COVID-19 Assistance To The Postal Service: Three Things To Know

At this writing, Congress seems poised to provide billions in financial assistance to the U.S. Postal Service (USPS) to ensure that it will be able to continue to operate amid the COVID-19 pandemic.

The action needs to be taken and is not unexpected. Unlike many entities, however, the USPS’s financial problems started well before COVID-19.

USPS has been on the U.S. Government Accountability Office’s (GAO’s) High-Risk List of government agencies since 2009. The Postal Service had previously warned in a January 2020 report that it could run out of cash as soon as 2021. It has a negative net worth exceeding $65 billion and unfunded liabilities of more than $140 billion.

Congress, which has not taken any action to reform the Postal Service, would be best served to have the following core approaches for the current crisis and beyond.

Provide loans and not grants. The U.S. Treasury already provides $11 billion to USPS in a near-zero interest loan. USPS is limited to borrowing $3 billion annually from Treasury. The borrowing cap should be eliminated, and Treasury should have the discretion about when and how much is provided in additional loans to USPS.

Existing debt should not be forgiven. There is a push to eliminate the $11 billion that USPS owes Treasury, i.e., taxpayers. For at least the foreseeable future, this debt should be kept on the Postal Service’s balance sheet, particularly as liquidity will not be a problem if Treasury has greater authority to make additional loans. Eliminating the debt would saddle taxpayers with this obligation. It would also set a troubling precedent regarding the more than $140 billion in unfunded liabilities USPS now has.

Structural reforms must be implemented by July 1, 2021. For more than a decade, Congress has failed to act on GAO’s warnings about USPS being on the High-Risk List. Keeping the debt on the USPS books makes clear the real scope of USPS challenges and the need for reform. Absent major reform soon, USPS losses will continue to accelerate. While forgiving some debt might be reasonable in a “grand bargain” of Postal Reform, forgiving the debt now just further kicks the can down the road.

About the Author: Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.