Postal Service Running Low on Time and Money

Could you face life without the U.S. Postal Service (USPS)? You might have to, warns Postmaster General Patrick Donahoe as he looks to Congress for a bail-out.

Donahoe is also asking Congress for  permission to implement a drastic plan to reduce costs. The immediate problem for USPS is a $5.5 billion payment due this month to the postal workers pension fund. There is no money to make the payment and it appears likely USPS will default.

Beyond that, Donahoe says the agency is in danger of running out of operating funds early in the new year. To rectify the situation, Donahoe, a former member of the postal workers union himself, wants permission to break the no-layoff clause in the workers' current contract.

To cut costs, Donahoe wants to eliminate 220,000 jobs. As many as 100,000 would be cut through attrition while layoffs would eliminate the rest. The president of the postal workers union, as you might expect, has strongly objected.

Earlier this year USPS announced plans to close 3,700 postal facilities and has asked permission to eliminate Saturday mail delivery.

Politically unpleasant

Even lawmakers who profess cutting government agency budgets might find this a bit sobering, coming at a time when unemployment is high and the economy struggles to produce new jobs. Historically, closing post offices and reducing services have been politically unpalatable for lawmakers in whose districts the cuts are taking place.

Without the ability to cut its costs, or obtain a huge infusion of revenue -- from, guess who, taxpayers -- Donahoe says USPS will not be able to go on delivering the three billion pieces of mail it handles each week.

USPS has been fighting a battle with red ink almost since Congress broke it off as a pure government agency and made it independent in 1971. Prior to that time it was a government department completely supported by taxpayers.

USPS says that unlike its competitors, Federal Express and United Parcel Service, USPS delivers first class mail for a uniform, low rate anywhere in the country. It currently employs more than 500,000 people, making it the second largest U.S. employer after Walmart.

In the event USPS did shut its doors, consumers might have to transmit documents electronically or pay the significantly higher rates charged by shipping companies.  

On the other hand, if the USPS officially went out of business -- which is highly unlikely -- there's little doubt that one or more entrepreneurial ventures would move in to take over at least some of its functions.