

    Representative Issa talks about borrowing and favorable interest rates. His account is incomplete and misleading.

    Fed Ex can borrow money in the commercial paper market at a A2/P2 rate and the 30-day rate was running at 0.28% yesterday,, not much different from the USPS short-term revolving credit rate which Mr. Issa cites as 0.206%. UPS looks to be borrowing at even lower commercial paper rates, 0.12% according to its 10-Q filing (Sources of Credit,, page 39).

    The Postal Service has borrowed at various interest rates and is paying 3% on about $3.9 billion in loans.

    It is important to note that all of USPS borrowing over the last four years has been to make legislatively required payments to the Treasury for prefunding of future retiree health benefits. At the end of May 2011 there was more than $43 billion in the Postal Service Retirement Health Benefit Fund which doesn’t pay for anything at the moment. The Postal Service is paying the current annual bill for health benefits on top of the prepayments.

    Oh, wait a minute. . . The fund dropped to $34 billion in June 2011. Could it be that the fund is helping the United States pay its debts while the debt ceiling prevents more borrowing? This may well be consistent with the Treasury Secretary’s May 16, 2011 “debt issuance suspension period” letter, So perhaps the fund is paying for something – but not retiree health benefits. We know that the Secretary is also using the retirement funds and TSP funds into which postal employees and USPS pay. Maybe someone should thank the Postal Service for the “loan” of tens of billions from various benefits funds being used to push off a default on U.S. debts?

    The ad is not misleading.

    Phillip Tabbita

  2. And yet this Joker says nothing about the fact that Senators and Representives enjoy not having to pay a dime for their mailings. Why is nothing ever said about that? Are they going to cut their own salary’s and benefits? I would like to see that happen if they are going to do it to us… they are Federal employees with the same retirement and health benefits as Postal employees. Post office receives NO PAC money either. Just revenue from stamps and packages.

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