The Real Story Behind USPS' Financial Woes

Issue 33

08.24.20 - The US House of Representatives voted on Saturday to pass legislation for a bailout of the United States Postal Service, which has been posting huge losses for years – or at least on paper. In reality, the federal agency is bringing in billions of dollars in cash. Almost all of the Postal Services financial difficulties come from a unique, and somewhat utterly absurd, accounting system that no other business or government body follows or should follow and doesn't accurately reflect real costs.

Many have claimed that these financial problems have stemmed from the expected surge in mail-in ballots for the general election coming up in November, and shave claimed that the problems are caused because of its contracts to handle delivery of Amazon packages, but investigations of those contracts have confirmed that the USPS has made money on the contracts it has with Amazon and other major shippers.

The USPS accounted for a positive cash flow of nearly $2 billion in the nine months ending June 30, it was at $1.3 billion a year ago during the same time. It has carried a positive average annual cash flow of $3 billion over the last three fiscal years.

It is important to remember though that cash flow and profits are not at all the same thing. The cost of doing business factors into profitability and the Postal Services costs are significant due to an old, Great Recession era rule.

The unique rule requires that the USPS prepay for workers' retirement benefits for decades into the future. Almost 15 years ago, Congress passed legislation to require the agency to pre-fund 75 years’ worth of retiree health care benefits in the span of about 10 years.

The USPS has not been making those payments though, citing the lack of cash as their reason. Despite this, the agency still books those theoretical costs as an expense – accounting for most of the agency’s losses (almost $17 billion since 2017).

Source: CBS News