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US Postal Service on 'Brink of Default'

  • Michael Bowman

US Postal Service mailboxes are seen awaiting disposal September 1, 2011, in San Jose, California.

US Postal Service mailboxes are seen awaiting disposal September 1, 2011, in San Jose, California.

One of America's oldest institutions, the U.S. Postal Service, is teetering on the edge of default and must be radically restructured. That, according to the postmaster general, who spoke on Capitol Hill Tuesday.

The mail service Americans have known for generations is losing billions of dollars a year, as handwritten communication has all but disappeared - replaced by emails, text messages, and social-media - and billing and other commercial transactions are increasingly conducted over the Internet.

The changing technological landscape has left the regular mail service, what many Americans now refer to as "snail mail," in dire financial straits. U.S. Postmaster General Patrick Donahoe testified before the Senate Homeland Security and Governmental Affairs Committee.

"The Postal Service is at the brink of default," said Donahoe. "Without the enactment of comprehensive legislation by September 30, the Postal Service will default on a mandated $5.5 billion payment to the Treasury to pre-fund retirement retiree health benefits. Our situation is urgent."

The Postal Service is seeking congressional authorization to cut costs and curtail services, including eliminating hundreds of thousands of postal jobs, changing health care and retirement programs for postal workers, consolidating post offices, and ending Saturday mail delivery across the country.

"The Postal Service requires radical changes to its business model if it to remain viable into the future," added Donahoe. "The Postal Service is in a crisis today because it operates with a restricted business model. As a self-financing entity that depends on the sale of postage for its revenues, the Postal Service requires the ability to operate more as a business does."

Fighting the proposed changes is the American Postal Workers Union, whose president, Cliff Guffey, has blasted proposed changes as a "reckless assault on the Postal Service and its employees." He has also said that "crushing postal workers and slashing service will not solve the Postal Service's financial crisis."

But change is needed, according to the committee's chairman, Senator Joe Lieberman of Connecticut.

"We must act quickly to prevent a Postal Service collapse, and enact a bold plan to secure its future," said Lieberman. "The U.S. Postal Service is not an 18th Century relic. It is a great 21st Century national asset. But times are changing rapidly now, and so too must the Postal Service if it is to survive."

The U.S. Postal Service is a semi-autonomous federal entity, mandated by law to be revenue neutral. Both Democratic and Republican lawmakers have put forth proposals to reform it and ensure its solvency.

Americans learn of the Postal Service from an early age. Every year before Christmas, it receives an avalanche of letters from youngsters addressed to Santa Claus. It remains the preferred means to send greeting cards, wedding invitations, and other personalized or formal communication, as well as magazines and other periodicals and printed advertisements. Despite reduced mail flow, the Postal Service continues to deliver more than half a billion pieces of mail a day.

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