Postal Service can't deliver payments

As Congress bickers over the future of the system, the USPS faces its first default ever.

By Kim Peterson Jul 23, 2012 11:38AM
The Postal Service has two massive payments this year that it simply doesn't have the money for, and it's expecting to default for the first time.

The service owes a $5.5 billion payment due Aug. 1 that was deferred from fiscal 2011, The New York Times reports. Then it has $5.6 billion payment due at the end of September.

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The payments are for future retiree health benefits, part of the Congressional requirement that the Postal Service pre-fund the benefits for future retirees. The mandate has become too expensive for the Postal Service to meet while fulfilling all of its other obligations.

The Postal Service isn't declaring bankruptcy, nor will it stop functioning on Aug. 1. But this is an issue that lawmakers must take action on, because it isn't going away.

The U.S. Senate passed a bill in April that returns $11 billion the service has overpaid into one of its pension funds, the Times reports. The bill also gives the service more years -- about 40 -- in which to make its payments, thus dropping the annual total to $2.5 billion. It also delays for two years the inevitable move to five-day delivery.

But House republicans hate the bill, which is one reason they have put off a vote on it indefinitely. Rep. Darrell Issa, R-Calif., has offered another proposal that breaks union contracts and gives the service a fast deadline by which it must make drastic cuts to Saturday service and its plants and locations.

Labor unions hate both bills, but they especially hate Issa's proposal. They say the fix here is to end the mandate to pre-fund retiree benefits.

Without any sort of legislative solution, Congress can keep putting short-term bandages on the Postal Service. And an eventual bankruptcy keeps getting closer.

The Postal Service, meanwhile, has told FedEx (FDX) that it will seek bids for new partners after its longtime contract with the company ends next year. FedEx has provided service for the USPS since 2001 and received an estimated $1.5 billion in revenue last year in the contract.

Instead of renewing with FedEx, the Postal Service will make the company compete for a new contract. Rival UPS (UPS) is already preparing to bid, Reuters reports.

173Comments
Jul 23, 2012 3:51PM
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I say we start using inmates as slave labor...
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80 % of the USPS deficit is from the mandate. But note they would be deficit without it. This being the problem that was foreseen back when they ordered the mandate for fear they would not cover the healthcare and retirements... so apparently what you have here is govt inability on both sides of the govt here, congress side and usps side.....        
Jul 23, 2012 3:40PM
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Asking the House to get something done?  You got to be kidding!
Jul 23, 2012 3:40PM
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The GOP likes privatization because that way they can play by their own rules, evade laws, pay no Federal Taxes, infringe on worker rights.
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Overall it seems the Feds are going to continue to force the USPS to prepay retirement to them which will allow the Feds to "abuse their privileges of 'holding' the retirement funds" just like they did with the Social Security funds replaced with I O U's that can now never be covered.  Spoiled rich brats elected into offices mismanaging all the money as they have no clue to how live within a budget, nor how to make a budget, nor how to live 'normally' without all the expensive elite expenditures within their positions. While the working man and woman suffers with stupidity placed on the USPS providing good career positions for many people that the Govt doesn't seem to give a hoot if they screw that up. What next are they going to kill thousands upon hundreds of thousands more jobs?

 

Jul 23, 2012 3:33PM
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You can thank the Bush Administration for implementing a law during their administration for the Post Office to pay pension and healthcare benefits to their families and surviving spouses for a number of years.  What they really want to do is privatize every Federal agency they can get their greedy hands on. 

 

Romney, the faker loves privatization.  He also loves being a "tax dodger" hiding alot of his wealth off shore. 

Jul 23, 2012 3:31PM
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It`s time to dump the post office general and form a panel to run the post office . They could revamp the post office to run as a money

maker and not as a goverment funded  post office.

Jul 23, 2012 3:30PM
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Why are we STILL WAITING to go to a 5-day delivery system???????!!!!!!!!!!!!!!!!!!!!!!!!!!

That has been talked about for how many years now????!!!  SHEESH!!!!!!!!!!!

Jul 23, 2012 3:24PM
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I completely agree with "end it in 2012"

In the last month alone my letter carrier has lost 1 package sent to me, misdelivered another sent to me, and delivered me at least 10 pieces of someone else's mail.  5 months ago I went on vacation and had the post office hold my mail with a request to deliver it when I returned.  It was delivered to the wrong house.  You would think that after not delivering for a week the letter carrier would have an idea where it goes.......guess not.  Every time I see him he's on his cellphone.  The last conversation I overheard he was bragging about all of the overtime pay he was getting.  Forget about the postal service.  The inmates are running the asylum! It's time for the US taxpayer to stop funding an agency that is out of control.

Jul 23, 2012 3:19PM
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It seems that certain elements of the Republican Party are trying to destroy the postal system as we know it (it was doing fine before this pre-funding thing was instituted). I suppose because they would like to see it privatized, or perhaps it's part of the larger plan to destroy all unions, which tend to vote for Democrats (that's what Wisconsin was really about).  As a small business owner, I'm pretty ticked off, as the postal system if vital to my business. UPS is awesome, and I also use them a lot, but they don't serve a lot of small towns and rural areas, nor does FedEX. 
Jul 23, 2012 3:16PM
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Any service provided by the government is in the cross-hairs of the ultra conservatives.  If any service generates income, then that money MUST be diverted to the private sector.  It has happened to several services.  When the Post Office was dropped from a cabinet level government service and became the Postal Service, there were hopes that a lot of the bureaucracy would go away.  Didn't happen.  Proposed rule changes to streamline the mail handling were vetoed by Congress.  If anyone thought that the PO didn't have to answer to a higher authority, not so.  There are a lot of services that are now archaic that allow cheap rates for big business that lobbyists will not allow to be eliminated.  Library rates, book rates, and non-profit rates.  In the eighties, when Boeing went under, the PO wanted to buy their fleet of planes, and create their own faster, more efficient mail routes .  Congress shot that down.  When, not if, the PO is privatized, it will be a huge mess.  Remember when ATT was required to break up into baby bells?  Just think of what the PO will be like with hundreds of potential private mail services.  Anyone can set up a delivery service that can deliver mail in a small area, (think 50 mile radius) for say 10 cents a letter.  But who takes over when it goes across country?  Who is responsible for forwarding your mail?  Do you really want minimum wage people handling your mail?  Privatization for this service is going to be a real nightmare.
   Yes, I am a former postal employee.  Spent 35+ years there.  Can the PO do a better job?  Yes.  Should it do a better job?  Absolutely.  Is the private sector where this will happen?  Not likely.

Jul 23, 2012 3:15PM
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Someone asked can Congress get any more stupid? Oh yes, it's a bottomless pit but many of their seemingly inane actions are really the result of doing the bidding of lobbyists. The majority of senators and particularly representatives, are lobbyist owned.
Jul 23, 2012 3:11PM
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Why not charge what it actually costs to send a letter? That is a novel idea. It cannot cost the same to send a letter across the town as  it does across the country.  If you remember when UPS first started there over night letter delivery  service every over night letter was $10.95 or so. Then  a few years later to make it fair to all senders UPS started charging different prices for each letter depending on where it went. UPS 's thinking was it wasn't fair to the user sending a letter across town and charging the same for a letter going across the country. One user was subsidizing the other. Almost gov't like eh?
Jul 23, 2012 3:07PM
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The post office should go/remain private, it wasnt untill the house/senate started sticking their fingers into the till at the post office that things started going downhill.They screw up evrything they touch, always have.
Jul 23, 2012 3:07PM
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Well, the postal service is growing obsolete, but is still required by the Constitution.  So one (or more) of three things have to happen:

1: Removal of Saturday Mail
2: Removal of little used Postal Centers
3: Stop pre-funding medical benefits

Probably all three should be done at this point, but some in Congress dislike the service reductions because, heaven forbid, it hurts their consituents.
Jul 23, 2012 3:02PM
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I don't think  it's wrong to pre-fund the retirement system because sometimes when companies go bankrupt the helpless retirees who put in their time and paid their dues lose their pensions and health  benefits. I think this pre-funding and should probably be expanded to more companies and retiree benefits protected at all companies so like when airlines file bankrupcy which they often due they shouldn't be able to screw retirees.

 

Jul 23, 2012 2:59PM
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The postal service needs to generate new revenues.  Two ways they can do that is to do foreign money exchanges in high tourist areas.

Another would be to have the Postal system administer the new US SAving Bond program that is being created for the internet.  That means that only half of the population will have access to this Saving Bond program if its restricted to the internet.

Can Congress get any more stupid?

Jul 23, 2012 2:54PM
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Maybe if they had made cuts years ago instead of whining and looking for sympathy, they wouldn't be in this mess. I know it has been years since they  discussed cutting saturday service.
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Can't we just close the entire postal system?  Privatize mail and parcels, then everyone would move along with email, texting, and phone calls.
Jul 23, 2012 2:52PM
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Just another example of Obama's so called economic growth. 
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