[NoControllingLegalAuthority]

Good question. The congressional mandate that the U.S. Postal Service put $3 billion a year of revenue into a surplus "escrow fund" is pretty obvious.

The Congress wants the USPS to help finance the budget deficit of the U.S. government.

Congress has no doubt required the USPS to invest its budget surpluses in federal government debt obligations.

[snowsislander]

Congress has no doubt required the USPS to invest its budget surpluses in federal government debt obligations.

I don't know if that is a strict Congressional requirement, but that is exactly what the Post Office doing. They are putting the escrow money into short term federal government debt instruments according to their annual financial statement, mostly in overnight obligations. From page 31 of their annual report:

Interest and Investment Income

When we determine that our funds exceed our current needs, we invest those funds with the U.S. Treasury’s Bureau of Public Debt. We invest primarily in overnight securities issued by the U.S. Treasury. We favor short-term investments because of the nature of our cash flow patterns, and to ensure that our investments are not unnecessarily exposed to the price risk associated with increases in interest rates.

I have to admit that the general reaction to the news has been a bit different than my own take: I would much rather the Post Office run in the black than in the red.

I remember the grim days back in the 1970s when the Post Office was always running in the red. I much prefer today to read material like this on page 30:

Debt

As an independent establishment of the executive branch of the United States government, we receive no tax dollars for our operations. We are self supporting, and have not received a public service appropriation since 1982. The last time we received any substantial contribution of capital from the U.S. government was in calendar years 1976 and 1977, when we received two $500 million payments which we were required to use to repay operating debt. We fund our operations chiefly from cash generated from operating revenue. However, unlike companies in the private sector, we are not permitted to raise capital through the equity markets. Consequently our only source of outside capital is through securing debt obligations. An additional challenge is that we, unlike the private sector, are not free to set our own prices for our products and services. The postal rate setting process has been a complex and lengthy process in the past. The uncertainty created by this process influences our cash management strategy.

The amount we borrow is largely determined by the difference between our cash flow from operations and our capital cash outlays. Our capital cash outlays are the funds invested back into the business for capital investments in new facilities, new automation equipment, and new services. At the beginning of 2003 our debt stood at $11.1 billion. During that year, we reduced our debt by $3.8 billion and, in 2004 by $5.5 billion. Cash flow from operations in 2005 enabled the repayment of the remaining debt. This is the first time since postal reorganization that we have ended the year with no debt obligations outstanding.

I like to see enterprises run in the black, whether they are private or public. Accumulating debt for any purpose other than accumulating assets to net against that debt is not something that I like to see much of in an established enterprise.