NEW YORK - September 4, 2011 - The United States Postal Service has lived on the financial edge for a long time, but it has never been as close to the precipice as it is today.
The agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances.
“Our situation is extremely serious,” said Postmaster General Patrick R. Donahoe in an interview. “If Congress doesn’t act, we will default.”
In recent weeks, Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations, and laying off 120,000 workers - nearly one-fifth of the agency’s work force - despite a no-layoffs clause in the unions’ contracts.
The post office’s problems stem from one hard reality: it is being squeezed on both revenue and costs.
As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail.
At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80% of the agency’s expenses, compared with 53% at United Parcel Service and 32% at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.
