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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 :-)
 
 
 
r_transpose_pr_transpose_p on March 27th, 2007 12:07 am (UTC)
This isn't Tobin, is it?
Noahangelbob on March 27th, 2007 04:00 am (UTC)
Nope, not a guy you've met.