The United States Postal Service is a fixture of American life, with a footprint and daily presence that most corporations can only dream of. Yet for all its ubiquity, the agency occupies a legal and structural position that defies easy categorization. Perched between government bureaucracy and private enterprise, the modern USPS is a study in ambiguity, its status as a public institution increasingly strained by economic realities.
As consumers and citizens, we rely on the Postal Service to deliver our most essential communications and parcels, binding together far-flung communities. For retailers and marketers, the USPS is a critical link to customers, a channel for coupons, catalogs, and more. And as an employer of over 600,000 Americans, it‘s a bastion of stable, middle-class careers. All of this makes the question of just what the USPS is – a government agency, a business, or something in between – more than academic.
Neither Fish Nor Fowl: USPS as an "Independent Agency"
Officially, the United States Postal Service is an "independent establishment of the executive branch of the Government of the United States," a designation held since the landmark Postal Reorganization Act of 1970. This means that while the USPS is part of the federal government, it operates with a degree of autonomy, overseen by a Board of Governors rather than managed directly by the President.
This setup puts the USPS in rare company, one of around 100 independent federal agencies that include the likes of the CIA and the Federal Reserve. But even measured against this select group, the Postal Service is an outlier. Its scale of operations and workforce are vast compared to most agencies. And its daily interface with the public is unmatched – the USPS processes and delivers 146 billion pieces of mail a year, visiting nearly every home and business in the country.
This "betwixt and between" status for the USPS was no accident. The shift from a cabinet-level Post Office Department to an independent agency was meant to insulate the Postal Service from political pressures and allow it to operate in a more business-like manner. But in practice, it‘s often put the USPS in an awkward position, expected to fulfill a broad public service mandate while also staying afloat financially.
The Bottom Line: USPS Relies on Revenue, Not Taxes
One of the most important features of the USPS‘s unique setup is how it‘s funded. Under the 1970 law, the Postal Service does not receive taxpayer money for operating costs. Instead, it‘s expected to cover its expenses through the revenue it earns from selling stamps, postage, and other services.
In fiscal year 2021, the USPS brought in $77.0 billion in operating revenue, against $81.9 billion in operating expenses. The vast majority of that revenue, around 86%, came from shipping and packages, with marketing mail and first-class mail also significant contributors. On the expense side, compensation and benefits for current employees accounted for nearly 60% of costs, with retirement benefits, transportation, and other operating expenses making up the rest.
While this "pay your own way" funding structure gives the USPS a certain degree of independence, it‘s also proven increasingly challenging in the face of declining mail volumes. Between 2015 and 2020, the Postal Service saw an 11% drop in total mail pieces processed, from 154.2 billion to 129.2 billion. And although package volumes have grown with the rise of e-commerce, that boost hasn‘t been enough to offset the decline in profitable first-class mail.
As a result, the USPS has run in the red for most of the past decade. The agency reported a net loss of $4.9 billion for fiscal 2021, bringing its total losses since 2007 to an eye-watering $92 billion. Some of these losses can be attributed to the unique requirement that the USPS pre-fund decades of retiree health benefits, a mandate that was recently repealed but not before pushing the agency‘s finances deep into the red.
Service and Sacrifice: The Costs of Universal Coverage
Another factor weighing on the USPS‘s bottom line is its universal service obligation. Unlike private carriers such as FedEx or UPS, the Postal Service is required by law to provide "uniform and reasonable" access to its services for all Americans, regardless of geography. In practice, this means the USPS must maintain an extensive network of post offices and delivery routes, even in sparsely populated rural areas that are costlier to serve.
As of 2021, the USPS operates 31,247 retail locations nationwide, down from a peak of over 38,000 in the late 1980s. In recent years, the agency has tried to trim costs by reducing hours or closing underperforming post offices, but such efforts often face fierce pushback from affected communities and their representatives in Congress.
The Postal Service‘s mandate to deliver to every U.S. address, 6 days a week, also means it can‘t cherry-pick the most profitable routes like its private-sector rivals. A 2020 analysis by the Government Accountability Office found that 59% of the USPS‘s delivery points are classified as "profitable," compared to 95% for UPS and 82% for FedEx. The remaining "underwater" routes, which the USPS is obligated to serve, drag down its overall margins.
Proponents of the universal service model argue it‘s a necessary tradeoff to ensure equitable access to essential communications and commerce for all citizens. As a government entity, they contend, the USPS has a higher duty than pure profit. But in an increasingly competitive and digitized marketplace, the financial burden of that social mission has grown.
Pushing the Envelope: Privatization Proposals and Pitfalls
Given the Postal Service‘s mounting losses and its hybrid public-private setup, it‘s little wonder that the idea of full-scale privatization has long been a subject of debate. The basic pitch is that an unleashed, profit-driven USPS could slash costs, raise prices, and beat nimble challengers at their own game. But thus far, such proposals have struggled to gain political traction.
One of the most aggressive recent privatization pushes came in 2018, when a White House task force recommended ending the USPS‘s mailbox monopoly, selling off its real estate, and potentially breaking up the agency into separate retail and delivery units. But the plan was a nonstarter in Congress, opposed by Democrats and many Republicans who feared it would gut service and jack up rates.
For all its fiscal woes, the USPS remains broadly popular with the public. And a major transformation could be highly disruptive for key constituencies, especially rural residents who depend on far-flung post offices, and businesses that rely on the Postal Service for "last mile" delivery in remote areas. Privatization would also be fiercely resisted by postal unions, who see it as an existential threat to their members‘ jobs and benefits.
Still, the specter of privatization continues to hover over the USPS, given its deepening financial hole. Some proponents argue the agency could stave off a more drastic overhaul by shifting to a "hybrid" model, with a government-owned entity overseeing core mail services while private companies compete for package delivery and other add-ons. But any such reimagining would need to clear high political hurdles.
Caught in the Middle: The USPS Workforce
The Postal Service‘s unique quasi-governmental position is also reflected in the status of its massive workforce. The agency‘s 644,000 employees are not technically federal civil servants, and their pay and benefits are mostly determined through collective bargaining rather than by acts of Congress. At the same time, postal workers participate in federal employee benefits programs and are bound by certain federal workplace rules.
This "separate but equal" status for postal employees has led to some perks and protections not always available in the private sector. About 92% of career postal workers are represented by unions, compared to just 6% of private-sector workers. And according to the Government Accountability Office, USPS employees enjoy a 16% compensation premium over similar private-sector jobs when factoring in wages and benefits.
But the flipside is that postal workers are also subject to federal-style budget pressures and political whims that most private companies don‘t face. When the USPS‘s finances suffer, it‘s often postal workers who feel the squeeze in the form of hiring freezes, reduced hours, or benefit cuts. And during tumultuous times like the COVID-19 pandemic, postal employees have found themselves on the front lines of national crises.
As the USPS navigates an uncertain future, much may hinge on its ability to maintain a stable and well-compensated workforce. The Postal Service has long been a key source of middle-class careers, especially for Black Americans, who make up 29% of the USPS workforce compared to 12% of the U.S. population. But with ongoing financial strains and the threat of restructuring, some worry the agency‘s historical role as a driver of upward mobility could erode.
Searching for Stability: The USPS Looks Ahead
As it approaches its 250th birthday, the United States Postal Service finds itself in a familiar position: caught between the expectations of government service and the imperatives of business survival. The agency‘s leaders continue to walk a tightrope, seeking to please both the public and the political powers that oversee them.
Some USPS initiatives aim to cater to an increasingly wired citizenry, like the 2017 Informed Delivery program that sends customers digital scans of their incoming mail each day. Others, like the recent rollout of slower delivery standards for first-class mail, reflect the agency‘s attempt to align costs and performance with an era of shrinking letter volumes.
Looking ahead, the fate of the Postal Service may hinge on its ability to find new revenue streams and adapt nimbly to market shifts, all while fulfilling its solemn duty to bind the nation. Policymakers will face choices about just how far to push the agency towards a corporate model, and how to apportion responsibility for its historic social mandates.
At stake is nothing less than a storied American institution, one that has helped write the country‘s history and continues to shape its economy and communities. Neither fully public nor fully private, the USPS is an embodiment of the mixed models and studied compromises that have long defined the nation‘s character. For better or worse, its long walk between two worlds continues.
