The United States Postal Service booked a loss for fiscal 2023 of about $6.5 billion. The nationwide delivery agency predicts that its 10-year plan will right the fiscal delivery vehicle of state, but it was expecting lower losses this year — about $2 billion lower.
An obvious culprit is higher-than-expected inflation, which has made just about everything more expensive. But one expert says the problem runs much deeper than that. Even a great holiday season is unlikely to halt the carrier’s decline.
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“It’s a structural deficit,” Kevin Kosar, a senior fellow at the American Enterprise Institute, told the Washington Examiner. “Costs are very, very difficult to control.”
When other government agencies come up short, they can ask Congress to cover it through the appropriations process. According to the current law, that is not how the Postal Service is supposed to run.
“The Postal Service is expected to be financially self-sufficient — meaning it should cover its expenses through the sale of its products and services, not taxpayer money,” the Government Accountability Office wrote on its “Watchblog” in late August.
And yet, the GAO added that the shipping agency’s revenues "haven’t covered its expenses and debt for more than 15 years. And its expenses are growing faster than its revenues, in part due to continuing declines in volume for First-Class Mail — its most profitable product. USPS has been able to continue operating in this situation by increasing its debt and unfunded liabilities.”
The negative trend threatens the Postal Service's “ability to deliver your mail and pay retirees' benefits, as well as have broader effects on the mailing industry,” the federal government’s own watchdog said.
Kosar emphasized how hard it is for the Postal Service to cover costs. It has an unwieldy and expensive presence.
It had over 31,000 storefronts in 2022, according to the agency’s own numbers. For scale, compare that to McDonald’s, which reported just under 13,500 stores in the U.S. in 2021.
The Postal Service also reported just over half a million mostly unionized employees in 2022, over 164 million delivery points to service six days a week, roughly 235,500 postal vehicles, and 7.5 million passport applications.
The Postal Service enjoys a legal monopoly on regular mail, but “paper mail has just plummeted in volume,” Kosar said. Online communications make much of that once-printed correspondence obsolete.
Parcel shipping is helping the Postal Service in “adding revenue, but they’re competing with the private sector” and a “very nimble private sector businesses” at that, he said.
Granted, the Postal Service, under Postmaster General Louis DeJoy, “has aggressively raised rates,” but it hasn’t been enough to deal with the logistical problems the carrier faces.
“Moving paper envelopes is very different from moving boxes,” Kosar said. From mail carrier bags to vehicles to the backends of individual post offices, “everything has to be redone, and that’s super expensive.”
DeJoy doesn't cometh in the morning
DeJoy, appointed by former President Donald Trump, has tried to cut costs by consolidating some post offices, cutting down the number of collection points, and shrinking the nonseasonal workforce. For his trouble, he has been protested and vilified.
On a Saturday morning in August 2020, protesters chanted and stuffed fake absentee ballots into the entrance of DeJoy’s Washington, D.C., apartment building in the Adams Morgan neighborhood, in the heat of the presidential election that Trump would go on to lose against President Joe Biden. Protesters charged that the reduction in the number of mail collection boxes under DeJoy's leadership amounted to a kind of disenfranchisement for those mailing in their votes.
The prudence of that tactic was questionable since it wasn't clear DeJoy was even home that day. And taking place in Washington, D.C., which backed Biden over Trump 92.15% to 5.40%, the protest likely had the effect of just annoying swaths of Democratic partisans in one of the nation's bluest voting precincts.
More recently, Sen. Cory Booker (D-NJ) and 80-plus liberal groups complained of DeJoy’s “destructive leadership” and demanded that Biden help stack the deck with his picks to the Postal Service Board of Governors — so he could be pushed out as postmaster general.
When the Washington Examiner asked if that pressure might be hobbling DeJoy’s efforts to trim costs, Kosar was skeptical.
“Biden doesn’t have any direct route to fire the postmaster general,” he said, suggesting the president probably wouldn’t want to anyway.
“DeJoy is the first guy with extensive private sector experience” to lead the Postal Service in quite some time and has had to “clean a lot of that mess up,” Kosar said. “I don’t see DeJoy going anywhere anytime soon.”
A serious logistics background
There have been no fixed terms for the postmaster general since the Post Office Department in 1971 was reorganized into the Postal Service, an independent agency of the executive branch. Recent postmaster generals have generally held the job between four to six years, often overlapping Democratic and Republican presidential administrations.
The role previously was a Cabinet post, in the line of presidential succession, and a province of political operatives. Arthur Summerfield, postmaster general for President Dwight D. Eisenhower's entire White House tenure, was most immediately before chairman of the Republican National Committee in 1952-53. Larry O'Brien, postmaster general under President Lyndon Johnson from 1965-68, had been a Kennedy confidant and would go on to be Democratic National Committee chairman and prominent foil of President Richard Nixon in the early 1970s.
Before coming to the Postal Service, DeJoy had been a CPA, the founder of longtime Postal Service contractor New Breed Logistics, and president of the firm LDJ Global Strategies.
DeJoy enjoyed great success in the private sector. As postmaster, he has been credited by some for having kept the losses inflicted by the coronavirus pandemic and related lockdowns to a minimum. But his efforts to sweat down costs may be coming up short if the higher-than-expected 2023 losses are a reliable indicator.
If so, what else could be done to fix the Postal Service's financial woes?
“That is a tall task,” Kosar admitted. “It would require first addressing the issue of employee compensation.”
Close to 75% of the Postal Service's yearly operating costs are for employee compensation. Kosar doesn’t believe that the American Postal Workers Union will budge on salary demands.
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He does, however, hope that there could be some wiggle room in other areas. The Postal Service Retiree Health Benefits Fund and pension funds are heavily invested in U.S. treasuries, which do not provide great returns.
“If you were to take a quarter or a third of that money” and put it in index funds, Kosar said, “it would get so much better returns, and it would greatly help the Postal Service rectify this structural deficit.”