Postal Service Loses Another $2.5 Billion

Much-needed reforms can prevent a taxpayer bailout.

Photo by Jp Valery on Unsplash

For all the congressional hearings, leadership changes, and new initiatives offered by leadership, one might think that the U.S. Postal Service (USPS) will finally turn things around. One would be wrong.

On August 7, America’s mail carrier reported an astounding $2.5 billon net loss for the third quarter of fiscal year (FY) 2026, bringing total yearly losses in FY 2026 thus far to nearly $6 billion. Bizarrely, Postmaster General (PMG) David Steiner made it sound like things are on the upswing, stating, “Our results this quarter reflect some progress relative to those areas of the business where we can exercise control, namely with revenue generation, cost control and service improvement,” before acknowledging a “severe liquidity crisis.”

Meanwhile, he is fighting a reasonable congressional proposal to tie his $170,000 bonus to postal performance. PMG Steiner should take a pay cut and work with Congress on ways to get the USPS out of fiscal jeopardy.

The good news is that there are plenty of ways for the USPS to get back on firmer fiscal footing. The USPS Office of Inspector General (OIG) recently released a report titled “Options for Addressing the U.S. Postal Service’s Financial Gap,” which contains a menu of options for the agency to either bring in more money or cut down on costs. For example, the report states, “To lower delivery costs, the Postal Service could reduce delivery frequency. Some international posts have reduced mail delivery to five or three days per week or instituted alternate-day delivery. Decreasing delivery days could allow USPS to scale back its delivery network and reduce labor, processing and transportation costs.” The OIG cites estimates provided by the Postal Regulatory Commission (PRC) that this would save the USPS $3.4 billion per year, or nearly 40 percent of the agency’s $9 billion net loss for FY 2025. However, this “estimate does not consider any revenue that would be lost by reducing delivery by one day,” and implementing the reform would likely take legislative approval. Nonetheless, reducing delivery days is among the most promising options available to cut soaring postal expenses.

Additionally, the USPS could outsource various aspects of its operations to the private sector. According to the report, “Middle mile operations, encompassing all activities between mail collection and delivery, represent a significant financial burden for the Postal Service, costing $23.3 billion in FY 2025 and accounting for over 25 percent of total operating expenses.” The best estimates suggest that “substituting the Postal Service’s FY 2025 middle mile labor expenditures with private sector equivalent positions could yield $1.3 billion in [annual] cost savings.” Moreover, this is almost certainly an underestimate because the figure “excludes any impact on productivity or efficiency.”

The USPS could also outsource a portion of its retail network to private providers. The report finds, “The Postal Service directly operates more than 30,000 post offices across the country, a significant fixed cost for the agency” and outsourcing “could reduce labor, management, rent, and other non-personnel costs.” The OIG estimates that the USPS could save anywhere from $1 billion to $1.6 billion per year, assuming “the Postal Service only outsourced post offices without a co-located delivery unit [i.e., a local postal facility that shares a building or site with another postal operation]. These facilities comprised about 36 percent of the post office network in FY 2024.”

Coupled with reducing delivery days, strategically outsourcing middle-mile and retail operations to the private sector could save the USPS nearly $6 billion per year—and wipe out most of its net losses in any given year. And while reducing delivery days would take lawmakers’ approval, outsourcing operations would likely only require PRC approval and union negotiations (depending on the scope). This would still entail a lot of work and coordination, but steps need to be taken to prevent another taxpayer bailout.

It’s long past time for America’s mail carrier to get back into the black and deliver for taxpayers and consumers.