The United States Postal Service (USPS) incurred operating losses in 2007, 2008, and 2009, prompting some observers to declare the agency in a fight for its survival.¹ There is no question that the USPS faces long-term challenges that it must overcome in order to remain financially self-sustaining in the 21st century. First among these challenges is Americans’ increasing use of the Internet for digital, rather than physical, mail delivery.

But these long-term challenges are not the principal cause of the USPS’s recent losses. A 2006 Congressional mandate that the USPS pre-fund its retiree health benefits—a requirement imposed on no other government entity or private-sector company—accounted for all of the operating losses in 2007 and 2008 and a significant portion of the operating loss in 2009. In 2009, the recession accounted for the rest of the loss, as it sent USPS revenues plunging by over 9%.