U.S. Postal Service Can't Stop the Bleeding

By Daniel Indiviglio

The U.S. Postal Service is still having a tough time. It lost another $3.5 billion in the second quarter, as mail volume continued falling and operating expenses rose. How bad is it? Let's consider its recent performance.

Via the Wall Street Journal:

The Postal Service's $3.5 billion loss for the quarter ended June 30 compares with a $2.4 million loss a year earlier. Its year-to-date loss widened to $5.4 billion from $4.7 billion.

In other words, the USPS is hemorrhaging cash. It can't see to get its head above water, and things are getting worse, instead of better.

In July, we learned of a potential postage increase. This might help a little, or it might not help at all. As the slope of a consumer demand curve shows, as a product or service's price rises, the appetite for it falls. So it's unclear just how much good raising prices would really do for overall revenue if it lowers volume. The USPS had better hope that the consumer demand curve for mail is very steep.

But despite the post office's poor performance, it's hard to imagine that the federal government would ever allow the USPS to fail entirely. So Washington will probably just throw more and more money at it if necessary. At this point, it's hard to see how the business will ever be profitable, considering how the world continues to evolve.

This article available online at:

http://www.theatlantic.com/business/archive/2010/08/us-postal-service-cant-stop-the-bleeding/61019/