The Post Office Is on Pace for Its Worst Year since 2012 Default
The United States Postal Service on Friday reported total revenue of just over $17 billion for the third quarter of fiscal year 2019. Total operating expenses came in at $19.3 billion.
Through three quarters, the $5.9 billion in losses already exceeds annual losses for the previous six years and puts USPS on track to exceed $7 billion in losses for the first time since 2012.
In that year, the Post Office defaulted on two payments totaling $11.1 billion, prompting Postmaster General Patrick Donahoe to call on members of Congress to pass comprehensive legislation to put the USPS on sounder financial footing.
Subsequent legislation that restructured employee retirement plans and mandated a defined contribution plan for future Post Office employees curbed losses. Nonetheless, the Post Office remained in the red, posting $27.6 billion in total losses over the past six years.
Since 2007, USPS losses have totaled more than $70 billion.
How Did This Happen?
The Post Office, like any organization, has faced its share of obstacles. These include falling demand for mail delivery, high employee costs, and surging benefits. Its most popular product, first-class mail, has plunged 45 percent since 2000.
Yet, the Post Office also has advantages, as Chris Edwards of the Cato Institute has pointed out. It has a legal monopoly and, as a government entity, pays no taxes. (FedEx, on the other hand, paid more than $10 billion in taxes between fiscal years 2013 – 2017.)
Last year, a Trump administration task force concluded that the business model “is unsustainable and must be fundamentally changed if the USPS is to avoid a financial collapse and a taxpayer-funded bailout.”
Nothing short of privatization is likely to save the Post Office. This is precisely what Edwards advocated in testimony before Congress earlier this year.
“Privatization would give the USPS the flexibility to save itself, allowing access to debt and equity markets for capital investment—a lifeline for a company that has long been short of cash and deferring the purchase of vital new vehicles and technologies,” Edwards said.
In the absence of such reform, expect the Post Office to keep racking up the losses.
This article appeared at FEE.org at: https://fee.org/articles/the-post-office-lost-6-billion-already-in-2019-and-is-on-pace-for-its-worst-year-since-its-2012-default/