The Check Is in the Mail

The United States Postal Service currently loses something to the tune of $400 million a month. But believe it or not that's not actually its biggest financial problem. Instead, as Al Root wrote today, it’s the size of the Postal Service's pension obligations:

The USPS retirement obligations dwarf those of FedEx and UPS. It makes some intuitive sense that the retirement obligations of the USPS are large. It is an old organization. In fact, the Post Office has been around longer than the country. Benjamin Franklin was the first post master general, appointed by the Continental Congress in 1775, a year before America declared its independence from Britain. Today, the USPS employs more than 630,000 full and part-time workers and handles roughly 146 billion pieces of mail each year.

The Postal Service's outstanding retirement obligations are more than four times the combined pension obligations of FedEx and UPS. And almost $44 billion of the $322 billion total is unfunded.

Eventually, the Postal Service may have to raise prices to close that gap. A good place to start would be on its rates for services like parcel delivery. Those have become more important as first-class mail volumes decrease.

That could be good news for FedEx and UPS, which tend to charge more for parcel delivery than the Postal Service does. Higher prices at thePostal Service could give them more cover to hike their rates as well.