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26 March 2007 @ 07:45 am
I was attempting to respond to a fellow about libertarianism and private versus government financing of various programs. I was attempting to respond to his assertion that the US postal service is not heavily subsidized by the US government. While I don't think I succeeded, I feel like I did a bit of interesting research on the way, so I figured I repost it in case anybody cared.

His assertions, which are pretty spot-on, were that the postal service has yearly revenues of around $72 billion, and claim a yearly profit of around $900 million.

Also, please don't take anything behind the cut as if it were meant to be a cogent argument. I just couldn't get enough evidence to support either my point or his, so it's frustratingly inconclusive. I just think there's some interesting data on the way to that non-conclusion :-)

the USPS is not heavily subsidized by the US government.

I haven't done a lot of research on this, so I'm just looking back-of-the-envelope. A quick summary about them on usgov.info (here) says they make about a billion in profit per year, and cover the "bulk" of their costs not with taxes, but with postal products, including sales of stamps. They also get $96 million (not much, but still 10% of their profit) from congress to cover things like free postage for the blind. That all sounds fair enough, and like good support of your argument, other than that troublesome word "bulk", suggesting that some of it is paid for by taxation (particularly in context -- see original article).

So let's get a similar back-of-envelope estimate on how much tax money goes to the USPS, shall we? My favorite way to start was to Google "US postal service federal budget", which might tell us what kinds of federal money is earmarked for the post office. Is it more or less than their profits of around $900m (you said) or about a billion (usgov.info said) per year?

Here's an early hit on that:

From here: The U.S. Postal Service requested $779 million for bio-defense in 2005. The agency said part of that $779 million already has been spent, with the rest to be spent next year. The USPS last received emergency-preparedness funding in the 2002 fiscal year, when it got $762 million.

Okay, so there's about $330m/year that the USPS gets from the US gov't and FedEx has to subtract from the bottom line. Are there more? I'm thinking yes, but I'll keep looking to support that or not.

Or perhaps Google would prefer "US postal service profit numbers".

There's a good one from Answers.com that supports your numbers pretty well. Claims around $70B in revenue for 2005, and a profit of around $1.5B, and even claims that's a noticeable fall from 2004. So that means the USPS would need to receive a lot more than that $300m/year to be genuinely unprofitable. A good start.

Hm. A relevant-looking link is a pretty damning-looking report from the GAO about how the post office is entirely failing to cover expenses with its income, but that's also from back in 2001, so let's look further.

A link on the white house site at least suggests that we may be able to solve this soon -- Bush wants the USPS to have to satisfy SEC filing requirements, so in a few years we may be able to get hard numbers on the web. That'd be nice. The same article suggests that they're having trouble funding their "substantial" retiree benefits which apparently got them in some trouble paying off, and this change to take money that would otherwise be held in escrow would allow them to, not to put too fine a point on it, fully pay liabilities that the federal government would otherwise have to pick up. Retirement benefits are another thing that private companies generally have to pay for themselves, though I'm leaving myself open to some pointy rejoinders about airlines when I say that :-)

Hm. Going back and looking at this link, which is the one above that mentioned allocating extra money to the USPS for disaster allocations, apparently they also re-estimated what the USPS had to pay in pensions in such a way as to save $3B/yr. So apparently their post-2005 profit would otherwise be $3B/yr lower, or else they're not counting retirement benefits in that yearly profit bit.

Most of what I'm getting from all this is that the USPS is so entwined in US gov't finances that it's really just not possible to tell whether they're making a profit or not.

On the plus side, they *do* sell shares in themselves and count as a public company. They just don't have to file the same SEC reports that all other public companies in this country do. But, y'know, no special treatment from the US gov't on that one :-)
The Water Seeker: houseplymouth on March 26th, 2007 08:46 pm (UTC)
Some of us will happily pay NOT to get junkmail. Now if someday they make junkmail illegal and instead of paying a private company to keep it away I'm instead paying a subsidy to the post office through taxes (to make up for their lost revenue) I think I'm OK with that :)
D._duncan on March 27th, 2007 02:49 am (UTC)
impromptu rant *for* junkmail
if [...] I'm instead paying a subsidy to the post office through taxes (to make up for their lost [junkmail] revenue) I think I'm OK with that

I'm not. Seriously, not.

Advertising *seriously* drives that bus. With it I can send eight physical documents anywhere in the country for $3. Post card photos of Lisa Ambler. Payments that bypass Visa and its transaction charges without involving EFT and trust that requires. Interlibrary transport. Cash. Drugs. Joke gifts. Things I buy or sell on eBay.

Without it I expect we'd have a much more complicated postal rate structure, *less* (new) automation and an increase in delivery time.

For the price of a few dollar-menu items I can send the postman all over the country, whether to keep my service providers paid or simply for amusement. I'm happy to have that subsidized by advertisers because they have, at each drop, the opportunity to opt out. As soon as the subsidy is lumped in with tax code the payers lose the ability to opt out and resentment builds.

Hmm. Seems I'm Libertarian on this issue.

Sorry 'bout all the newsprint making the loop from post box to recycling bin and back.
taoflaherty on March 27th, 2007 04:11 am (UTC)
Re: impromptu rant *for* junkmail
I agree with this, though I wish there was another way. I'm comfortable with web sites being supported by advertising right now, but I'd be much happier if there was an easy way for us to directly pay the web sites that we like.
The Water Seekerplymouth on March 27th, 2007 04:42 am (UTC)
Re: impromptu rant *for* junkmail
Sorry 'bout all the newsprint making the loop from post box to recycling bin and back.

Except that a good 90% of that never makes the loop - it goes straight into the landfill because a lot of people are lazy asses and a lot of locations don't have recycling. And even when it does go full-circle paper fibers have a finite lifespan - they can only be recycled a couple of times before they degrade. And even when they do get recycled it used energy. All so that a supermarket chain can send me a circular that I have never looked at once in the 6 years I've been getting it. I consider this immoral. I resent that a HELL of a lot more than any measly tax. Where exactly was my chance to opt out? Even with green dimes I can't get rid of it all and green dimes didn't even exist until last september.