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.

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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.

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"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

  • 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.

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Murse, Tom. "Why Does the US Postal Service Lose Money?" ThoughtCo, Feb. 16, 2021, thoughtco.com/postal-service-losses-by-year-3321043. Murse, Tom. (2021, February 16). 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 April 10, 2021).