September 6, 2011
By: Meaghan Olson
After a front-page story in Saturday’s New York Times, the woes of the U.S. Postal Service are beginning to sink in. In short, the Postal Service will soon default if Congress does not take action.
Hoping to encourage legislators to step in, Postmaster Patrick R. Donahoe will address the Senate Homeland Security and Governmental Affairs Committee in a hearing Tuesday.
Thomas R. Carper, the Delaware Democrat who serves as chairman of the Senate subcommittee overseeing the Postal Service, spoke with the New York Times about the current situation.
"The situation is dire," said Carper. "If we do nothing, if we don’t react in a smart appropriate way, the postal service could literally close later this year. That’s not the kind of development we need to inject into a weak uneven economic recovery."
The dire straits the post office currently finds itself in are due in large part to the Internet age and the preferred use of e-mail over traditional mail. The change in trends has led to a significant drop in revenue for the Postal Service.
Also affecting the financial health of the Postal Service are decades of contractual promises to union workers that continue to increase the agency’s costs. According to the New York Times, labor currently represents 80 percent of the Postal Service's expenses, while it accounts for 53 percent at United Parcel Service and only 32 percent at FedEx.
The post office is currently so low on cash that it will be unable to make the $5.5 billion payment due this month to finance retirees’ future health care. It is projected that the agency will run out of money to pay employees sometime early next year. Failure to pay employees would force the agency to stop delivering the roughly three billion pieces of mail it handles weekly.
At Tuesday’s hearing, Congress will consider a number of emergency proposals to prevent the agency’s potential bankruptcy filing. One radical proposal would allow the Postal Service to recover billions of dollars in what it considers overpaid employee pension funds. The proposal would provide a short-term fix, but would not alleviate the crisis entirely.
Postmaster Donahoe claims the agency must also find a way to increase revenue. Ideas for doing so include things like allowing the Postal Service to deliver wine and beer or allowing commercial advertisements on postal trucks and in post offices.
The New York Times reported that Donahoe also intends to seek approval from Congress to lay off employees, an action currently prohibited by a no-layoff clause in union contracts. If given approval, the Postmaster would lay off 120,000 workers in addition to cutting 100,000 jobs through attrition.
Thus far, legislators are divided on the issue with Republicans opposing the cuts and Democrats recognizing that action must be taken. Fredric V. Rolando, President of the National Association of Letter Carriers, warned of the dangers of such partisanship when speaking with the reporters.
"This is about one of America’s oldest institutions," said Rolando. "It survived the telegraph, it survived the telephone, and we have to do everything we can to preserve it and adapt."