Calls have been coming for a while to halt Saturday delivery by the US Postal Service (USPS) in order to cut back on costs, but this hasn’t stopped the USPS from raising pay checks in the meantime (and employee compensation has been estimated to be about 80% of their costs).
Yet just this past Friday, the USPS came in with an $8.2 billion loss from the past year. This is a higher loss than any they had in the depths of the Great Recession. The USPS is hemorrhaging badly.
US Postal Service Negative Profits
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As you can see, the US Postal Service is on a mean losing streak:
- Yearly losses in 2008: $2.8 billion
- Yearly losses in 2009: $3.8 billion
- Yearly losses in 2010: $8.2 billion*
*a “year” runs from October 1 to September 30.
It doesn’t look any better for 2011, as the USPS guides they expect to be “flat” relative to 2010 (but with significant retiree health benefits increases and rising wage labor costs).
The Difference Between Revenue and Earnings
Will USPS Need a Bailout?
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All of these leads some analysts to imagine that the USPS will eventually join the ranks of “too big to fail” and require a bailout. Personally, I’d much rather see the USPS getting a bailout than the lying, hypocritical U.S. auto industry. But that’s neither here nor there.
You can see for yourself from the USPS report quoted over at the extremely resourceful ZeroHedge. The USPS openly expects it will not have enough cash to cover obligations in 2011. This says nothing about 2012 and beyond, either.
“Only one problem: a statutory limit that prohibits them from borrowing more than $3 billion in any given year, and not to exceed $15 billion total.”
You do the math: the USPS already has about $12 billion in debt. And they can’t borrow more than $3 billion more – so they’ll either run out of options at the end of 2011, or if not then, 2012.
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{ 3 comments }
Not to be too cynical, but perhaps the solution is to limit delivery to ONLY Saturdays.
Email, electronic payments, the future of Netflix as a streaming content provider, the decline of direct mail marketing – the USPS doesn’t have a very bright future. It’s sort of another example of the past making a promise that the future can’t pay.
I predict we’ll be using UPS or FedEx to send Christmas cards in 10 years (that is if we are still sending physical cards by then and not some form of hologram greetings).
Ah, technological utopianism – I don’t buy it. We’ll always need some kind of regular postal service (even you concede that in the form of FedEx). I don’t think it’s quite fair to draw the analogy with social security. Besides, not every country’s postal service is near bankrupt. That said, the obvious could still have been done and Saturday delivery eliminated a while ago, since they raised compensation. So they knowingly went into spending they could not afford.
Problem is USPS spend too much in worker benefit, is hard to believe they paid like 1/2 cost of health care compare to all other federal worker, mean federal govt paid almost all of the employee and their family health care cost, not too mention there’s like 500-600k usps worker, which not even in China has that many postal worker consider they had a 4 time smore population. USPS need to be contractor not a federal worker my opinion,
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