Why the US Postal Service is in deep financial trouble

It's no secret that the US Postal Service has been losing money for a long time, but that's not entirely its fault. Here are the real reasons it's in the red.

Posted: Oct 6, 2020 7:10 PM
Updated: Oct 6, 2020 7:11 PM

Even by 2020 standards, the United States Postal Service is having a terrible year. With election day less than a month away, concerns are mounting that the USPS lacks the bandwidth to process the likely historic number of mail-in ballots.

But, paradoxically, business for the USPS is booming. The agency netted a positive cash flow of almost $2 billion in the nine months ending June 30. The agency has been cash-flow-positive for the last three years, partly because of increased package deliveries and steady rates of first-class mail delivery.

How is it, then, that the country's most popular federal agency is earning millions of dollars, while also facing one of the greatest financial crises in its history? The answer to the USPS financial oddities can be traced back to a single source: Congress.

The USPS is not like other government agencies

Established in 1775 to promote the free exchange of ideas across the colonies, the United States Postal Service is among the country's oldest government institutions -- and yet it operates with few of the financial benefits of being a federal agency, while still bearing many of the costs.

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.

And unlike private courier services such as UPS and FedEx, the USPS does not get to set its own prices or excise unprofitable routes. 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.

"UPS and FedEx depend on the Postal Service to go where they don't want to go," said Oregon Representative Peter DeFazio, author of a USPS reform bill. "If you wanted to run it as a business, you'd eliminate the least profitable routes, you'd cut out all of rural routes. 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 2006 law makes the USPS' problems worse

Despite these unique requirements, the USPS continued to net positive cash flows, and was actually profitable until 2006 -- 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.

"There's no other entity on Earth that does anything like that," DeFazio said. "When I talk about it, people say it's utterly absurd."

So far, the USPS has paid $20.9 billion but it's also deferred on some $47.2 billion as of September 2019. 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 ... pre-fund the retiree health plan," the USPS Inspector General wrote in 2015.

Some policymakers see a chance for reform without resorting to the controversial cost-cutting measures from Postmaster General Louis DeJoy. One such solution is a proposed bill from DeFazio that would eliminate the retirement pre-funding requirement.

Others object to the very idea of the USPS funding itself with its own revenue.

"We don't tell [the Department of Defense] to go sell weapons to make revenue to serve the American people," California Representative Ro Khanna said. "We don't say that about our health service, or the National Institute of Health. So why should we have a different standard for the postal service?"

-- Chris Isidore contributed to this report

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 314710

Reported Deaths: 7254
CountyCasesDeaths
DeSoto21646260
Hinds20369416
Harrison17949309
Rankin13643278
Jackson13450246
Madison10113217
Lee9986174
Jones8384163
Forrest7689152
Lauderdale7198240
Lowndes6403148
Lamar623686
Lafayette6203119
Washington5341134
Bolivar4802132
Oktibbeha462998
Panola4596107
Pearl River4519146
Marshall4450103
Warren4393121
Pontotoc420872
Monroe4115133
Union411176
Neshoba4031176
Lincoln3969110
Hancock379586
Leflore3498125
Sunflower336290
Tate334784
Pike3327105
Scott316274
Alcorn313368
Yazoo311770
Itawamba300577
Copiah297465
Coahoma295579
Simpson295388
Tippah288768
Adams286982
Prentiss280060
Marion269380
Leake268473
Wayne262841
Grenada261587
Covington259881
George248148
Newton246862
Winston227581
Tishomingo227067
Jasper221148
Attala214473
Chickasaw208057
Holmes189174
Clay185554
Stone182833
Tallahatchie178941
Clarke178080
Calhoun170932
Yalobusha164638
Smith162534
Walthall134245
Greene130633
Lawrence128724
Montgomery127142
Noxubee126734
Perry126338
Amite123142
Carroll121829
Webster114532
Jefferson Davis107133
Tunica105726
Claiborne102430
Benton100025
Humphreys96733
Kemper95828
Franklin83923
Quitman81116
Choctaw76418
Wilkinson67531
Jefferson65728
Sharkey50217
Issaquena1686
Unassigned00

Alabama Coronavirus Cases

Cases: 537813

Reported Deaths: 11024
CountyCasesDeaths
Jefferson791691529
Mobile41177808
Madison35002507
Tuscaloosa25871454
Shelby25076249
Montgomery24549591
Baldwin21290309
Lee15946171
Calhoun14556319
Morgan14364280
Etowah13890353
Marshall12262223
Houston10602282
Elmore10115206
Limestone10031151
St. Clair9890245
Cullman9730194
Lauderdale9449243
DeKalb8853188
Talladega8325176
Walker7259277
Autauga6971108
Jackson6830112
Blount6750139
Colbert6317134
Coffee5546119
Dale4869113
Russell444338
Chilton4343113
Franklin426282
Covington4138118
Tallapoosa4040152
Escambia394577
Chambers3581123
Dallas3564153
Clarke351361
Marion3137101
Pike311977
Lawrence302298
Winston275673
Bibb263064
Geneva252577
Marengo249664
Pickens234862
Barbour231956
Hale223677
Butler217869
Fayette212462
Henry189644
Cherokee184345
Randolph182042
Monroe178140
Washington167639
Macon160750
Clay156957
Crenshaw153357
Cleburne149241
Lamar143035
Lowndes139653
Wilcox127430
Bullock123041
Conecuh110629
Coosa108928
Perry107826
Sumter104932
Greene92634
Choctaw61024
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