As if the 2020 election wasn’t affecting daily life enough already, politics is seeping into the post office. President Trump has been steadfastly opposed to Speaker Nancy Pelosi’s insistence that $25 billion be devoted to the U.S. Postal Service. Meanwhile, the mere suggestion that the Postal Service might not need such an injection of taxpayer dollars has prompted a flurry of protests and keyboard-warrior activism imploring public officials to “save the post office.” Some suggest that if the Postal Service does not receive this money, then the 2020 election will be compromised and the very core of our democracy threatened.
The Postal Service itself has denied such thinking. In reality, its problems exist outside of congressional funding and have for many years.
First-class mail is going the way of the dinosaurs, only the cause of death is far less surprising. No meteor, no cataclysm — just technological advance. In 2001, first-class mail volume peaked at 103 billion pieces. In 2019, people mailed 54 billion pieces of first-class mail, a nearly 50% decline in only 18 years. Comparatively, email users received an estimated 293 billion emails per day in 2019.
When faced with such a drop in consumer demand, most companies retool themselves into a viable long-term operation. Instead, the Postal Service has accepted year-over-year losses as the new norm. Over the past 11 fiscal years, the Postal Service has lost $69 billion and nearly $4 billion in FY 2018 alone.
Part of the reason for these losses is inflexibility to a changing market. Mail volume continues to nosedive, but the Postal Service maintains much of the same infrastructure. Many letter sorting machines sit unused in distribution centers, and the post office continues to maintain extraneous delivery points. While the Postal Service has expanded its parcel service in response to growing online retail shopping, it lacks authorization to change prices in response to market demand and changing costs. Behaving more like a private business by revenue-maximizing and trimming waste would go far in improving its profitability.
These year-over-year losses and declining demand signal serious operational problems for the Postal Service, but the long-term situation is even more dire. Its unfunded pension and debt liabilities total over 200% of its annual revenue. While unfunded pension obligations among government entities are well documented, such as the $5 trillion in unfunded state pension liabilities exposed by the ALEC Center for State Fiscal Reform research, most government employers continue to make retirement payments. Unfunded liabilities are due primarily to future obligations.
Not so for the Postal Service. Incredibly, the Postal Service has failed to contribute $42 billion in actuarially required retiree health benefit payments since 2010 and has missed $5.6 billion in pension payments since 2014. Without these payments, it is likely retirees will not receive the benefits they are entitled to under current retirement policy. By 2030, the trust fund supporting payouts to current retirees is expected to be depleted. Once the retirement benefit trust fund dissipates, 100% of all retirement and benefit payments must come from annual Postal Service revenues.
The long-term financial instability of the Postal Service is partially due to Congress’s chokehold on its retirement policy. For example, Postal Service retirees have the option to not enroll in portions of Medicare and instead rely solely on the Postal Service for retirement healthcare, drastically increasing costs. This is also a benefit not afforded to private sector workers. Congress and the postal workers unions must remove undue burdens on retirement reform to help guarantee a secure, well-funded retirement for postal workers.
Pelosi has insisted on a $25 billion Postal Service bailout. This figure does not come with any reforms or mandatory policy changes. Much like a bailout of states with underwater pensions and rampant spending, more money would simply push the Postal Service to the next fiscal year while doing nothing to solve the root problems.
The Postal Service faces structural problems that neither $25 billion nor $250 billion from Congress would solve. To “save the post office,” the U.S. Postal Service must be reformed.
Skip Estes (@Skip_Estes) is legislative manager at the American Legislative Exchange Council and writes on a variety of nationwide tax and budget issues.
