It’s my understanding that the junk mail is highly profitable. Bulk mail doesn’t only cost less to send — it also costs the post office a lot less to deliver. For one thing, no sorting is necessary.
There’s also a limit on what the post office can charge to deliver bulk mail. Inserts in newspapers — especially “free” community papers are an alternative service. That’s pretty stiff competition. The newspapers deliver these inserts (a major component of bulk mail) profitably; or they wouldn’t be doing it.
I’ve sent my share of junk mail - presorted by zipcode and delivered in bulk to the commercial part of the post office. I really cannot imagine how the final delivery is less expensive. Presorting is trivial in the entire process. Sorry, the post office is an archaic holdover from times gone by and should be disbanded. If newspapers want to deliver junk mail, let them. Why should I pay for our government to support a competing service?