4 Reasons Why States Suing to Stop Immigration Actions Stand to Lose Big

Immigration activists demonstrate at the Supreme Court in Washington in support of President Barack Obama’s executive order to grant relief from deportation in order to keep immigrant families together, March 18, 2016. The U.S. Capitol is in the background.

Immigration activists demonstrate at the Supreme Court.
SOURCE: AP/J. Scott Applewhite

 — by Tom Jawetz 

On April 18, the U.S. Supreme Court is set to hear oral arguments in a lawsuit, United States v. Texas, brought by more than two dozen states challenging an immigration enforcement policy by the secretary of homeland security. If successful, the lawsuit could tear apart millions of American families, while at the same time greatly undercutting the U.S. economy.

Twenty-six states filed a lawsuit challenging the Deferred Action for Parents of Americans and Lawful Permanent Residents, or DAPA, initiative along with the expansion of the existing Deferred Action for Childhood Arrivals, or DACA, initiative. Under DAPA, DACA, and expanded DACA, certain unauthorized immigrants who have lived in the United States for many years and who either came to the country as children or are the parents of U.S. citizens or lawful permanent residents can come forward, register with the government, pass background checks, and request deferred action—a temporary protection from the threat of deportation. With deferred action, such people are also eligible to request permission to work in the country legally. The implementation of both DAPA and expanded DACA has been temporarily placed on hold while the case works its way through the courts.

In suing to freeze DAPA and expanded DACA, these 26 states have chosen to forgo tens of billions of dollars in increased state gross domestic product, or GDP, not to mention the additional earnings of their own residents, as well as hundreds of millions of dollars each year in increased state and local tax revenue. This is significant in part because the 5th Circuit Court of Appeals decided that the plaintiff states had standing to bring this lawsuit based upon the district court’s finding that the state of Texas may end up spending “several million dollars” to issue driver’s licenses to some of the people who receive deferred action. In addition to these monetary losses, the plaintiff states are also threatening to tear fathers, mothers, brothers, and sisters away from the more than 2.6 million U.S. citizen family members with whom they live in these states. (see Table 2)

Here are four key facts you should know about the states that are suing to freeze DAPA and expanded DACA.

1. The plaintiff states stand to lose at least $91.9 billion in increased state GDP

Nationally, the three deferred action initiatives—DAPA, DACA, and expanded DACA—are estimated to grow the U.S. economy cumulatively by $230 billion over 10 years. The reasons for this are fairly simple. As professional economists and scholars in related fields recently explained in an amicus brief to the U.S. Supreme Court, when unauthorized immigrants gain work authorization and protection from deportation—even temporarily—they are able to find jobs that make full use of their skills and abilities, earn higher wages, and become even more economically productive.

What’s more, individual states can expect to see their economies grow as a result of these initiatives. Together, 18 of the 26 states suing to freeze DAPA and expanded DACA stand to lose an estimated $91.9 billion in increased state GDP over 10 years if the three deferred action initiatives are not fully implemented. And while the original DACA initiative is not under review in United States v. Texas, the 5th Circuit Court of Appeals’ decision places a cloud over it as well.

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2. Residents of the plaintiff states stand to lose an estimated $48.4 billion in increased earnings

Because of the enormous economic activity that would be generated by these initiatives, the cumulative earnings of American workers would increase by an estimated $124 billion nationally. In the 18 plaintiff states for which CAP has data, we estimate that implementing DAPA, DACA, and expanded DACA would raise the earnings of these states’ residents by more than $48.4 billion over 10 years.

3. The plaintiff states stand to lose nearly $272 million annually in increased state and local tax revenue

Unauthorized immigrants contribute enormous sums to state and local coffers through taxes:$11.64 billion annually, according to a new report by the Institute on Taxation and Economic Policy. Full implementation of the three deferred action initiatives would increase state and local tax contributions by unauthorized immigrants by an estimated $805 million each year.

The 26 states that are suing to block DAPA and expanded DACA would stand to gain an estimated $271.7 million annually in state and local tax revenue. Texas leads the way with the nearly $59 million it is estimated to gain each year in such revenue through the implementation of DAPA, DACA, and expanded DACA. (see Table 1)

And it’s not just states and localities that would stand to lose additional tax revenues: The nonpartisan Congressional Budget Office and Joint Committee on Taxation studied the budgetary effects of legislation to block DAPA, DACA, and expanded DACA and found that the bill would reduce federal tax revenues by $22.3 billion over a 10-year period, leading to a $7.5 billion increase in the deficit over that same period.

4. More than 2.6 million U.S. citizens live with a DAPA-eligible family member in the plaintiff states

By definition, the parents of American citizens or lawful permanent residents who would be eligible to apply for DAPA have deep roots in the United States. Nearly 70 percent of anticipated DAPA beneficiaries have lived in the United States for at least 10 years, and a full one-quarter have lived here for at least 20 years.

According to an estimate prepared for CAP by the University of Southern California’s Center for the Study of Immigrant Integration, there are more than 6.1 million U.S. citizens around the country who live in the same household as a DAPA-eligible family member. California leads the pack with an estimated 1.8 million individuals, but Texas comes in a close second at nearly 1.1 million. And in the 21 plaintiff states for which CAP has data, there are more than 2.6 million U.S. citizens living with a DAPA-eligible family member.

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Conclusion

Given the facts presented above, it is little wonder that the largest cities and counties in many of the plaintiff states filed an amicus brief with the Supreme Court arguing in support of DAPA and expanded DACA. If the Supreme Court overturns the lower court’s decision and permits these policies to take effect—as it should—not only will the nation as a whole benefit from the implementation of these sensible policies, but the plaintiff states will benefit as well.


Tom Jawetz is the Vice President of Immigration Policy at the Center for American Progress.

This material [the article above] was created by the Center for American Progress Action Fund. It was created for the Progress Report, the daily e-mail publication of the Center for American Progress Action Fund. Click here to subscribe. ‘Like’ CAP Action on Facebook and ‘follow’ us on Twitter

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The Obama Health Care Legacy: More Coverage and Less Spending

—by Harry Stein

ImageOn March 24, the Congressional Budget Office, or CBO, published data that surprised even the staunchest advocates for health care reform: New estimates show that total federal spending in fiscal year 2016 for major health care programs will be lower than was projected back in January 2009. Why is this shocking? The January 2009 projections did not include the Affordable Care Act, or ACA, which was not signed into law until March 2010. This means that federal health programs are covering more people while spending less money.

Though the ACA coverage expansion added new costs, total spending for federal health programs is still less than what the CBO projected in January 2009 because of huge savings from Medicare. In fact, the CBO’s projections for FY 2016 Medicare spending have fallen $107 billion since January 2009. A portion of the Medicare savings can be unambiguously attributed to the ACA.

Read more about how the ACA expanded coverage while saving money at the Center for American Progress.


This material [the article above] was created by the Center for American Progress Action Fund. It was created for the Progress Report, the daily e-mail publication of the Center for American Progress Action Fund. Click here to subscribe. ‘Like’ CAP Action on Facebook and ‘follow’ us on Twitter

New Speaker, Same Old Policies

— by CAP Action War Room

Paul Ryan’s Record Indicates We’re In For The Same Broken GOP Policies

Ryan06
Speaker of the House — Paul Ryan (R-WI)

After much chaos and dysfunction, the House of Representatives elected Representative Paul Ryan from Wisconsin to be Speaker of the House. The Republicans have lauded their new Speaker as their “thought leader” who creates the “blueprints” for policies: he was Mitt Romney’s running mate in 2012 and chairman of the Ways and Means Committee. Much of the GOP rhetoric around Ryan’s run for speaker has suggested that he will usher in a new era of moderate, pragmatic, and effective leadership that will be both good for the economy and the American people. Though we hope Ryan can bring sanity to this House of GOP crazies and stop them from holding the government hostage time and again, we’re not holding our breath for a “new day in the House of Representatives.”

Despite GOP rhetoric, the reality of Paul Ryan’s record, including his signature 2014 budget, suggests that his Speakership will be full of the same old, out of touch, extreme Republican policies that undermine working families to help the rich get richer—policies that voters already rejected in the 2012 election. Here are a few reminders of Ryan’s record:

  • Bad for low-income families. Ryan tried to paint himself as an anti-poverty crusader, by embarking on poverty tour in 2014 and releasing a report documenting his concerns about poverty. But in reality, Ryan creates policies that cut programs that are vital for working families and blames poverty on personal failures, claiming that it is the result of a “culture problem.” The bulk of the Ryan Budget’s spending cuts—69 percent—come from gutting programs that serve low-income people. And after his 2014 poverty tour, he proposed slashing $125 billion from the
    (SNAP), also known a food stamps, over the next 10 years, and converting it to a flat-funded block grant. He also proposed cuts to Medicaid, a critical program that provides health care to 70 million Americans, including low-income children, seniors, and people with disabilities. And of course, Ryan wants to repeal the Affordable Care Act, which has provided health insurance for 17.6 million people.
  • Bad for seniors. In his 2014 budget, Ryan abandoned the pledge Republicans made to protect anyone age 55 or older from Medicare cuts and instead advocated for forcing seniors to pay more by radically altering Medicare. He also supports turning Medicare into a voucher system, which would increase premiums for traditional Medicare by 50 percent, according to the CBO. Ryan has also attacked one of the other pillars of economic security for seniors: Social Security. Despite the fact that Social Security survivor benefits made it possible for him to pay for his college tuition, Ryan’s 2010 budget cut benefits and privatized a substantial portion of the program, instead of lifting the Social Security payroll tax cap so that the rich pay their fair share of payroll taxes.
  • Bad for women. Ryan’s dismal record on women’s issues has earned him a 0 percent score from Planned Parenthood on women’s issues. He has voted numerous times to defund Planned Parenthood and is a leading advocate for personhood bills. And though Paul Ryan used his power to guarantee time with his family despite his Speaker duties, he refuses to support legislation, such as guaranteed paid sick and paid family leave, to help others have this right. Unlike Paul Ryan, no one else has federally guaranteed paid time off for illness, holidays, vacation, or the arrival of a new child. Women usually still most feel the burden of this lack of paid leave. More than 40 percent of mothers have cut back on work to care for family. And as new research shows that boosting women’s earnings helps slow the growth of inequality, it is apparent that Paul Ryan’s extremism hurts not only women, but also the economy.
  • Bad for the economy. Ryan’s budgets and rhetoric tout the same failed trickle-down economic theories that have only helped the rich get even richer but leave middle class and working families behind. His budget proposed giving millionaires a tax cut of at least $200,000. And analyses indicate, there is no way to implement Ryan’s tax cuts for millionaires in a deficit-neutral way without raising taxes on the middle class. Ryan also advocates for austerity measures that have never worked and would hurt the economy. And yet, his budget advocates for enormous cuts to investments in education, science, and other programs that benefit the middle class.

BOTTOM LINE: Though we’d like to hope that Paul Ryan’s new title will cause him to reevaluate his policies and support legislation that will actually help working families, his record of damaging polices creates huge warning signs. If Paul Ryan’s reign as speaker is anything like his record, we’re in for another period of GOP extremism that hurts families, seniors, women, and the economy. But now that the chaos has cleared, Republicans in the House of Representatives should take this opportunity under new leadership to pass policies that support working families, rather than the wealthy few.


This material [the article above] was created by the Center for American Progress Action Fund. It was created for the Progress Report, the daily e-mail publication of the Center for American Progress Action Fund. Click here to subscribe.  ‘Like’ CAP Action on Facebook and ‘follow’ us on Twitter

Affordable Care Act at 3: Increased Savings for Seniors

— by Kathleen Sebelius, Secretary of Health and Human Services,  March 21, 2013

In the three years since the Affordable Care Act became law, the slower growth of health care costs is saving money in Medicare and the private insurance market, helping to curb previously skyrocketing premiums and making Medicare stronger.

The nonpartisan Congressional Budget Office recently estimated that Medicare and Medicaid spending would be 15 percent less — or about $200 billion— in 2020 than was previously projected, thanks to this slower growth. Medicare spending per beneficiary rose by just 0.4% in 2012, while Medicaid spending per beneficiary actually dropped by 1.9% last year. We are making Medicare stronger, too, by spending smarter, promoting coordinated care, and fighting fraud. Not only does this ensure that taxpayer dollars are spent wisely.  It means that those who count on Medicare — our grandparents, parents, our friends, and neighbors – will have it for years to come.

Today, we are announcing that thanks to the Affordable Care Act, more than 6.3 million seniors and people with disabilities on Medicare have saved more than $6.1 billion on prescription drugs since the health care law was enacted three years ago. This is the result of the law’s closing of the prescription coverage gap known as “the donut hole.”

Nearly 3.5 million people with Medicare saved an average of more than $706 each on their prescriptions in 2012.

In the case of Helen Rayon of Pennsylvania, the savings on her medications is enough to help her contribute to the education of her grandson. She says: “I take seven different medications. Getting the donut hole closed … gives me a little more money in my pocket.”

David Lutz, a community pharmacist from Hummelstown, PA, described his elderly customers, “splitting pills, taking doses every other day, missing doses, stretching their medications.”  But he says this has begun to change with the savings resulting from the Affordable Care Act, and that’s good for their health as well as their budgets.

After the law was passed, the Affordable Care Act provided a one-time $250 check for people with Medicare who reached the Part D prescription drug coverage gap in 2010. Since then, individuals in the donut hole have continued to receive savings on prescription drugs. In 2013 individuals in the donut hole are saving over 50% off of the cost of branded drugs. The savings on both brand name and generic drugs will continue to increase until the coverage gap is closed in 2020.

Along with savings on their medications, American seniors have also benefited from access to vital preventive services — such as mammograms, cholesterol checks, cancer screenings, and annual wellness visits — with no Part B coinsurance or deductibles. In 2012, more than 34 million seniors and people with disabilities with Medicare received at least one free preventive service. Having easier access to preventive services without worrying about the cost helps seniors stay healthier and identify health conditions before they become more serious and costly.

Helen works as a health-and-wellness coordinator at a senior center, arranging for health and fitness activities for seniors older than herself.  She knows they struggle with the costs of staying healthy. “If it weren’t for the health care reform, many of our seniors would not get to a doctor,” to get a check up, Helen says. “It is expensive for us to keep good health.”

Affordable Care Act initiatives are also ensuring that if Medicare beneficiaries do end up in the hospital that their care is coordinated and they stay out of the hospital once they’re discharged. This also gives Medicare beneficiaries – and other taxpayers – more value for their health care dollars. In fact, hospital readmissions in Medicare have fallen for the first time on record, resulting in 70,000 fewer readmissions in the last half of 2012.

The Affordable Care Act is helping us keep our moral commitment to ensure that our grandparents and other seniors get the high-quality, affordable health care and security they need and deserve.

To learn more about how the Affordable Care Act is saving seniors on prescription drug costs by closing the donut hole coverage gap, visit www.hhs.gov/news/press/2013pres/03/20130321a.html


NOTE:  Today, in the U.S. House of Representatives, GOP members of that House, on a purely partisan vote, passed the Ryan Budget which, if it were to become law, would repeal the Affordable Care Act, and all of it’s provisions which help not just those folks on Medicare, but those of us who might have what the insurance industry has termed a “pre-existing condition” that they can then use to deny coverage.  It would also allow insurance companies to once again impose both annual and lifetime limits on coverage.  Those of you with children under 26 would no longer be able to continue to carry them on your existing health insurance policy once they reach age 18. And that’s just a few of the provisions that make a difference in ordinary Americans’ lives.  Please take the time to review exactly “what” is covered under Obamacare  and then help us bury Senator Heller in emails, tweets, and letters letting him know you will not forget any vote he takes to repeal this needed and necessary law by voting for Ryan’s Path to Poverty budget.

Economic Rapture Might Be around the Corner

If the deficit disappears, our economic nightmare might finally come to an end.

— By Salvatore Babones

Salvatore Babones

It’s January 25, 2001, the first week of the Bush presidency and more than half a year before the September 11 attacks. Federal Reserve Chairman Alan Greenspan testifies before the Senate Budget Committee, asserting:

“If current policies remain in place, the total unified surplus will reach $800 billion in fiscal year 2011. The emerging key fiscal policy need is to address the implications of maintaining surpluses.”

As the poet William Wordsworth put it, “Bliss was it in that dawn to be alive!”

The 2011 fiscal year ended with a $1.3-trillion deficit. How did America go from a state of “burgeoning federal surpluses” (in Greenspan’s words in 2001) to “extraordinary financial crisis” (the way he put it in 2010) in just one decade? Two words suffice: tax cuts.

Forget the recession and the Bush-Obama stimulus packages. Those are history.

The recession ended three years ago — at least in terms of economic growth. So why aren’t the deficits disappearing?

The problem is that taxes are just too low. Most Americans will shudder to hear those words, but it’s the truth. Taxmageddon? Bring it on.

If Congress does what Congress does best and takes no action by New Year’s Eve, both the Bush and Obama tax cuts will expire. On January 1, 2013:

  • The Bush tax cuts on high-income filers will expire, returning the top marginal rate to its 1990s level of 39.6 percent.
  • The alternative minimum tax will be restored for a large number of high-income filers that are currently exempt.
  • Social Security employee payroll taxes will return to 6.2 percent from their current reduced level of 4.2 percent.

Other automatic mechanisms will result in spending reductions, including the elimination of extended unemployment insurance benefits for the long-term unemployed. Long-overdue Pentagon spending cuts will also go into effect.

The Congressional Budget Office (CBO) projects that these automatic tax increases and spending cuts would immediately cut the federal budget deficit in half, returning it to a manageable level.

The downside? According to the CBO, such a sudden tightening of the federal budget would reduce real economic growth from a projected 4.4 percent to just 0.5 percent in 2013.

I think we can have a lot of confidence in those projections. “Budget,” after all, is the CBO’s middle name.

But economic growth of 4.4 percent if only we keep our current low tax rates? I think CBO economists may be living the same low-tax fantasy as much of the rest of the economics profession.

Some facts: According to data from the Bureau of Economic Analysis, the last time real national income grew at a rate over 4 percent per year was in the high-tax 1990s.

The economy grew by over 4 percent a year four years in a row: 1997, 1998, 1999, and 2000.

That’s right. The last four times the economy grew by 4 percent were the four years before the Bush tax cuts. Go figure.

In the decade since the Bush tax cuts went into effect the highest recorded growth rate was 3.5 percent, in 2004.

Now, it just might be that roaring economic growth is right around the corner. Happy days will be here again if only Congress and President Barack Obama can take the tough actions necessary to prevent tax cuts from expiring.

Keep the candy coming and everything will work out just fine.

On the other hand, this might be the best time in history for a do-nothing Congress to deadlock over the issue and let the tax cuts expire.

It’s hard to know what direction the economy will take. But no one doubts that if the tax cuts expire, the deficit will disappear. And if the deficit disappears, our economic nightmare might finally come to an end.

Economic rapture may be just around the corner.


Salvatore Babones is an American sociologist at the University of Sydney and an Institute for Policy Studies associate fellow. His book on the American economy, Benchmarking America, is due out in 2013. www.ips-dc.org
Distributed via OtherWords (OtherWords.org)

Corporations Score another Supreme Court Victory

The Affordable Care Act ruling won’t heal our ailing health system.

By Margaret Flowers

Margaret Flowers

As a physician, I find it very odd that the debate over the Affordable Care Act has focused on the effect the law will have on the presidential election rather than the impact it will have on patients, health professionals, and health outcomes.

The Supreme Court case reinvigorated the debate over the Obama administration’s 2010 health care reform law. But we’re still getting partisan talking points instead of an honest review of the changes that are in store. This will likely worsen as we get closer to Election Day.

The new law is based on concepts developed by the Heritage Foundation, a conservative think tank. Republican presidential candidate Mitt Romney passed a very similar law for his state when he was the governor of Massachusetts. So while most Democrats are celebrating the Supreme Court decision to uphold the Affordable Care Act and Romney is saying he’d repeal it, consider this: Had a Republican passed this federal law, we would have the opposite situation.

imageLet’s put politics aside and look at the law from a policy standpoint. The big winners of the Supreme Court decision are the corporations who are profiting from the current health system — private health insurers, pharmaceutical companies, and corporate-owned hospitals and medical practices.

The Court has deemed it constitutional for the government to require people to spend up to 9 percent of their income to purchase private insurance despite it being a defective product. People with insurance continue to face financial barriers to care. They delay and avoid necessary care because of the cost of co-pays and deductibles.

When patients have a serious medical condition, they risk financial ruin. Illness and soaring medical costs are the greatest causes of bankruptcy in the United States, even though four out of five people experiencing medical bankruptcy have health insurance. Purchasing private insurance is going to be subsidized with taxpayer dollars. It will cost Uncle Sam an estimated half a trillion dollars between 2014 and 2019 to pay that tab, according to the Congressional Budget Office. The insurance mandate and these subsidies will create corporate welfare on steroids.

What will the insurance companies do with all that money? They’ll hold onto as much as they can by denying and restricting payment for care. And they’ll use those dollars to weaken regulations meant to protect patients.

When national health care reform is fully implemented in 2019, 26 million people will still lack coverage. And health costs will continue to rise because the law lacks proven cost controls.

While the law does include a few positive provisions, it won’t stop the deterioration of our health care system. We’ll continue to see unnecessary suffering and preventable death. This is unacceptable when we are already spending nearly twice as much per person on care each year as other industrialized nations with universal health systems and much better health outcomes.

The truth is that we can solve our health care crisis. The fastest way to accomplish this is to drop just two words from the Medicare Act — "over 65" — and immediately expand Medicare to every person. That would create a system that’s about health care, not corporate profits. A universal Medicare system would control costs and improve the quality of patient care.

Let’s demand Medicare for all now. The longer we wait, the more people will suffer and die needlessly.


Margaret Flowers, MD is a pediatrician from Baltimore and co-director of ItsOurEconomy.US.  Distributed via OtherWords (OtherWords.org)

How the Post Office Is Being Destroyed By a Phony Budget Crisis

 

Congress, not the post office itself, is the problem

by David Morris

As every 6 year old learns, there is real and there is make believe. The massive Post Office deficit that is driving its management to commit institutional suicide by ending 6-day mail delivery, closing half of the nations’ 30,000 or so post offices and half it’s 500 mail processing centers, and laying off over 200,000 workers, is make believe.Photo by Ross Griff under a Creative Commons license from flickr.com Local post offices all across the country, which function as community commons, including this one in Gerry, New York, are threatened with destruction because of Congress’s shenanigans with the USPS budget.

Here’s why. In 1969 the federal government changed the way it did accounting. It began to use what was and is called a unified budget that includes trust funds like social security previously considered off budget because they were self-sustaining through dedicated revenue.

At that time the Post Office was, as it had been since 1792, a department of the federal government like the Department of Energy or the Department of Agriculture. While generating most of its revenue from postage it also received significant Congressional appropriations.

In 1970 Congress transformed the Post Office into the U.S. Postal Service (USPS). The new quasi-public agency was intended to put the Postal Office on a more business like footing. The Postal Service was given was allowed to borrow to make needed capital investments and was given more flexibility in how it spent its money. In return Congress required the Postal Service to become self-sufficient. The subsidy, at that time running about 15 percent of total revenues (close to $10 billion a year in 2012) was phased out over the next 15 years. After the mid 1980s the only taxpayer funds involved in the Post Office, amounting today to $100 million a year, subsidizes mail for the blind and official mail to overseas voters.

In keeping with the new philosophy that the Postal Service should be independent, President Richard Nixon’s Office of Management and Budget administratively moved its finances off budget in 1974. In 1989 Congress did it by statute.

None of this made any difference, as exhaustively detailed by the USPS Inspector General in a 2009 report. The OMB and the Congressional Budget Office (CBO) continued to treat the postal service as part of the unified budget, the budget they use for “scoring” legislation to estimate its impact on the deficit.

And that’s where the make believe comes from.

In 2001 the Government Accountability Office (GAO) 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. A year later the Office of Personnel Management (OPM) 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 that’s when make believe began to have a tragic impact in the real world.

How the Unnecessary Tragedy Unfolded

In late 2002, the CBO announced that this logical change in the retirement contribution formula could increase budget deficits in Congress’s unified budget by as much as about $3.5 billion a year, or $41 billion over the long haul. If the overpayments were used to delay future rate increases, the CBO added, future government receipts would decline, adding to the unified budget deficit.

To overcome the budget scoring objections Congress began what in retrospect we can see was little more than an exercise in rearranging the chairs on the Titanic. The final law allowed the Postal Service to use its overpayments to pay off its debt and delay increasing rates for 3 years. After that any overpayments were to be collected in an escrow fund that would be unavailable to the Post Office until Congress determined how the funds would be used. And then came the quid pro quo. The Postal Service became responsible for paying postal workers for the time they spent in prior military service. Up until then, as one might expect, these obligations were paid by the U.S. Treasury. Assuming that obligation essentially eliminated any Post Office surplus during the 10 year scoring window.

The House and Senate held 11 hearings on postal reform between 2003 and 2006. Senator Susan Collins, Chair of the Senate Governmental Affairs Committee commented, “two issues… united every single witness who has testified before our committee … a desire to see the escrow account repealed and the return of the military pension obligation to the Treasury Department.”

Bills to this effect were well received in Congress. But again and again the OMB and CBO stepped in to thwart policy makers. In 2004, as the bills were moving rapidly through Congress the Bush Administration stopped their progress by announcing its opposition,which they justified by the impact on the unified budget. The next year, on the day that a bill to help the Post Office with big bipartisan backing was brought to the floor of the House , the Bush Administration again threatened a veto because of its “adverse impact on the Federal budget”. Congress backed down.

In 2006 Congress finally passed a new law. The Postal Service was allowed to tap into escrow money and pension obligations for military service were shifted back to the US Treasury. But again a quid pro quo was required that negated any financial benefits that would result. To achieve unified budget neutrality the USPS was required to make 10 annual payments of between $5.4 billion and $5.8 billion each to the newly created Postal Service Retiree Health Benefits Fund. The fund could not be tapped to pay actual retiree health benefits during those 10 years.

The level of the annual payments was not based on any actuarial determination. The numbers were produced by CBO as the amounts necessary to offset the loss of the escrow payments.

Remember, this all began because the post office discovered it had surplus funds. Unified budget accounting made sure it could never tap into this surplus unless at the same time it assumed new liabilities of an equal magnitude.

The Simple Solution

The solution to the post office financial deficit is simple. Give it back the money Congress, as a result of pressure from the CBO, has stolen from it over the past years. Then make future payments into the health fund for retirees actuarially based.

Once this artificially generated financial noose is removed from the postal service’s neck we can get on with helping it navigate the shoals of an uncertain future. To do this the postal service must build on its two most important assets: its ubiquitous physical infrastructure and the high esteem in which most Americans hold it. In combination, these assets offer the post office an enviable platform upon which to many new revenue-producing services.

But to do this Congress will have to remove another burden imposed by the 2006 law: a prohibition on the postal service offering non-postal services. Like issuing licenses (e.g. drivers, hunting, fishing, etc.) or contracting with local and state agencies to provide services. Congress should also lift the prohibition on the post office shipping wine and beer.

In offering new services the USPS could learn from post offices in other countries. The French post office offers banking and insurance services. Remember that from 1911 to 1967 the US Post Office successfully and profitably ran a nationwide postal savings bank. The Swedish post office will physically deliver e-mail correspondence to people who are not online.

But before any of this will happen we need to fess up. The postal crisis is contrived. Let’s stop scaring ourselves silly with make believe deficit monsters and unshackle this national asset.


This work is licensed under a Creative Commons License


David Morris

David Morris is Vice President and director of the New Rules Project at the Institute for Local Self-Reliance, which is based in Minneapolis and Washington, D.C. focusing on local economic and social development.