Post Office

After Losing Nearly $4 Billion Last Year, Postal Service on Track to Lose $7 Billion This Year

Revenue and mail volume is basically flat, but the USPS' operating expenses are out of control.

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The U.S. Postal Service lost more than $2 billion during the second quarter of the fiscal year, putting it on track to finish the current year more than $7 billion in the red—way worse than the nearly $4 billion in losses it posted last year.

In its quarterly fiscal report, published today, the Post Office reported small decreases in mail volume and overall revenue compared to the same quarter of 2018. Its big losses are driven by a sharp increase in expenses, primarily workers' compensation costs, pension liabilities, and payments for retirees' health benefits.

For the fiscal year that ended on September 30, 2018, the Postal Service recorded a then-record loss of $3.9 billion. At the time, Postmaster General Megan Brennan bluntly declared that the agency "cannot generate revenue or cut enough costs to pay our bills" and predicted that the agency would continue to post losses at "an accelerating rate."

After losing $1.5 billion in the first quarter of the current fiscal year, the Post Office has now lost $3.6 billion in just six months. That comes even after an increase in the cost of sending first-class mail. The cost of a stamp jumped 10 percent* on January 1, and other mailing services increased by 2.5 percent on average. The agency predicted that those changes would increase revenue by $1.7 billion—but expenses have been outpacing revenues by a wide margin.

It's not exactly news that personnel costs are driving the Postal Service's financial problems. The agency has $100 billion in unfunded pension liabilities and "no clear path to profitability," according to a White House assessment report released last year. The Post Office has lost $69 billion since 2007, and it probably would have gone bankrupt long ago if it were a private entity—FedEx and UPS certainly wouldn't exist today if they were posting annual losses of $4 billion. And they pay taxes, which the Postal Service does not.

As Reason has been arguing for literally 50 years, the postal service should be privatized. It would probably require significant restructuring and service changes for the privatized service to net a profit, and the federal government would likely need to absorb the current debts. That means it will only become more difficult to free the Post Office from government control as the agency's debt mount. Still, it could net a windfall to help pay off the service's massive liabilities—the Cornell economist Richard Geddes has found that a postal IPO could raise $40 billion.

"Privatization would give the [Post Office] the flexibility to save itself, allowing access to debt and equity markets for capital investment—a lifeline for a company that has long been short of cash and deferring the purchase of vital new vehicles and technologies," Chris Edwards, an economist at the Cato Institute, writes in National Review.

Unfortunately, some members of Congress seem more interested in having the Postal Service expand its losing business into new areas. An overhaul of banking and credit card systems floated this week by Sen. Bernie Sanders (I–Vt.) and Rep. Alexandria Ocasio-Cortez (D–N.Y.) would effectively convert the Post Office into a bank of sorts, offering checking and savings accounts.

In other words, it would take a government agency that's already failing to compete with private sector alternatives in the shipping industry (despite massive structural advantages) and let it fail in competition against private banks as well—and would force poorer Americans to rely on that floundering institution as their primary provider of banking services. As Reason's Peter Suderman wrote yesterday, this is "not a new idea, but it is a bad one."

Republicans aren't likely to go for that plan, but fixing the Post Office's problems don't seem to be high on their list of priorities either. The Trump administration included the Post Office in a 2017 report highlighting services that could be privatized, but that survey seems to be mostly gathering dust right now.

The Postal Service, meanwhile, continues to gather debt.

CORRECTION: This article originally stated that the Post Office implemented a 5 percent increase in the price of a First Class stamp in 2019. The increase was from 50 cents to 55 cents, or 10 percent.

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96 responses to “After Losing Nearly $4 Billion Last Year, Postal Service on Track to Lose $7 Billion This Year

  1. Bottom line it for me. How much do we need to charge for a first class stamp to put us in the black?

    1. How much ya got?

      1. That is the government way of doing business. You will take the service we force upon you and pay the price we charge you.

    2. Yeah, I do not mind paying a dollar per stamp and recieving mail only twice per week. The post office needs to stop rellying on the high volume that it will never achieve again. How many stamps does the average voter use in a year anyway?

    3. The Post Office is prohibited by law from operating in the black. The best they can legally do is break even. Most of their loss is probably down to the tons of bulk rate mail you get every day, trying to sell you something, which congress won’t let them raise prices on.

      1. This is another government manufactured crisis. The pension funding issue the biggest problem. The politicians wanted to privatize the post office so large campaign contributors like Fed Ex and UPS could pick off the most lucrative business. I don’t really care if the Post Office is privatized, but depending where you live, like in a isolated rural area, prepare to pay a lot for the delivery of even one letter.

        1. why shouldn’t someone who chooses to live in an isolated rural area pay a lot for delivery?

          1. That is generally my response to such questions. However in this case those rural areas have had the same cost of delivery as every other area forever. Someone who moved into those areas would have had no expectation that this would change.

            As well, FedEx and UPS don’t charge different prices for rural deliveries and ‘city’ deliveries.

          2. And why shouldn’t they? Use a third party vendor to act as receptacle for letters and packages. Those in remote areas can hitch horse to wagon and travel to town to pick up their mail, like the good old days. Or let’s make sure the Country is blanketed with internet access and the need for physical mail disappears . . .

  2. The Postoffice shouldn’t have been written into the Constitution.

    1. It wasn’t.
      To quote in full; “To establish Post Offices and post Roads”
      Says nothing about staffing only with overpaid federal employees. Just like public schools, the source of funding and the source of the employees are distinct.
      Of course, they can turn a profit with the simple change of charging everyone the same amount to deliver a piece of mail. Quit carrying commercial mail at unprofitable rates. Once the junk mail goes away, the payroll, and hence future pensions, can be dramatically reduced.

      1. If I recall correctly, it was also only later that competing post offices were banned.

        1. Lysander Spooner hardest hit.

    2. Its not a requirement for the government to do this, only something it *can* do – and it doesn’t have to do it itself.

      In fact, you could make a great argument that whatever the need for a government-run post office in the past, that need no longer exists and the USG could close down the USPS and sell off its assets to UPS, FedEx, DHL, etc – they already do all that stuff anyway. And they’re self-sufficient at doing it.

      1. By that interpretation, the feds aren’t required to do defense either.

        Odd how much time and effort libertarians spend yapping about ‘savings’ by eliminating the post office when we could eliminate 150 times more by eliminating defense.

        It’s all a bunch of moronic virtue signalling by ‘libertarians’.

        1. Lots of (most?) libertarians are also in favor of privatizing defense. That’s what the militia clauses are all about.

          But if you want to talk about privatizing, we already do defense privatization, it’s called the military industrial complex. The only part of defense not privatized is the staff, everything else is bought from private vendors….. it just so happens that much of what the military needs doesn’t have a large enough civilian market to get economies of scale.

          The old M939 and M1088 series trucks are a good example; we pay about the same for each, even though the M1088 is superior in almost every way…. because it’s essentially a copy of a truck sold widely for commercial shipping with some minor modifications, while the M939s are not.

    3. Actually it wasn’t. The Constitution says the gub’ment has to build post roads. It doesn’t say it has to erect post offices.

      1. No it doesn’t:

        The Congress shall have Power To […]
        To borrow Money on the credit of the United States;
        […]
        To establish Post Offices and post Roads;
        […]
        To declare War
        […]

        There is no duty for Congress to borrow money (why would they if revenues always met or exceeded outlays?), have some war declared somewhere at all times, or create post offices or post roads.

  3. Interesting 1968 article. Completely wrong about the future, but interesting in how people thought computers would be used 10 years later.

    Is a bit puzzling that he’d go straight for picture transmission, text-to-speech and speech-to-text. Why not simply text entry, text display? Why not speech recording and playback? He was way overthinking it.

    1. right. are post office employees even allowed to use email? no fords at the chevy plant.

    2. I’m honestly surprised that this hasn’t been proposed yet.

      1. I vaguely remember it being talked about during the Clinton Presidency.

        1. Its been a bit of an urban myth pretty much since email became a thing. I used to run a Snopes-like column (before Snopes was a thing) for my college newspaper and AFAIK no politician has ever seriously suggested it

          1. An idea that was floated was to charge a tiny amount – less than one cent – to send an email. The point was not to raise revenue but to discourage spam.

            Another scheme was to charge more, but for the money to go to the recipient of the email. The premise was that if you get an email you want you are likely to respond, so the cost washes out.

            I’m not sure either suggestion was all that practical.

  4. Progress!

  5. The post office is obsolete. Someone manufactures paper, delivers it in a truck burning fossil fuels and adding congestion to the roads. I take it and put it into recycling bin for another truck to take it away. The government taxes us for the short fall in the user fees (stamps) another tax for the recycling, another tax for the roads that are used to deliver and take away the stuff I never wanted in the first place.

  6. […] USPS is “on track to finish the current year more than $7 billion in the red,” Reason reported. Hey, who wouldn’t want to deposit all their money […]

  7. I use fedex or UPS.

    The post office is by far the worst most unreliable service.

    Get rid of it.

    1. Both of which often use USPS for the last mile.

      So odds are, you use USPS too.

      1. Well, at least the FedEx and UPS tracking apps can track packages through the USPS system.

        The USPS tracking app can’t even do that.

        Had a delivery recently through USPS (live chickens). According to USPS they sat at the receiving office for three days and then instantly teleported across the country.

        1. Oh, and did you know that there are areas the USPS won’t deliver to (but FedEx/UPS will do so just fine)?

          Before I moved, I lived in a part of town the USPS wouldn’t deliver to. 3/4 of the town they would. Across the street (which was outside of the town – in the county) they would. My section of town – nope.

          Because it takes time for them to update their delivery areas to accommodate new construction. So, 10 years later and they still haven’t accommodated that ‘new construction’ there.

        2. Who cares about a frigging tracking app? That’s your argument against the postal service?

      2. EscherEnigma
        May.10.2019 at 6:09 pm
        “Both of which often use USPS for the last mile.”

        Not in SF they don’t.

      3. And when they do my packages are often delivered to the wrong address. So much so that I now pay extra for UPS or FedEx last-mile shipping whenever I can

        A few weeks ago my mail carrier delivered 3 blocks worth of mail to wrong addresses (every since house got the mail of the house one number higher) I get that this sort of off-by-one error is easy to make, especially if a house doesn’t have any mail that day, but for 3 blocks? He never looked at the address of the mail he was delivering even once? And this isn’t an isolated incident, its a pattern of poor service that goes back years on my route

        1. One thing I’ve noticed, and been told by the guys at my local PO that I know, is that they’re using a lot more temp type employees… When I first moved to my house, I had the same post man for like 7 or so years, and I don’t even know how long he had this route before I moved here. The last few years I’ve literally been getting multiple people in the same week a lot of the time. So they just don’t know the route and are n00bs in general.

          I was told this kind of stuff is essentially cost cutting measures of using non full time people or whatever to skate on some of the benefits. Overall the USPS isn’t TOO bad, but almost every problem I have is the incompetence of the actual post man, which didn’t used to be an issue.

  8. Now would be a good time to privatize the USPS.

    1. One problem with trying to privatize the USPS is the legacy labor contracts, which guarantee that postal workers will be vastly overpaid, get very generous retirement benefits, and can never be fired for even the most egregious incompetence. No investor in his right mind will agree to take over the USPS unless: (a) he could immediately terminate those union contracts, and (b) the Federal Government fully funds ERISA-compliant trust funds to pay all accrued pension and employee retirement benefits (about a $100 Billion hit, since the Federal Government has never complied with ERISA’s funding requirements for any of its retiree obligations). And the Postal Workers Union and its paid-for Democratic politicians will never let that happen.

  9. […] USPS is “on track to finish the current year more than $7 billion in the red,” Reason reported. Hey, who wouldn’t want to deposit all their money […]

  10. Any article about the Post Office’s fiscal issues that doesn’t mention the Postal Accountability and Enhancement Act (2006) isn’t telling you the whole story.

    1. Why? It’s not the USPS is making the payments they are required to make under that law anyway?

      [https://about.usps.com/news/national-releases/2017/pr17_069.htm]

      Similar to the last several years, the Postal Service was unable to make any of the payments that were due to the federal government at the end of the fiscal year, which amounted to approximately $6.9 billion in 2017, to pre-fund pension and health benefits for postal retirees.

      “Making the payments to the federal government in full or in part would have left the Postal Service with insufficient liquidity to ensure that we will be able to cover our current and anticipated operating costs, make necessary capital investments, and absorb any contingencies or changes in the marketplace,” said Chief Financial Officer and Executive Vice President Joseph Corbett. “We will continue to prioritize the maintenance of adequate liquidity to ensure the Postal Service is able to perform our primary mission of providing universal service to all Americans.”

  11. Of all the government boondoggles that piss away my tax money, the post office is the only one that’s useful in my daily life. I’d just as soon keep it, since I’m still going to be stuck paying for the agencies that are not only useless to me but actually hostile.

    1. You don’t think a privatized post office would provide better service, cheaper?

      That’s some statist faith ya got there!

      1. Will the privatized service drop off and pick up mail at a box in front of my house 6 days a week and hold my items in their office free of charge for a month while I’m on vacation?

        What will the new service charge to ship an envelope picked up at my house?

        1. I don’t know, but I’m tired of paying for your service.
          Pay for your service or don’t get it.

          1. If you can fix it so I don’t have to pay for stuff I don’t use or want, you’re on. But you can’t and I can’t, so here we are.

  12. With their track record, I see why Bernie wants them to serve as a bank for low income folks.

  13. Not sure rural America would appreciate you closing down the damn near only biz operating in their towns.

    1. I’ve seen a steady trickle of post offices for sale on the GSA auction site over the years.

      1. The whole operation just seems like something from and for another time before phones and computers.

    2. “Not sure rural America would appreciate you closing down the damn near only biz operating in their towns.”

      Lame.

      1. What do you know about it city slicker? I drive through small towns all the time and can’t help but notice all the post offices. Plus my grandfather’s best friend was a post master. Those guys are big shots in the rural areas because they can hire people. Those small towns are dependent on big govt. Whether it’s farm subsidies, USDA buildings, game wardens, parks, prisons, roads and bridges that aren’t justified and paid for by the local tax base, federal jobs. It’s really ironic the way politics works out some times. There is a cognitive dissonance at play and it’s probably the reason nothing really ever changes when Republicans do govern.

        1. big government equals post office, prisons, roads, and farming?

          wow: sounds like communism.

        2. First, I doubt most people in rural America (where I’ve lived almost my whole life) can name their post Master anymore. And rural post offices are closing left and right. They’re usually among the first places cut when the USPS closes offices.
          Secondly, if you count just federal taxes as what you get from rural America, you’re a myopic idiot. We provide the food you eat, the lumber you build with, the gas in your car, the electricity you use to post drivel on the internet with. Fuck you’re an idiot. If you’re an example of ordinary, I’ll gladly claim not to be ordinary.

          1. It is kind of funny/sad have basically everything ACTUALLY required for life is produced in rural areas… But the value of those goods/services have somehow become super devalued, and nearly useless and superfluous things done in the big city now pay better money than the stuff we actually need.

        3. And roads and bridges that aren’t justified? How do you think goods get across the country? Travelling on roads through rural America.

        4. “What do you know about it city slicker?”

          Well, I have lived in small towns for most of my life. So I have some personal experience.

          “I drive through small towns all the time and can’t help but notice all the post offices.”

          Name these small towns — hell, just ONE of them — with a large post office. The local post office usually matches the size of the town it services.

          “Plus my grandfather’s best friend was a post master. Those guys are big shots in the rural areas because they can hire people.”

          Well, proof provided. Your grandfather’s best friend — no further proof needed.

          “Those small towns are dependent on big govt. Whether it’s farm subsidies, USDA buildings, game wardens, parks, prisons, roads and bridges that aren’t justified and paid for by the local tax base, federal jobs.”

          Just one town where what you’re describing is the reality. Just one.

          “There is a cognitive dissonance at play and it’s probably the reason nothing really ever changes when Republicans do govern.”

          Well, the economy is doing well in ways that were considered impossible under Obama…so, yeah, you got a point.

          :rolleyes:

          1. As with most big cities (Detroit, other midwest cities, etc) that have lost their economic purpose for existing, small towns that aren’t producing something useful economically are shrinking/right sizing themselves. I know of a number of towns/cities in Washington state where I live that are slowly bleeding population, because the industries that sustained them have dried up, often times because of government regulation. But there are others that have strong private sector employment and are growing.

            Things work themselves out. Due to the fact that people form attachments to places, AND retired people have money coming in from outside the local area, the shrinking doesn’t always happen immediately when an industry dies… But it does happen over time. You’d be hard pressed to find any town that doesn’t do something useful there in the private sector to give it a reason to exist.

    3. Can you cite these locales where the ONLY business operating in town is the Post Office?

      Most towns that small would barely even have a post office, mind you.

  14. It would probably require significant restructuring and service changes

    Would they have to get rid of those trucks that are made by a canoe company?

  15. Yeah, given the success of UPS and FedEx and now even ride-sharing companies getting into package delivery, privatizing USPS should be the easiest thing in the world.

    Of course I thought the same thing about privatizing PBS once Cable/Satellite TV really took off…

    1. It’s unfortunately quite difficult to get folks to agree to a cut. Particularly budget barely matters to most people.

    2. PBS — where thousands work so dozens can watch.

      Hell, Sesame Street is on HBO. Why do we need PBS?

      1. For the commie propaganda of course!

  16. “An overhaul of banking and credit card systems floated this week by Sen. Bernie Sanders (I–Vt.) and Rep. Alexandria Ocasio-Cortez (D–N.Y.) would effectively convert the Post Office into a bank of sorts, offering checking and savings accounts.”

    Corruption *AND* a money-losing operation! I know where I want my money.

    1. With those two running the banks and Warren running the software companies, the economy will be humming in no time.

  17. Oh and fix the potholes and traffic on route 39.

  18. They lose money because they’re mandated to continue service in rural areas and other places of little need unlike FedEx and UPS. Only morons like this writer would think privatizing would solve it all- they simply have to cover more ground for NO MORE MONEY as their budget is continually cut.

    Guarantee FedEx and UPS would be in the same hole if they had to service every single place in the US every day too.

    AOC may have been right about something- Republicans want to take the battery out of the car, pretend it doesn’t work, then sell it off for parts.

    1. I blame poor management and generous benefits and questionable hiring practices.

    2. AOC wants to scrap the car, give you a tricycle and pretend she’s saving the environment.

    3. I’ve seen plenty of UPS trucks in remote areas 50 miles from the nearest town – ANY town. UPS would be broke if their employees all got to retire at 55 with full benefits.

      1. Yeah I’ve seen those trucks hauling ass in the backest of the back roads and I was surprised.

  19. Yeah, but just wait til they start making low interest unsecured loans to people without bank accounts, as Crazy Bernie and idea factory AOC demand. Then the cash will roll in.

  20. A discussion of Post Office privatization is a great way to generate self-identification of hopeless losers who will never be relevant to worthwhile political debate in the United States.

    Next rousing argument: Stop signs, traffic lights, and public roads.

    Carry on, clingers, malcontents, and inconsequential chuckleheads.

  21. UPS and FedEx get to decide what they’ll deliver. Notice you don’t get bulk main and advertising from them. If the P.O. could either drop that stuff or charge what it actually takes to deliver it, they’d be in much better shape. Unfortunately, the bulk mailers have more pull with Congress than the Post Office does.

    1. I’m sure if someone wanted to pay Fedex or UPS rates to send you advertising, UPS and Fedex would be happy to carry it. They are “chosing” by pricing. If USPS charged $15 for every piece of advertising…but Congress won’t let them. OTOH, as I understand it, it is the bulk mail that makes money at the USPS, that and being the last-mile for Amazon.

  22. It wasn’t.
    To quote in full; “To establish Post Offices and post Roads”
    Says nothing about staffing only with overpaid federal employees. Just like public schools, the source of funding and the source of the employees are distinct.
    Packers and Movers in Chandigarh
    Of course, they can turn a profit with the simple change of charging everyone the same amount to deliver a piece of mail. Quit carrying commercial mail at unprofitable rates. Once the junk mail goes away, the payroll, and hence future pensions, can be dramatically reduced.

  23. If, when we give a bank a deposit, the money is the banks and the bank merely promises that we can have it back at a later date with some interest paid on the deposit.. …any USPS bank could use our deposits to pay down debt or fund liabilities? No? Another bad Bernie brain fart.

  24. When Am*z*n uses the USPS they can never find my house and then return the package to sender. UPS and Fedex, no problems. The reason? I don’t have a mailbox so the USPS can’t find the house, swear to g*d that’s what the USPS told me…

    1. Why the hell don’t you have a mailbox??? Where do letters/bills etc get put? They’re like $20 bucks at Home Depot, just buy one.

  25. The problem is not that the postal service is not private, it is the long term meddling by legislators affecting operations rather than just providing oversight. From the 10-Q:

    Market-Dominant services, which accounted for approximately 67% of the Postal Service’s annual operating
    revenue in 2018, are currently subject to a price cap as measured by the Consumer Price Index for All Urban
    Consumers (“CPI-U”). However, the Postal Service’s costs are not similarly constrained. A large portion of its cost
    structure cannot be altered expeditiously due to the Postal Service’s universal service obligation, which currently
    includes a legal requirement to deliver mail six days per week, while the number of delivery points continues to
    grow by approximately one million per year, further driving up delivery costs. As described above, certain employee
    and retiree benefit costs are mandated by law and cannot be altered without legislative change. Under current law,
    the Postal Service is generally unable to increase prices sufficiently to offset increased costs, and is likewise
    constrained by law from reducing many of its costs or from pursuing many alternate sources of revenue.

    They also contribute between 6 and 13% pts more than employees to the retirement plans.

  26. Only if the right to vote is restricted to net tax payers, active military and veterans would there be a chance for improvement at the post office, or for that matter schools, among other government operations.

  27. Is this the same Post Office that Elizabeth Warren wants to turn into a government owned bank?

  28. The USPS is generally pretty reliable in my community as far as service to and from my house and business. Service at the Post Office branches is less satisfying and I am glad I rarely need to go to the Post Office. I’ve read that the USPS feels it’s unfair that they have to pre-fund 100% of their future health care liabilities, unlike private sector companies. Even if that’s a valid point, I’m sure the USPS could reduce their operating expenses – although $7 billion is a big gap to fill.

  29. “Its big losses are driven by a sharp increase in expenses, primarily workers’ compensation costs, pension liabilities, and payments for retirees’ health benefits.”

    Ponzi scheme. Promise retirement benefits to government workers now, and put the taxpayers of the future on the hook for those benefits.

  30. I’ve used the USPS for my business for around 20 years. Why? Because they have the lowest prices, and usually faster service than UPS/FedEx at the price point. Priority Mail and First Class packages kicks the shit out of private services basically 100% of the time for small packages.

    Really, they just need to be able to adjust their pricing without meddling, and they’d be fine. I’m not opposed morally to fee for service government operations, as it is willing buyer willing seller, and I DO think at least in theory sometimes the government can fill needs in a decent way when private business might not care as much. In this case that would be rural delivery etc.

    That said, in order for it to be morally acceptable there should be no monopoly granted like the USPS currently has on letters etc. There should also not be other laws designed to hobble their private competitors.

    I say get rid of such laws, open them up to competition, allow them free reign in pricing their products and in hiring practices… And if they can still compete and stay break even or profitable, so be it. If not, so be that too.

  31. Please make the necessary reforms, no more subsidies. There is no mail I receive that could not be delivered electronically. But as Joe Biden once said, ‘we can’t end the USPS because seniors look forward to their junk mail’, really? Well, that junk mail has become too expensive to subsidize. Charge $2 a letter if necessary, invite competition, close physical post offices and outsource services to third parties, reduce deliveries to two days a week, reform, reform reform. Ask yourself, ‘what would Amazon do?’

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