Why postal service is losing money

For starters, there is no reason the post office should make money. It is essentially a federal agency with a universal service mandate.

It costs the same to mail a letter to rural America as it does within densely populated cities, but publicly traded logistics companies charge more for deliveries to areas off the beaten track.

Congress, for instance, rolled back a 2-cent stamp-price increase in because lawmakers decided the Postal Service had recaptured the sales declines associated with the financial crisis. The price of a stamp is a political issue. A third critical factor is that around , lawmakers imposed new expenses on the USPS, in part because it was too profitable.

Finally, blame the internet: Mail volumes are falling. Growth helps any business absorb fixed costs and allows management to bring in new, lower-priced labor to help offset legacy liabilities.

The USPS loses money, but cash flow has been more stable. That is because as mentioned above, the USPS has some unusual expenses, imposed by Congress, that artificially depress earnings. The requirement hit cash flow until the post office could deal with the expense no longer. Now the Postal Service just records the cost on its books, cutting into the bottom line, but without setting aside any cash.

Congress required the Postal Service to prefund its health-care obligations. No other company has to do that, though companies have to prefund pension liabilities, a requirement that became part of the law in the s. Companies put money into a trust that can continue to pay retirees even if the business goes under. Corporate health-care benefits are paid as they are incurred.

Congress, essentially, decided that the USPS should go a step beyond what corporations do, taking some of its profits and using them to prefund health care as if it was a pension. Employees, of course, deserve health care. The issue boils down to how the USPS will pay those benefits—as they are incurred, or out of a huge trust built up very quickly by Congressional mandate. For one, unlike other government agencies, the USPS is not allowed to receive taxpayer funding, and instead must rely on revenue from stamps and package deliveries to support itself.

On time delivery of first-class mail, which contains ballots, plummets. Instead, Congress sets the postage rate and stipulates that the postal service delivers to all homes in America-- including a remote community in the Grand Canyon, where the mail is delivered by mule. These unique rules help preserve the USPS as a public service, rather than a business. There's no substitute for the Postal Service for much of the country. Still, this combination makes for a difficult model: the USPS is subject to congressional oversight of other federal agencies, but does not get any taxpayer revenue; it competes with private courier services like a profit-seeking company, but cannot set its own agenda.

A law makes the USPS' problems worse. Despite these unique requirements, the USPS continued to net positive cash flows, and was actually profitable until -- at which point Congress passed the Postal Accountability and Enhancement Act during a lame-duck session.

Under this law, the USPS was required to pre-fund 75 years worth of retiree health care benefits in the span of roughly 10 years. Still, those delayed payments still count as an expense -- meaning that regardless of the agency's financial successes over the last few years, its balance sheets will continue to report enormous losses. The Postal Service's debt "is a direct result of the mandate that it must Some policymakers see a chance for reform without resorting to the controversial cost-cutting measures from Postmaster General Louis DeJoy.

For perspective, USPS hired 40, employees in ; 38, employees in ; and 26, employees in , according to Freedom of Information Act requests filed by our auditors at OpenTheBooks. In fact, the postmaster general out-earns actual U.

DeJoy and Brennan have plenty of company. Nearly employees have been on the job for at least 50 years; 8, for at least 40 years; 76, for at least 30 years; and , for at least 20 years. Post Office defenders might suggest that the USPS could lean on its stable of veteran workers to help generate best-in-class ideas to help balance the books. In , the executive suite tried this. A post office spokesperson responded to our comment request and provided additional clarification. The law allows Mr.

Uluski to receive his Postal Service pension while at the same time receiving a federal salary—with limits, as the document identifies.

In order to survive, the USPS must pick a lane: Is the organization going to operate like a private company or a government agency?