The United States Postal Service (USPS) announced losses for January that exceeded $1 billion, while total losses for this year are already over $2 billion. Losses rise despite recent reform efforts to stop financial hemorrhaging. The public is left wondering how the USPS fails to stem the tide, while insights into the Postal Service’s finances remain undisclosed. The lack of transparency leaves consumers in the dark as they speculate on the causes of rising costs.
Losses for January were over twice as high as the USPS predicted. If the current rate of loss continues, the company could be on pace to beat its net losses for 2022 of $4.9 billion. Since 2007, the USPS has netted losses of over $80 billion, with 2006 being the last year with a positive net expenditure. After 15 years of mounting consecutive annual net losses, Congress has needed to step in to alleviate the company.
In March 2020, Congress authorized $10 billion in funding to the USPS after warnings that the company may have to cease operations due to a depleted treasury. By April 2021, these funds had nearly been exhausted, with only $1.4 billion of the original amount remaining.
Congress responded to this depletion in May with the introduction of the Postal Service Reform Act, which eliminated $107 billion of prefunded liabilities and payments — functionally moving those costs onto the backs of the taxpayer as the USPS was not profitable enough to meet its obligations.
Along with these bailouts, then-President Donald Trump inaugurated Louis DeJoy as the newest Postmaster General. DeJoy introduced his Deliver for America plan, which aimed to make the Postal Service financially sustainable through a 10-year plan. Part of that plan included shifting the company’s focus from letter delivery toward packaging. This shift towards competitive package delivery markets has occurred for years, with Deliver for America being the most recent effort.
Some observers have noted that competitive services cover only a small portion of fixed and institutional overheads while making up a larger amount of total revenues. In 2019, revenues from competitive shipping services were 32 percent, while their coverage of fixed and institutional overheads remained at 8.8%.
These peculiarities have prompted speculation that the USPS may be shifting costs away from its competitive packaging services to a service in which it has a legal monopoly: letter delivery. For consumers, this would mean a rise in costs associated with products that lack market alternatives and a decrease in costs for products that already have a competitive market. Such changes are being seen in the Postal Service’s 2023 Postage Price Changes.
While the Postal Service has claimed that competitive cost coverage for FY2019 exceeded the 8.8% threshold, a lack of financial insight on the part of the public prevents definitive answers from being made.
Consumers and taxpayers are left in the dark as losses mount and prices for mail continue to climb. To dispel speculation, Congress would only need to open the books on the Postal Service’s competitive services. From there, an analysis can be made of where the failures to balance the budget stem from. For the USPS, this would also provide an opportunity to address accusations of cost-shifting.