The United States Postal Service is in dire financial straits and faces default as it cannot afford to meet an upcoming obligation of more than $5 billion. A postal service bailout is being sought from Congress to keep the semi-public agency financially afloat.
Declining revenues more daunting than rain or gloom of night
The Greek historian Herodotus wrote that Persian messengers could not be deterred by “snow nor rain nor heat nor darkness,” according to Wikipedia. That passage has been slightly misquoted over the years and adopted as the unofficial motto of the United States Postal Service. Mounting expenditures and falling revenues are more daunting than the elements. The United States Postal Service, according to the New York Times, has posted a fiscal loss for the past four consecutive years. In that time, the USPS has lost revenues amounting to $22 billion so far. This year and last were among the most vicious as, according to CBS, the USPS will post an $8 billion or more loss for the second consecutive year. The USPS is unable to meet a $5.5 billion obligation, due September 31, and lapse into default if action is not taken.
Bailout sought by sickly agency
According to Reuters, the USPS has already posted a $3.1 billion loss in the last quarter alone. Any proposal for a bailout or assistance for the Postal Service would require short- and long-term restructuring, as the agency is close to total failure. The USPS is currently working with Congress on a solution. The largest obstacle to the future of the USPS, aside from the 22 percent drop in mail volume over the past five years, is considerable labor costs. Labor accounts for 80 percent of costs. Postal employees, according to the Washington Post, account for 40 percent of benefits paid out under the Federal Employees Compensation Act, which compensates federal workers for on-the-job injuries. The Postal Service paid $1.2 billion into the fund last year. According to the New York Times, the USPS has also overpaid two employee pension funds by more than $60 billion. A report by the Post Office Inspector General, according to the Washington Post, found the USPS was using about 64 million more square feet of space in its properties than it needed.
Proposals on the table
Currently, there are a few proposals on the table for what to do with the ailing USPS. Postmaster General Patrick Donahue is currently proposing plans to reduce the annual $75 billion post office costs by $20 billion by 2015. That includes closing 300 sorting facilities, closing 3,700 post offices, canceling Saturday deliveries and laying off up to 220,000 employees. The USPS needs Congressional approval to do so, as the labor agreement between the USPS and postal workers unions includes no-layoffs clauses. Congress would have to overturn the collective bargaining agreement, which the American Postal Workers Union strenuously opposes, according to the Christian Science Monitor. The Postal service, according to CBS, still has the outstanding obligation to deliver mail for 150 million people.
New York Times: http://www.nytimes.com/2011/09/05/business/in-internet-age-postal-service-struggles-to-stay-solvent-and-relevant.html?pagewanted=1&_r=1&ref=general&src=me
Washington Post: http://www.washingtonpost.com/politics/postal-service-occupies-too-much-real-estate-report-says/2011/09/01/gIQASVtAvJ_story.html
Christian Science Monitor: http://www.csmonitor.com/Business/Mises-Economics-Blog/2011/0905/USPS-broke.-Do-we-really-want-another-bailout
Wikipedia on the “Postal Service creed”: http://en.wikipedia.org/wiki/United_States_Postal_Service_creed
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