David Morris
If chutzpah is killing your parents then throwing yourself on the mercy of the court because you're an orphan then Peter Orszag is the poster child for chutzpah. In his recent article in Bloomberg News he insists the best fix for the post office is to take it private. Where does the chutzpah come from? Orszag was Director of the Office of Management Budget (OMB), an agency that played a key role in crippling the USPS with a manufactured financial crisis.
Here’s the back-story. In 1970, after almost two centuries, the Post Office was transformed from a Cabinet agency to the quasi-independent US Postal Service (USPS). In keeping with its new status, Congress eventually moved its finances off budget. Yet, as I’ve discussed before, the OMB and the Congressional Budget Office (CBO) ignored Congress and continued to include the USPS in the unified budget, the budget they use for “scoring” legislation to estimate its impact on the deficit.
Fast forward to 2001. The Government Accountability Office put the Postal Service on its list of “high-risk” programs because of rising financial pressures resulting from exploding demand from both the residential and commercial sectors. Then in 2002 the anxiety level fell dramatically when the Office of Personnel Management found the Postal Service had been significantly overpaying into its retirement fund.
It seemed a simple matter to reduce future payments and tap into the existing surplus to pay for current expenses. And would have been if the OMB and the CBO did not insist on adhering to their make-belief accounting system.
Several times between 2002 and 2005 Congress did overwhelmingly approved tapping into the existing surplus. Each time the White House nixed the idea because it would increase the deficit.
Finally, in 2006 the Post Office and Congress agreed to literally buy off the CBO and OMB. Budget neutrality over a ten-year period was achieved by requiring the USPS to make ten annual payments of $5.4-5.8 billion. The level of the annual payments was not based on any actuarial determination. They were produced by the CBO to equal the amounts necessary to offset the loss of the escrow payments. Under the Postal Accountability and Enhancement Act of 2006 the USPS was forced to prefund its future health care benefit payments to retirees for the next 75 years in ten years,
something no other government agency or private corporation is required to do.
The Postal Regulatory Commission noted that those payments “transformed what would have been considerable profits into significant losses.”
Indeed, 90 percent or more of the current deficit is a result of these artificially created debts.
The Post Office is indeed in a financial crisis, but not one of its own making.
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