Why Does the US Postal Service Lose Money?

Modern History of Postal Service Losses

A USPS mail truck in the United States.
A USPS mail truck in the United States. Wikimedia Commons

The U.S. Postal Service lost money in six out of the 10 years from 2001 through 2010, according to its financial reports. By the end of the decade, the semi-independent government agency's losses had reached a record $8.5 billion, forcing the Postal Service to consider seeking an increase in its $15 billion debt ceiling or face insolvency.

Though the Postal Service is bleeding money, it receives no tax dollars for operating expenses and relies on the sale of postage, products, and services to fund its operations.

The agency blamed the losses on the recession that began in December 2007 and significant declines in mail volume as a result of changes in the way Americans communicate in the age of the Internet.

The Postal Service was considering a host of cost-saving measures including the closure of as many as 3,700 facilities, the elimination of wasteful spending on travel, the end of Saturday mail and cutting delivery to just three days a week.

When Postal Service Losses Began

The Postal Service carried billion-dollar surpluses for many years before the Internet became widely available to Americans.

Although the Postal Service lost money in the early part of the decade, in 2001 and 2003, the most significant losses came after the passage of a 2006 law requiring the agency to prefund retiree health benefits.

Under the Postal Accountability and Enhancement Act of 2006, the USPS is required to pay $5.4 billion to $5.8 billion annually, through 2016, to pay for future retiree health benefits.

See also: Find Postal Service Jobs Without Being Scammed

"We must pay today for benefits that will not be paid out until some future date," the Postal Service said. "Other federal agencies and most private sector companies use a 'pay-as-you-go' system, by which the entity pays premiums as they are billed ... The funding requirement, as it currently stands, contributes significantly to postal losses."

Postal Services Seeks Changes

The Postal Service said it had made "significant cost reductions in areas within its control" by 2011 but claimed it needed Congress to approve several other measures to boost its financial outlook.

Those measures include eliminating mandated retiree health benefit pre-payments; forcing the federal government to return Civil Service Retirement System and Federal Employee Retirement System overpayments to the Postal Service and allowing the Postal Service to determine the frequency of mail delivery.

Postal Service Net Income/Loss By Year

  • 2021 - $9.7 billion loss (projected) 
  • 2020 - $9.2 billion loss
  • 2019 - $8.8 billion loss
  • 2018 - $3.9 billion loss
  • 2017 - $2.7 billion loss
  • 2016 - $5.6 billion loss
  • 2015 - $5.1 billion loss
  • 2014 - $5.5 billion loss
  • 2013 - $5 billion loss
  • 2012 - $15.9 billion loss
  • 2011 - $5.1 billion loss
  • 2010 - $8.5 billion loss
  • 2009 - $3.8 billion loss
  • 2008 - $2.8 billion loss
  • 2007 - $5.1 billion loss
  • 2006 - $900 million surplus
  • 2005 - $1.4 billion surplus
  • 2004 - $3.1 billion surplus
  • 2003 - $3.9 billion surplus
  • 2002 - $676 million loss
  • 2001 - $1.7 billion loss

COVID-19 Pandemic Threatens Postal Service Survival

In April 2020, lawmakers warned that losses related the novel coronavirus COVID-19 flu pandemic could threaten the Postal Service’s very existence.

“The Postal Service is in need of urgent help as a direct result of the coronavirus crisis,” said the House Committee on Oversight and Reform. “Based on a number of briefings and warnings this week about a critical fall-off in mail across the country, it has become clear that the Postal Service will not survive the summer without immediate help from Congress and the White House. Every community in America relies on the Postal Service to deliver vital goods and services, including life-saving medications.”

Already burdened by a negative net worth of $65 billion and an additional $140 billion in unfunded liabilities, the USPS originally expected to run out of liquidity by 2021 without help from Congress. However, with fewer people and businesses because of the COVID-19 outbreak, the quasi-governmental Postal Service—which relies on user fees rather than taxes—could be forced to close its doors as early as June 2020, lawmakers warned. Despite the dire warnings, however, the USPS received no additional funding in the $2 trillion coronavirus stimulus and relief package legislation signed by President Trump on March 27, 2020.

“The Postal Service needs America's help, and we must answer this call,” said leaders of the Committee on Oversight and Reform. “These negative effects could be even more dire in rural areas, where millions of Americans are sheltering in place and rely on the Postal Service to deliver essential staples,” the lawmakers warned.

USPS Announces 10-Year Plan to Save Itself

In March 2021, Postmaster General Louis DeJoy released his strategic plan designed to save the U.S. Postal Service $160 billion over the next decade and position the agency more squarely in the growingly lucrative package delivery business. Among other less-noticeable measures, the plan would raise prices, lengthen delivery timetables, and cut post office hours.

DeJoy’s “Delivering for America” 10-year blueprint calls for first-class mail to be transported cross-country on trucks instead of airplanes and lengthens the expected delivery time window for first-class mail from within three days to five days. On the other hand, the plan introduces new products to help commercial shippers move packages more efficiently.

The USPS is banking on expectations that its package delivery business will grow as much as 11% percent through 2025 as consumers continue to shop online as they did during the pandemic. The agency plans to open 45 package processing annexes nationwide to expedite shipping and will look to replace mail sorting machines with high-speed package sorters.

On May 28, 2021, the U.S. Postal Service announced it had proposed the first increase in the price of a first-class stamp would increase since Jan. 27, 2019. If approved by the Postal Regulatory Commission as expected, the price of a first-class stamp will jump from 55 cents to 58 cents effective August 29, 2021. A postcard would increase to 40 cents from 36 cents and an international letter to $1.30 from $1.20. 

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Murse, Tom. "Why Does the US Postal Service Lose Money?" ThoughtCo, Jun. 4, 2021, thoughtco.com/postal-service-losses-by-year-3321043. Murse, Tom. (2021, June 4). Why Does the US Postal Service Lose Money? Retrieved from https://www.thoughtco.com/postal-service-losses-by-year-3321043 Murse, Tom. "Why Does the US Postal Service Lose Money?" ThoughtCo. https://www.thoughtco.com/postal-service-losses-by-year-3321043 (accessed June 16, 2021).