One thing Congress can do to help save the US Postal Service

The U.S. Postal Service lost $1 billion last quarter, according to the agency’s most recent financial report. This is particularly distressing news because this red ink came during the holidays’ peak mailing season. 

The losses stem partly from inflation driving up operating costs: Gasoline, worker compensation and just about everything costs more. The bigger problem was a slide in revenue. The agency’s annual revenue was $2.2 billion less than its 2021 take. Holiday season deliveries were 1.5 billion fewer than in 2021 and, it is worth noting, 3.3 billion fewer than in 2017.  

This should raise alarm bills on Capitol Hill, seeing as Congress has delivered aid to the agency three times in the past few years. During the final year of the Trump presidency, Congress gave the Post Office a $10 billion loan, which it later turned into a strings-free gift. Last year, Congress passed and President Joseph Biden signed bipartisan postal reform legislation. That legislation shifted more than $100 billion in USPS retiree healthcare costs onto Medicare. And late last summer, Congress provided the agency with $3 billion to help electrify its aged delivery fleet. 

Yet, the losses continue. 

Nobody should be surprised because Congress’ various enactments have failed to address the USPS’s basic problem: A broken business model. The 1970 law that birthed the U.S. Postal Service aimed to cover the agency’s operating costs by giving it a monopoly on letter mail. Rising mail volume brought rising revenues, which covered the costs of hiring unionized employees to deliver mail six days per week. 

But this business model broke at the dawn of the 21st century. High-volume mailers began quitting the mail and communicating with their customers via the internet. So too did government agencies, like the Internal Revenue Service. The Great Recession of 2008 exacerbated this trend, as the private sector contracted in size and cut their use of the Post Office even more. All told, mail volume has declined more than 40 percent since 2006.  

Yet, Congress has not drafted a bill that would address the agency’s outdated business model. Instead, legislators have pitched ad hoc aid to the Postal Service and declared, “You guys figure it out.” 

To pay the bills, the Postal Service has delivered more express mail and parcels. A decade ago, these lines of business comprised 17 percent of the agency’s revenues. In the past few years, they have brought in 40 to 47 percent of its dollars. 

Of course, receiving, sorting and delivering boxes is a different business from paper mail. This has forced the Postal Service to revamp its network, from mail carriers’ mailbags to the sorting machines and the trucks — all of which were designed to carry paper mail. Postmaster General Louis DeJoy estimates that it will take 10 years and $40 billion in capital investments to get the agency to the point where it can consistently cover its operating costs. 

Of course, the problem with this approach is that it relies on the Post Office, a government agency, to increasingly compete with the private sector to survive. Delivery firms like UPS, FedEx and DHL have been moving express mail and boxes for decades and know the business cold. Big retailers like Amazon and Walmart are building out their own delivery networks. The USPS could get whupped. 

If Congress does not have the stomach to try to remake the USPS’s business model, there is another way it can improve the agency’s odds of surviving. Congress should let the Post Office more sensibly invest its retiree health and pension assets. Presently, the Post Office is forbidden from investing its $357 billion in retirement assets in anything but low-yield U.S. Treasury bonds. This is crazy — no state or municipal cop or teacher pension funds are stuck buying only bonds. Even federal government employees get to fund their retirements by investing in index funds curated by the Thrift Savings Program.  

Making this change to the present law would bring the Postal Service perhaps $3 billion a year in additional revenue. This reform would garner bipartisan support. Rep. Stephen Lynch (D-Mass.) introduced a bill in 2019 that proposed something similar, and legislators on the political right long have supported reforms to bolster Americans’ retirement accounts. 

So, Congress has a choice: Make this no-brainer change or cross its fingers and hope that the agency does not go belly up and require a colossal taxpayer bailout.

Kevin R. Kosar (@kevinrkosar) is a senior fellow at the American Enterprise Institute. He is the co-editor of “Congress Overwhelmed: Congressional Capacity and Prospects for Reform” (University of Chicago Press, 2020). He hosts the Understanding Congress podcast.