The Impending Implosion of the Postal Service

Posted: Oct 12, 2013 3:32 PM

It's no secret that the United States Postal Service is in trouble. They've officially lost billions of dollars every year since 2007, and 2012 was a record year for operating losses. In that time period, the USPS has lost $45 billion. The future isn't bright, either: the GAO projects that mail volume will never recover to pre-2007 levels, even with gains produced from commercial mail. (Commercial mail is what you know as junk mail - coupon books and the like that companies pay the USPS to deliver to your mailbox.)

Progressive supporters of the federal government's operation of the USPS and the maintenance of the USPS as a legal monopoly like to point out that, since 2006, the USPS has been forced by congressional mandate to "pre-fund" its retirement benefits - a standard that isn't fair to the USPS' accounting. While there are good reasons to require the USPS to start to pre-fund its retirement benefits, that's not the main reason that the agency is deep in the red.

A new report from the Heritage Foundation points out that the self-sufficiency of the USPS is completely gone and will never return. Even if the USPS wasn't subject to the pre-fund requirement, they would still be running multi-billion dollar deficits every single year:

As the Heritage Foundation reports:

Moreover, even without the pre-funding payments, the USPS still would have lost over $1 billion since FY 2010, a sizable sum by any measure. The roots of the postal crisis go far deeper than pension-fund pre-funding.

The real problem facing the Postal Service is a sustained, steep, and stark drop in demand. With the relentless rise of digital communications, Americans simply are not mailing things as often as they used to. The numbers tell the tale: Mail volume—which peaked in 2006 at 213 billion pieces of mail— totaled less than 160 billion in FY 2012, a 25 percent drop, The reduction in first-class mail volume, the USPS’s biggest source of revenue, has been more dramatic. From a high of 103 billion pieces in 2000, first-class volume has dropped by a third, to fewer than 69 billion in 2012.

The Postal Service's problems go deep. Very deep. There are a few different paths to reform - privatization and corporatization - but the status quo is simply not working. It's not due to pre-funding obligations. The fundamental structure of the USPS is unsustainable.

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