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Volume 21: The Post Office

James Farley Post Office

Neither by Snow, nor Rain, nor Heat, nor Darkness

“The post office, or any world of work, is only one institutionalized system of control that is designed to beat people, to condition them into accepting that humiliation and failure is the norm. Those who do not rebel against this lose any ability to think for themselves. The workers are robbed of power whilst the bosses have only a small amount of it and can only use it arbitrarily, which is to say, pointlessly.”

“We’re forced into absurd lives, against which the only sane response is to wage a guerilla operation of humor and lust and madness.” - Charles Bukowski, Post Office


The United States Postal Service has an image problem. The last time you walked into a post office, you probably thought that it needed a coat of paint. Envelopes and boxes may have been strewn about. Postal employees, perhaps sitting behind bullet-proof glass, served an ever-lengthening line of customers. Their uniforms, as well as that of your mail carrier, have been little-updated since 1992. “Postal worker” has unfairly become synonymous with an employee biding time until reaching a generous, taxpayer-funded retirement.

On top of its image, the post office has financial problems. Legally required to operate with government subsidies, the USPS has lost an average of $5 billion per year for a decade. Not only have these losses caused deficits in conflict with its mandate, but the attendant cost cutting has limited long-term capital spending. Which feeds into the image problems in a non-virtuous cycle.

Peeling behind the numbers and the façade, we find that the USPS is a truly strange animal. Part agency, part private; part business, part locus of political patronage. When we look closer, we find that the post office is an efficient letter-delivery machine, but one with an uncertain future.

  • [if !supportLists]What is the United States Postal Service?

  • [if !supportLists]How is it doing financially?

  • How does it compare to private competitors?


What is the United States Postal Service?

Our nation had a post office before it was a nation. Benjamin Franklin became our first postmaster general in 1775 – just after the battles of Lexington and Concord and a year before the Declaration of Independence. But the first two centuries of the history of our post office are irrelevant to our story; the United States Postal Service as you know it has existed only since the Postal Reorganization Act of 1970 (PRA).(1)

Passed in response to a massive, nationwide strike of postal workers, the PRA fundamentally changed the nature of postal services in our country. Previously, the United States Post Office had been a department of the government. Unlike other defunct departments like War and Navy, the Post Office Department wasn’t rolled into a new organization, but rather rolled out to a strange, hybrid, public-private animal.

The unique character of the USPS causes confusion. Legally, it is an independent agency of the federal government. Postal employees are government employees. While its charter offers it a nearly absolute ability to run its own operations, this charter is itself subject to amendment via new legislation. It has several features that are clearly governmental in nature; it pays no tax and can claim land via eminent domain.(2) However, according to the PRA, it can also engage in numerous activities that resemble private corporations. It operates its finances outside of the Congressional appropriations process. It can enter into contracts under its own name. It competes with (and co-operates with) private companies. It can change its own regulations.(3)

We could debate without end the semantics about what the USPS is, but understanding its mandate is far more important.(4) The mandate of the USPS gives it certain monopolistic rights, but also forces it to offer services that are not profit maximizing.

The USPS has a statutory monopoly on the delivery of non-urgent letters. This is why private delivery companies, like UPS and FedEx, don’t offer a service to deliver envelopes in a manner other than on a guaranteed schedule. You may have also wondered why private delivery companies always leave packages on your doorstep or place them directly in your hand. Smaller items – as well as letters, obviously – would fit in your mailbox. The use of official postal mailboxes is also limited to the USPS. The USPS also has a monopoly on marketing mail; you can thank them for all those catalogues you throw out.(5)

Monopolies are valuable things. They protect companies (or whatever the USPS is) from competition. But, when regulated, they are not necessarily bad for consumers; your electricity and water are probably provided by a regulated monopoly, and they work well.(6) In exchange for its monopolies, the USPS is required to meet a universal service obligation (USO). This USO has never been formally defined by Congress. However, the USPS interprets it very broadly.

  • Geographic scope: the USPS provides a consistent service in even the most remote regions.

  • Affordable and uniform pricing: within its mandated products, it costs the same to send mail to Nome, Alaska as around the block.

  • Access to facilities and services: even if the décor is outdated, your local post office offers a wide array of governmental services.

  • Mail security: statistics are difficult to find, but the USPS delivery failure rate is exceptionally low.(7)

In addition to the services described in its mandate, the USPS is permitted to compete with private companies via its aptly named Competitive services. These are the postal products that you know as Priority Mail or First-Class Package Service, as well as some smaller brands. In its Competitive category, the USPS operates on a more-level playing field with private companies – although it still has the mailbox mandate. The products offered by the USPS usually differ from those offered by the private companies. UPS offers guaranteed overnight deliveries, while the USPS tries really, really hard to get it there tomorrow, at which it succeeds around 97% of the time. The USPS is prohibited from using its mandated businesses to subsidize its Competitive businesses.(8)

How is it doing financially?

The USPS is required by its mandate to be self-funding. It does not and can not receive any tax revenue. It must find a way to break even – unless it doesn’t.

Whatever negative things you can say about the post office, and there are a lot, it is impressively transparent. Just like private companies, it publishes an annual report, called a 10-K.(9) It includes almost 100 pages of financial statements, discussions of its businesses, disclosures of risks and various types of supplemental data. One would think there is enough here to come up with a clear answer to a simple question: How is the post office doing?

We’ll start by looking at the revenues. The USPS helpfully breaks it down by category; note that “Shipping and Packages” includes all their Competitive services.(10)

Table 1 - USPS revenue by service ($ Millions)

In 2017, a long-term decline in First-Class revenues continued. It was partially offset by revenues in the USPS’s Competitive space. The document notes that they expect First-Class revenues to continue to decline as more traffic moves to electronic communication.

Next, we can move onto the income statement:

Table 2 - USPS net income ($ Millions)

This isn’t good – the post office is running at a loss of between 4 and 8% of revenue. This loss is a continuation of a trend that began in 2007, as we see in Table 3.

Table 3 - USPS gain / loss, 2001-2017

These ongoing losses have led to the following balance sheet: