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Post Office near economic meltdown. Will a bail-out help?

August 3, 2011

Could a Bailout Save the Postal Industry?
By Oregon Tax News,

A 2010 GAO report detailed that the U.S. Postal Service is on the brink of an economic meltdown. There have been serious calls to save costs by ending Saturday service and to close nearly 2,000 office. Oregon has over 40 post offices on the national target list.

The U.S. Postmaster General told federal lawmakers that the U.S. Postal Service is about to default on billions of dollars in workers’ compensation and retiree health payments and needs Congress’ help to make payroll. The U.S. Postal Office payroll obligations is above industry standard

Percent of budget to employee benefits
USPS, 80%
UPS, 61%
FedEx, 43%
– Source: Bloomberg Businessweek

The WallStreet Journal reported that Mr. Donahoe urged lawmakers at a Senate hearing to change the law governing how the Postal Service sets aside money for future retiree health benefits. He also urged Congress to help the Postal Service retrieve the billions of dollars it overpaid into retirement and pension systems over the years.

The USPS has not covered its annual budget since 2007. Eighty percent of the USPS annual budget goes to salaries and benefits. However, the USPS still managed to stay afloat by borrowing $12 billion from the U.S. Treasury.

This is not the first time Congress has intervened with the USPS. In 2006, it relieved the postal service of $27 billion in pension liabilities for workers with military service. In return, the USPS agreed to make annual payments of $5.5 billion for the next 10 years to build up a fund for future retirees. Although this bailout worked for a year, over the next three years, the service lost $12 billion.
Currently, the USPS is $15 billion in debt. Federal lawmakers must determine how to address the problem of the imminent decline of the postal industry. As the U.S. Post Office economic woes intensifies so will calls for another multi-billion bailout or borrowing option.

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Discuss this article

Bad Boy Brown August 3, 2011

It’s way past time to stop fooling around with this antiquated Federal agency. Cut saturday service, close thousands of small, marginally profitable offices, and get the IRS to go after retirees that were overpaid.
It might also be time to start charging bulk mailers the full cost of mailing out their worthless garbage. I’m not sure about others that read this message, but at least 50% of the mail we receive everyday goes straight to the shredder.

Bob Clark August 3, 2011

I think they could actually go to four day per week delivery, and the economy wouldn’t really lose anything. Raise the price of stamps will no doubt also assist.

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