The U.S. Postal Service (USPS) lost nearly $2 billion in 2018. But that eye-popping number does not capture the full picture. The agency failed to pay $2 billion into its employees’ health care fund, so its real loss this year is $4 billion.
This is not good. Congress designed the Postal Service to be a self-funding entity. Despite having to go through the appropriations process, USPS does not live off taxpayer dollars.
How did the Postal Service find itself perennially running losses? The answer is simple: USPS revenue is too low and its costs are too high.
In the past decade, mail volume has declined 30 percent. Today, despite postage price increases and a huge rise in the number of packages USPS is carrying, the Postal Service’s revenues are the same as they were in 2005: about $70 billion per year. That makes it hard to cover operating costs, to say nothing of turning a profit and paying down unfunded obligations.
The decline in mail volume is not hard to understand: Big companies are sending less paper mail and are using other means to communicate with customers. The public used to get all its bills via first class mail and pay them via first class mail, and the Postal Service made money on the postage coming and going. Now, consumers get nearly all their bills online and pay them that way. Magazines, which once made up a big portion of the mail stream, are fewer, as consumers get their news and indulge their cat fancies online.
Meanwhile, the Postal Service’s operating costs feel continuous upward pressure. A growing U.S. population means mail carriers must schlep to more homes and businesses each year. Congress — and rural legislators in particular — continue to demand the postman deliver six days per week. And every four years, the various Postal Service unions bargain for higher compensation for their members.
One good bit of news is that the Postal Service presently is not in danger of shutting down due to a cash crunch. The agency has a little more than $10 billion in cash.
But this good news comes with big, bad asterisk: One reason USPS has so much cash on hand is that it is not putting sufficient cash toward reducing its debts. USPS owes $15 billion to the Treasury and has another $100+ billion in unfunded pension and retiree health care obligations. Unless USPS starts paying down these obligations, they will keep growing.
This slow-moving fiscal crisis could leave USPS workers getting less than they were promised. And in the end, the Postal Service may require a taxpayer bailout.
To date, Congress has refused to make hard choices. This is understandable: Congressmen feel that virtually every significant reform would negatively affect one stakeholder or another. Mailers do not want to pay more. Rural citizens do not want to see fewer days of mail delivery. Postal unions do not want to see USPS hire nonunion labor. And some members of the public grouse when post offices close, even if they themselves seldom visit them. Postal reform is hard because the politics is hard.
But Congress needs to do something. USPS cannot fix itself. The numbers are what they are. We are in the digital age, and the Postal Service we need today is not the Postal Service of the pre-internet era. Continuing to do nothing now ensures that we’ll face a more dire and costly USPS crisis in the future.
Kevin R. Kosar (@kevinrkosar) is the vice president of policy at the nonprofit R Street Institute. He has studied postal policy and politics since 2003.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.
