Faced with the possibility of running out of money, the U.S. Postal service asks Congress to consider 'drastic measures'

Changes to USPS mail delivery have an outsized
impact on rural Americans. (Photo by D. Trinks, Unsplash)

Expensive delivery obligations and government constraints both contribute to the U.S. Postal Service's deepening financial woes. "In testimony to Congress last month, David Steiner, the postmaster general, delivered a dire warning," reports Adam Sella of The New York Times. "Without drastic measures, he said, the U.S. Postal Service could run out of cash in less than a year."

Some of the "drastic measures" Steiner outlined included reducing service days from 6 to 5, dropping "unprofitable routes," and closing some smaller post offices, Sella writes. All three changes would have an outsized impact on rural communities that other carriers, such as FedEx and UPS, avoid due to higher costs.

A large part of the agency's financial turmoil can be blamed on what Congress has tasked it with doing, which doesn't create a profitable business model (which is why UPS and FedEx don't do it), and federal limitations on its financial options, including pricing and pension investments.

For instance, USPS is supposed to be financially self-sufficient while meeting its universal service obligation, which requires it to deliver to everyone in the United States at a reasonable price, Sella explains. "In 2022, Congress added a six-day-a-week delivery requirement. . . .That commitment has cost the agency money: more than $6.5 billion a year."

USPS is also restricted on pricing. "It must get approval from an independent regulatory commission, which limits the agency’s ability to raise prices," Sella reports. Congress also limits its borrowing power, which means it can run out of money.

USPS leadership isn't allowed pension portfolio flexibility, which could have a dramatic impact on its bottom line. Sella explains, "The Postal Service is only allowed to invest its retirement funds in Treasury notes. The Postal Service’s Office of Inspector General estimated in 2023 that USPS retirement funds would have been worth approximately $800 billion more if they had been able to be invested in a mix of 60% stocks and 40% Treasury bonds."

Meanwhile, USPS has turned to one of its few reliable revenue streams: postal price increases. "The commission approved a temporary surcharge of 8% on packages, in light of rising fuel and transportation costs," Sella reports. The Postal Service also requested a 5% increase in first-class mail rates. "That means first-class mail 'forever' stamps would increase from 78 cents to 82 cents."