A reader sent me this article on the impending insolvency of the United States Postal Service. The USPS, which has an operating cost of about $70 billion per year (Wikipedia) pays for its retiree health care obligations on a current basis, unlike other federal agencies. This year, the article says, they have to set aside $5.5 billion, or about 8 percent on top of the operating expenses.
Assuming the actuaries are right about what the retiree health care costs will actually be (historically these have been underestimated since few people expected the inflation in health care costs that the U.S. has had), the average government agency, by incurring but not funding retiree health care, is probably spending about 8 percent more than the official figure on cost. (Of course, there is a much larger hidden cost to running state and local government due to the underfunded pensions.)
[This assumes that other government entities have similar obligations as the USPS regarding retiree health care. My evidence for this being a reasonable assumption is that USPS employees share a retirement policy with standard civilian federal workers.]
Any post about the USPS should note that 50-70% of total mail volume is discarded unopened and 90% gets marked as “unwanted” in surveys, so the operation is a giant subsidy to advertisers and corporations too lazy to incentivize e-billing.
Congress prevents them from doing anything to balance their budget, much less laying off 90% of employees and shuttering most post offices, so this is yet another gift from the Chinese and other buyers of our debt.
Of course, if Moynihan was right it’s a bargain.
Federal workers outside the military are largely on a defined payment program, not a defined benefit one. There is a forcing mechanism that moves a goodly portion of Federal worker’s retirement medical costs onto Medicare.