The Postal Service’s $75 Billion Problem (and Why You Should Care)

The novel Coronavirus pandemic is threatening one of our nation’s most beloved institutions: the United States Postal Service. Thanks to a perfect storm of plummeting mail volume, one burdensome Congressional mandate, and a lack of action in the recently passed CARES Act, USPS is in dire need of a financial bailout now more than ever.

Mail Volume Has Declined as a Result of the Coronavirus

Thanks to the Coronavirus pandemic, mail volume has cratered. Businesses have shuttered, and advertising and marketing budgets have evaporated. As a result, marketing mail volume has also dwindled. This poses a significant problem for USPS, since the organization makes a huge portion of its revenue through mail services.

On the other hand, parcel volume has surged because of the pandemic. As America continues to shelter in place at home, eCommerce growth and the resulting demand for packages has skyrocketed. In fact, total eCommerce orders in America have grown nearly 40% since the start of the pandemic. Thanks to this, all of the major shipping carriers have benefitted from the increase in parcel volume, including USPS.

Due to the growing eCommerce trend of the past several years, package services have also quickly become one of the Postal Service’s most profitable revenue streams. In fact, packages are the largest source of revenue growth that USPS experiences. That said, the Postal Service still makes a significant portion of revenue from its essential mail services. After all, USPS is the only carrier legally allowed to deliver mail, which includes items like letters, postcards, and credit card statements. In this unprecedented time, the growing revenue from rising package volume simply isn’t enough to counteract the losses from dwindling mail volume.

The Stimulus Bill Isn’t Enough to Save the Postal Service

The decrease in mail volume is just one piece of the puzzle that frames the Postal Service’s predicament. Originally, Democrats pushed for a $25 billion cash grant for USPS as part of the stimulus bill. This money, while still not enough, would have given the Postal Service a solid runway to continue operating. However, Republicans fought staunchly against this—specifically, President Trump. As a result, the CARES Act provided USPS with a far cry from that level of financial backing.

As part of the CARES act, the only thing USPS got was $10 billion in borrowing power from the US Treasury. In essence, that is just a license to add more debt onto the already huge pile of debt that USPS is saddled with. Therefore, that first stimulus bill is nowhere enough to save USPS.

USPS Has Requested $75 Billion in Emergency Funding to Continue Operating

The last portion of the Postal Service’s pickle is burdensome pre-funding legislation the organization has dealt with for over a decade. Enacted in 2006, this legislation mandated that USPS set aside billions to pre-fund future employees’ retirement and health benefits decades in advance. The pre-funding mandate has proven to be one of the worst decisions American lawmakers have ever made. In fact, this legislation is the main reason why USPS has been in such a large financial hole since 2007. Thanks to pre-funding, USPS was already in dire financial straits because of this legislation even before the Coronavirus pandemic hit.

Now, to weather the storm, USPS has requested $75 billion in emergency funding to stay operational. As talk of a second stimulus bill circulates in Washington, the organization hopes that legislators will take this into account and take the necessary action to save USPS.

Postmaster General Megan Brennan said it best:

“Congress and the Administration take steps to support businesses and industries around the country,” Brennan said. “It is imperative that they also take action to shore up the finances of the Postal Service, and enable us to continue to fulfill our indispensable role during the pandemic.”

If Congress doesn’t take action and the Postal Service goes under, the economic results would be disastrous. The margins of the millions of eCommerce businesses that rely on USPS aren’t the only thing that would be threatened. It’s the 630,000 direct employees of USPS, our nation’s fourth largest provider of jobs. It’s the network of 7.5 million jobs that exist as a direct result of the Postal Service’s network. Most importantly, it’s the universal service that USPS provides for each and every one of us.

If the Postal Services ceases to exist, American everyday life would change forever.