Rand Paul calls USPS a ‘broken business model,’ says labor costs must be controlled

LOUISVILLE, Ky. (WDRB) — Kentucky Senator Rand Paul said the U.S. Postal Service is operating under a "broken business model" and must get labor costs under control to avoid a deeper financial crisis than it already has.

Paul made the comments Wednesday morning during a Senate Committee on Homeland Security and Governmental Affairs hearing, where David Steiner, the U.S. Postal Service’s postmaster general, requested reforms he said are needed to keep the agency financially stable.

Since 2007, USPS has lost more than $117 billion, including roughly $9 billion in the last year. Paul said the postal service has maxed out on the money it can borrow from the treasury, and is on track to run out of money completely as soon as September.

"This is not a rough patch, that is a broken business model," Paul said. "The question is not whether the post office needs more money, the question is whether congress will keep rewarding failure without requiring change."

Steiner agreed that the USPS system is broken, but said that the agency faces unique financial challenges because of federal service requirements.

According to Steiner, 84% of city delivery routes and 52% of rural delivery routes are operating at a loss. But unlike a private company, USPS is legally required to deliver to every address in the country.

He also said 58% of post offices — about 18,000 locations — are losing money, accounting for more than $2.5 billion in operating costs.

"In a normal business model, if 70% of routes are losing money, you would adjust the routes," Steiner said. "In a normal business model, if 60% of the stores you had were losing money, you'd close them. We're not allowed to do either."

Paul maintained labor costs remain the Postal Service’s biggest financial challenge. He said they account for roughly 80% of USPS expenses, and argued the service cannot solve its financial problems without reducing payroll expenses.