The U.S. Postal Service will be out of cash and unable to deliver mail, and pay vendors and employees, in less than 12 months unless Congress lifts the carrier’s statutory debt limit of $15 billion and eliminate mandates that handcuff its ability to make money and burden it with uncontrollable expenses, Postmaster General David Steiner told Congress on Tuesday.
After 20 years of losses tied to a drastic decline in mail volume, Steiner is forcing a policy debate on how to finance a universal service obligation in a fast-changing digitized world where communication has moved online.
In prepared testimony for a hearing by the House Oversight and Government Reform subcommittee on government operations, the Postal Service chief said lawmakers need to pick a strategic direction: drastically cut postal operations, including post offices and delivery days per week; raise delivery prices or provide subsidies; or change the statutory and regulatory constraints that limit the self-sustaining agency from balancing its books and having pricing flexibility to preserve universal service.
“If you want the same level of services that we have today — six-day-a-week delivery and 33,000 plus post offices, we can do that, and we are glad to do that. But someone has to pay for it, and the only options are postal ratepayers or taxpayers. If we want to have a discussion about reducing the level of service to both meet the needs of the American public but also make the Postal Service self-sustaining, we are glad to have that discussion,” said Steiner. “But there is one thing we can’t do, and that is maintain the status quo. I am confident that we can grow revenue, reduce costs, and solve our financial predicament. But that takes time, and we don’t have a lot of time. One small and easy action, increasing the borrowing limit, buys us that time — time that we can use to determine what the Postal Service should do to best serve the American public.”
Under the universal service obligation, 71% of delivery routes lose money and 58% of post offices don’t cover the cost of operations, the postmaster general said.
“Transporting cargo to the most remote parts of the U.S. costs about $150 million per year. Not being able to ship alcohol like our competitors costs us hundreds of millions of dollars in missed revenue. Keeping all post offices open and not being allowed to consider financial losses as a reason to replace them with alternative means of accessing our services costs another $840 million,” the postmaster general said.
Mail volume has plunged 49% since 2007, with First-class mail down 56% and marketing mail down 45% since then, according to USPS figures. In 2006, the Postal Service handled 213 billion pieces of mail compared to 109 billion last year. Despite the collapse in demand, the Postal Service is required by law to deliver mail to 170 million addresses six-days-a-week at uniform and affordable prices.
The financing model designed to support nationwide delivery depends on stable, monopoly-protected letter-mail revenue. Although the growth of package shipping has stabilized revenues — operating revenues are actually slightly higher than in 2007 — it hasn’t solved the profitability problem, noted Elena Patel, a senior fellow at the Brookings Institute, in an essay last week. The parcel share of revenue has increased from 14% to 40% while First-class mail’s share fell from nearly 49% to 32% in nearly 20 years. But because the parcel business functions in a competitive market with private carriers, the Postal Service can’t command the higher margins necessary to offset the overhead cost of infrastructure designed for nationwide mail delivery, she said.
Instead of rule changes that would have made it easier for the Postal Service to adapt to changing economic forces, legislators and regulators threw the agency an anchor, Steiner complained. He slammed the Postal Regulatory Commission for still treating the agency as a monopoly.
“There are electronic or private competitor alternatives to every piece of volume in our system. In fact, we are regulated worse than a monopoly, because even a monopoly is allowed to make money,” Steiner said. Think about that: our regulator ensures that we won’t make money or break even — out of fear of a non-existent mail monopoly. The regulator puts pricing restrictions on us, requires we give ‘work share’ dollars back to our [large] customers, and places a number of other unreasonable burdens on us that cost us billions of dollars every year. Moreover, they recently enacted an order that, among other things, limits us to one price increase per year for our mailing services, a change that by their own math could cost us up to $700 million in lost revenue in a year.”
Other structural burdens include having to pay a disproportionately high share of pensions ($3 billion per year) even though the agency is more like a private company than a government agency, to follow outdated federal workers compensation requirements, and to invest retirement funds only in Treasury notes. A broader portfolio of investment options, to include stocks and bonds, would have delivered an additional $800 billion for retirement plans and prevented the need to draw on operating funds to pay pension obligations.
Steiner said no private company is limited in its credit access and that based on its revenue the Postal Service borrowing limit should be $30 billion to $40 billion.
The USPS is $20 billion behind in capital improvements because of the constraints on raising revenue and borrowing, he added.
The Postal Service is taking steps on its own to improve finances. On the revenue side, management recently launched an auction whereby a broader range of e-commerce shippers can bid for last-mile delivery. The organization also is pushing for higher postage rates. Steiner is pushing postal regulators for a stamp price of 90 cents to 95 cents, saying mail service would still be the lowest in the industrialized world and largely solve its adjusted operating loss.
“Compare it to France, at almost $3, and England at $2.50. And the longest distance that letters have to travel in those countries is about 600 miles — smaller than the state of Texas. We deliver from the tip of Puerto Rico to the tip of Alaska for 78 cents. That’s a distance of 5,000 miles. So, we sell the stamp at less than half the cost to travel over eight times farther,” said Steiner.
The agency is also tackling costs through a multi-year streamlining of local and regional processing centers into a hub-and-spoke system and shifting more shipments from air to cheaper ground transport, which critics say has impacted service. Network and transportation reforms have generated $1 billion in annual savings as of fiscal year 2025. The Postal Service has reduced its workforce by nearly 29,000 persons and air transportation costs by 46%, with overall network transportation costs down 18% over the past four years, even as it adds one million addresses each year.
Revised delivery standards implemented in 2025 are projected to save at least $36 billion over 10 years from transportation, mail and package processing and facility cost reductions, according to the USPS.
After years of neglect, the postal system is modernizing its logistics capabilities by upgrading facilities with more functional layouts and automation, updating IT systems and deploying larger delivery vehicles to improve route density.
“We are doing our part to right the ship. But long-term sustainability requires alignment between what the country asks of the Postal Service, and what revenue sources are available and policy limitations are imposed…. Lift the anchor and grant us the freedom to operate as a truly independent agency, and I am confident the Postal Service will not only stay afloat, but remain a strong, self-sustaining institution that continues to bind the nation together for another 250 years,” said Steiner.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.
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