About the U.S. Postal Service

A Very "Business-like" Semi-governmental Agency

US Postal Service letter carrier decked out for Independence Day
US Postal Carriers. Dorann Weber / Getty Images

Early History of the U.S. Postal Service

The United States Postal Service first began moving the mail on July 26, 1775, when the Second Continental Congress named Benjamin Franklin as the nation's first Postmaster General. In accepting the position, Franklin dedicated his efforts to fulfilling George Washington's vision. Washington, who championed a free flow of information between citizens and their government as a cornerstone of freedom, often spoke of a nation bound together by a system of postal roads and post offices.

Publisher William Goddard (1740-1817) first suggested the idea of an organized U.S. postal service in 1774, as a way to pass the latest news past the prying eyes of colonial British postal inspectors.

Goddard formally proposed a postal service to Congress nearly two years before the adoption of the Declaration of Independence. Congress took no action on Goddard's plan until after the battles of Lexington and Concord in the spring of 1775. On July 16, 1775, with revolution brewing, Congress enacted the "Constitutional Post" as a way to ensure communication between the general populace and the patriots preparing to fight for America's independence. Goddard was reported to have been deeply disappointed when Congress chose Franklin as Postmaster General.

The Postal Act of 1792 further defined the role of the Postal Service. Under the act, newspapers were allowed in the mail at low rates to promote the spread of information across the states. To ensure the sanctity and privacy of the mails, postal officials were forbidden to open any letters in their charge unless they were determined to be undeliverable.

The Post Office Department issued its first postage stamps on July 1, 1847. Previously, letters were taken to a Post Office, where the postmaster would note the postage in the upper right corner. The postage rate was based on the number of sheets in the letter and the distance it would travel. Postage could be paid in advance by the writer, collected from the addressee on delivery, or paid partially in advance and partially upon delivery.

For a complete history of the early Postal Service, visit the USPS Postal History website.

The Modern Postal Service: Agency or Business?

Until the adoption of the Postal Reorganization Act of 1970, the U.S. Postal Service functioned as a regular, tax-supported, agency of the federal government.

According to the laws under which it now operates, the U.S. Postal Service is a semi-independent federal agency, mandated to be revenue-neutral. That is, it is supposed to break even, not make a profit.

In 1982, U.S. postage stamps became "postal products," rather than a form of taxation. Since then, the bulk of the cost of operating the postal system has been paid for by customers through the sale of "postal products" and services rather than taxes.

Each class of mail is also expected to cover its share of the costs, a requirement that causes the percentage rate adjustments to vary in different classes of mail, according to the costs associated with the processing and delivery characteristics of each class.

According to the costs of operations, U.S. Postal Service rates are set by the Postal Regulatory Commission according to the recommendations of the Postal Board of Governors.

Look, the USPS is an Agency!

The USPS is created as a government agency under Title 39, Section 101.1 of the United States Code which states, in part:

(a) The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people. The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities. The costs of establishing and maintaining the Postal Service shall not be apportioned to impair the overall value of such service to the people.

Under paragraph (d) of Title 39, Section 101.1, "Postal rates shall be established to apportion the costs of all postal operations to all users of the mail on a fair and equitable basis."

No, the USPS is a Business!

the Postal Service takes on some several very non-governmental attributes via the powers granted to it under Title 39, Section 401, which include:

  • power to sue (and be sued) under its own name;
  • power to adopt, amend and repeal its own regulations;
  • power to "enter into and perform contracts, execute instruments, and determine the character of, and the necessity for, its expenditures";
  • power to buy, sell and lease private property; and,
  • power to build, operate, lease and maintain buildings and facilities.

All of which are typical functions and powers of a private business. The post office provides various services to customers, such as holding mail for up to 30 days at their facility. However, unlike other private businesses, the Postal Service is exempt from paying federal taxes. USPS can borrow money at discounted rates and can condemn and acquire private property under governmental rights of eminent domain.

The USPS does get some taxpayer support. Around $96 million is budgeted annually by Congress for the "Postal Service Fund." These funds are used to compensate USPS for postage-free mailing for all legally blind persons and for mail-in election ballots sent from US citizens living overseas. A portion of the funds also pays USPS for providing address information to state and local child support enforcement agencies.

Under federal law, only the Postal Service can handle or charge postage for handling letters. Despite this virtual monopoly worth some $45 billion a year, the law merely requires the Postal Service to remain "revenue neutral," neither making a profit or suffering a loss.

How is the Postal Service ‘Business’ Doing Financially?

Though intended to be a self-funding entity, the Postal Service has suffered a dismal string of financial losses since the 1970s, when it sometimes at least broke even. After the Great Recession of 2008, the volume of advertising mail—the vast majority of mail—dropped sharply as many businesses switched to less-costly email correspondence. Since then, mail volume has continued to drop, creating a crisis for a business whose costs are all but guaranteed to rise annually. For example, the number of addresses to which the USPS must deliver increases constantly.

In FY2018, the USPS suffered what it called a “controllable” operating deficit of $3.9 billion and reports that it expects costs to continue to rise in FY2019. “Compensation and benefits expenses are planned to increase by $1.1 billion in FY2019, due to wage increases by $0.6 billion resulting from contractual general increases and cost-of-living adjustments.” In addition, the agency sees its retiree health benefits and transportation expenses to increase by $1 billion in FY2019.

COVID-19 Pandemic Hits USPS

The financial health of the Postal Service rebounded briefly during early 2020, reporting total revenues of $17.8 billion from January 1, 2020, through March 31, 2020—an increase of $348 million, compared to the same period in 2019. However, the COVID-19 pandemic, which slowed the entire U.S. economy, began to take its toll on the USPS in late March with drastically declining mail volume. By early May, postal officials issued dire warnings that pandemic-related losses over the next eighteen months could “threaten the Postal Service's ability to operate.

The 2020 Presidential Election Controversy

Postmaster General Louis DeJoy arrives to testify during a hearing before the House Oversight and Reform Committee on August 24, 2020.
Postmaster General Louis DeJoy arrives to testify during a hearing before the House Oversight and Reform Committee on August 24, 2020. Tom Williams-Pool/Getty Images

In June 2020, newly appointed Postmaster General Louis DeJoy responded to the pandemic’s financial “threat” by implementing a series of cost-cutting measures, including eliminating overtime for mail carriers, reducing post office hours, shutting down unnecessary high-speed mail sorting machines, and removing under-utilized neighborhood postal boxes. The measures were blamed for slowing mail delivery and heavily criticized by Democratic lawmakers as an attempt to disenfranchise voters seeking to vote safely during the pandemic. On August 18, DeJoy, facing intense backlash, announced that the Postal Service would suspend—but not roll back—the cost-cutting measures until after the November 2020 election.

Dozens of removed mail boxes sit in the parking lot of a post office on Lafayette Avenue on August 17, 2020 in the Bronx borough of New York City.
Dozens of removed mail boxes sit in the parking lot of a post office on Lafayette Avenue on August 17, 2020 in the Bronx borough of New York City. David Dee Delgado/Getty Images

On August 21, DeJoy assured the House Oversight and Reform Committee that the USPS would be able to deliver the nation's election mail, including mail-in ballots, “securely and on time,” calling the burden of doing so a “sacred duty.” He went on to tell lawmakers that he was “extremely, highly confident” that any ballots mailed at least seven days before they are due will be delivered to state election officials on time.