The U.S. Postal Service reported that it lost $3.8 billion last fiscal year and that it expects to lose $7.8 billion this year. The loss occurred despite cost-cutting measures and legislation that allowed the USPS to forgo $4 billion in required payments to pre-fund retiree health benefits.

From the Associated Press:

The post office has been struggling to cope with a decline in mail volume caused by the shift to the Internet as well as the recession that resulted in a drop in advertising and other mail. Total mail volume was 177.1 billion pieces, compared to 202.7 billion pieces in 2008, a decline of almost 13 percent. For the fiscal year that ended Sept. 30 the agency had income of $68.1 billion, $6.8 billion less than in 2008. Expenditures were down $5.9 billion to $71.8 billion.

The recession and the rise in electronic communications are generating huge financial problems for the lumbering government monopoly. Despite its efforts to reduce headcount, the USPS remains overburdened by a costly and heavily unionized workforce. As I noted previously:

The average USPS worker earns $83,000 per year in compensation, which is considerably more than the average U.S. worker. And the Government Accountability Office recently noted that ‘compensation and benefits constitute close to 80 percent of USPS’s costs — a percentage that has remained similar over the years despite major advances in technology and the automation of postal operations.’

Radical reform is needed, but I suspect that Congress will just paper over the problems for now and also continue allowing the agency to defer funding its retirement obligations:

The post office is required to make an annual contribution of about $5 billion to pay in advance for medical benefits for future retirees. Congress reduced that by $4 billion for 2009, but that change was for one year only. The agency’s independent auditor, Ernst & Young, questioned whether the post office would have enough money to make the next payment on Sept. 30, 2010, when $5.5 billion will be due.

This will just kick the can down the road. It shows that even when Congress gets something right — as it did with making the USPS pre-fund its retiree health benefits — it lacks the will to see it through when the going gets tough. Meanwhile, the Europeans continue to make progress toward deregulating their national postal services and allowing for competition. Unfortunately, it seems that Congress only looks to Europe for guidance on expanding the welfare state.