The Postal Service’s Financial Plight

September 30, 2011

Despite the numerous benefits that the Postal Service enjoys as a government enterprise, its financial situation appears shaky, says Michael Schuyler, a senior economist at the Institute for Research on Economics and Taxation.

  • In the first three quarters of fiscal year 2011, volume is off 1.3 by percent and revenue is down by 2.4 percent compared to the same nine months last year.
  • The Service posted a loss in the third quarter alone of $3.1 billion, marking the tenth consecutive quarter in which it has lost money.
  • Though the Service has been granted a low-cost credit line of up to $15 billion at the U.S. Treasury, this source of funds is almost completely maxed out.

The reasons for the slow demise of the U.S. Postal Service are diverse and vary in degree of impact.  The advent of electronic mail has undoubtedly bludgeoned the volume of mail sent physically, and contemporary circumstances such as fear of mail-delivered anthrax attacks in the early 2000s also deaden revenues.

To combat trends of lowered volume, the Service has made efforts to cut spending.  The agency's total workforce was reduced between 2000 and 2010 by 230,000 people (25.5 percent).  It has also made efforts to renegotiate fringe benefits and reduce the number of post offices.  However, many of the Service's initiatives to cut spending are hampered by the tight leash of the federal government. 

While its government association grants it substantial benefits, Service administrators are quick to emphasize that this association bears cost in the form of oversight. 

  • Efforts to renegotiate benefits and pensions are tilted against them through federal law and pressure.
  • They are required to abide by numerous federal statutes, including six-day per week mail delivery.
  • These regulations often hinder the Service's performance and limit its ability to gain financial solvency.

Source: Michael Schuyler, "The Postal Service's Financial Plight and the U.S. Credit Downgrade," Institute for Research on Economics and Taxation, September 22, 2011.

For text:

http://iret.org/pub/ADVS-279.PDF

 

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