The Impending Implosion of the Postal Service

By: Kevin Glass

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.)

POSTOFFICE_small The Impending Implosion of the Postal Service

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:

10 The Impending Implosion of the Postal Service

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.