How Does the Postal Service Pay Its Bills?

Answers to your questions about the news.
July 19 2001 6:28 PM

How Does the Postal Service Pay Its Bills?

The U.S. Postal Service projects a deficit of up to $2 billion this year. Given that the USPS doesn't receive any tax dollars from Congress, how will it come up with the extra $2 billion?

Under law, the Postal Service must break even over time, but its revenues need not equal costs every year. So even if it loses $2 billion this year, the Postal Service has enough cash to pay its bills. It's in no danger of going bankrupt. Whenever deficits loom, the USPS hikes rates to cover its losses.

Who runs the Postal Service? In 1970, Congress removed the postmaster general from the president's Cabinet and turned the Post Office Department into the United States Postal Service, operated by an 11-member Board of Governors. Nine members are appointed by the president and approved by the Senate. They serve nine-year terms, and no more than five members can belong to one political party. Those nine members appoint the 10th member, the postmaster general. Then the 10 members select the deputy postmaster general. The Board of Governors approves rate changes after consultation with the Postal Rate Commission, whose five members are appointed by the president and approved by the Senate.

The direct public subsidy for the Postal Service, which came from tax revenues, was phased out in 1983. USPS does receive indirect subsidies from tax revenues, however, which reimburse the Postal Service for the reduced rates it charges to nonprofit organizations and others.

The Postal Service has a legally protected monopoly on the delivery of letters to mailboxes. Eighty percent of its revenues come from mail covered by that monopoly.

Explainer thanks Nancy Pope of the National Postal Museum, former Postal Service economist Charles Guy of the Lexington Institute, and this history of theU.S.Postal Service.