The United States Postal Service (USPS) is the agency in the American government responsible for delivering mail to its citizens. This independent agency has maintained a rather robust financial outlook throughout the years. Up until 2006, the organization was entirely debt free and even managed to generate a surplus $6 billion dollars between 2001 and 2006.
Things could not have been running any more smoothly.
A Government Agency Actually Doing Well? Hah, Not On My Watch
In 2006, an agency formed by Congress called the Postal Regulatory Commission passed a mandate requiring the postal service to pre-pay more than 50 years worth of retiree health benefits. They also had to front-load the fund over the next decade with more than $50 billion.
This asinine business model, which is hilariously not used in any other part of the very same government that imposed it, massively burdened the organization. Most companies employ a “pay-as-you-go” model meaning the funds are drawn on an on-demand basis. This allows them to use any available cash for the purposes of growth and expansion.
Ever since this 2006 mandate, the USPS has posted massive annual losses.
Why This Is Bad For Taxpayers
President Donald Trump claims that companies like Amazon and UPS are ripping off the postal service. While it is true that the American taxpayer is subsidizing delivery costs for companies like Amazon, it is actually the USPS that demanded this situation, not Amazon.
You see, the postal service is required to service most residential addresses in the country. Whether you’re in the middle of the desert or in the mountains of Montana, you are guaranteed to receive mail. As it turns out, guaranteeing mail to every doorstep in the country isn’t very practical. It’s actually so prohibitively expensive that no other mail courier does it.
With that in mind, consider the following:
- USPS is required by law to provide an uneconomical and unsustainable service
- USPS is hemorrhaging money and needs all the business it can get
The USPS did the only thing they could do and rented out their last mile delivery service. They are required to do that route, right? Why not deliver some UPS or FedEx packages along the way? Both the postal service and the private companies benefit from the relationship. The real blame rests with the government for creating this Frankenstein entity in the first place.
The End Is Near
It’s not unusual for government services to lose money. Look at something like public transportation: the goal isn’t to turn a profit. It’s to better the country and provide citizens with an affordable way of transportation. It makes sense to have some economically unsustainable components to your operations if you’re funded by taxpayers and exist solely to serve the greater good.
The problem with this approach is that the USPS is not taxpayer funded. Even though they are allowed to borrow money from the treasury (which is why taxpayers will ultimately foot the bill if the debt isn’t repaid), the agency is almost entirely self-funded. Just like a private company, their earnings come from competing in the private sector and offering mailing services.
Why Immediate Action Is Necessary
The postal service is seemingly locked into a downward spiral with little hope for resolve. Congress has no apparent interest in reforming current laws and the postal service can’t move forward otherwise. Meanwhile, the organization continues to lose their competitive edge in the private sector as they increase postage rates, decrease service, and reduce their workforce in a capacity which is not consistent with market trends in the shipping industry.
This poses a problem because competing countries like China do not neglect their national postal service. In fact, the Chinese government subsidizes shipping costs which helps to keep exports high and bolster their economy. With such massive neglect taking place in the United States, American exporters are unable to remain competitive in the global market and are forced to move their operations to more accommodating countries instead.
China has responded to this by welcoming American exporters with open arms. Many notable American retailers are now warehousing and shipping their orders directly from China. While this is great for the bottom line of American retailers, the end result is that the money is now removed from the American economy. To make matters even worse, inventory warehoused overseas is not subject to the same import tariffs. It’s a lose-lose for the US government.
Postal officials have remained optimistic about the future of the USPS assuming the 2006 mandate is eventually reformed. It remains unclear how much longer the stalemate will continue; however, each passing day only makes it more certain that the debt will never be repaid. Hopefully the big-wigs in Congress can pull it together and rescue this otherwise commendable agency.