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 refund 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.

"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

  • 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